Performance - Peter Crow | Helping boards govern with impact

Published on: 10 November 2013

ECMLG'13: Observations and insights

Later this week—on Thu 14 and Fri 15 November—I will be speaking at the 9th European Conference on Management, Leadership and Governance in Klagenfurt, Austria. I'm looking forward to renewing acquaintances and making some new connections; to presenting a paper to an international audience which will include some of the world's leading governance scholars; to testing some emergent ideas; and, to learning from others throughout the two days.

I plan to post reflections here during the conference, so check back if you'd like to hear about the latest developments in management, leadership and governance research and practice.

Published on: 9 November 2013

How much time do you spend in your board role?

The National Association of Corporate Directors (NACD) has just published its 2013–2014 Public Company Governance Survey. The news release and several top-line findings are available here. A copy of the full survey report is available from the NACD bookstore.

The report makes for interesting reading. One metric that caught my attention was the average amount of time that board members commit to their work. Respondents claimed their annual time commitment was 235 hours per board. Using an 8-hour day as the basis, this means that directors of public companies in America commit, on average, 2.5 days per month to each board of which they are a director. Does this sound like a lot of time, or not much? By way of comparison, most boards of public companies in New Zealand meet ten or eleven times per year, and board meetings typically last between four and seven hours. Even taking the generous end of these ranges, and doubling the figure to account for committee work and pre-reading, the figure for a New Zealand director is about 154 hours, or roughly two-thirds of the American figure.

What amount of time is reasonable? Clearly, boards and companies are complex, socially dynamic, and subject to the vagaries of markets and many internal and external factors, so every situation is different. However, I would have thought that a figure closer to 400–450 hours per year would be necessary, if a director is to understand the business of the business well (this being a prerequisite to making an effective contribution to the development of strategy and the making of informed strategic decisions), and monitor performance well. Could the lower levels of commitment that seem to be typical be material to the various failures of governance that have come to light in recent years?

Published on: 4 November 2013

Swimming in data...but some clarity is starting to emerge

I'm sitting at my desk looking at a fantail flitting between the branches of the tree just outside the window. It's a great distraction from what I should be doing: cataloguing the pile of data gathered in the last week, including 900MB of sound recordings and 28 pages of handwritten notes, from two board meeting observations and three interviews. The insights from this latest data need to be compared with insights from data gathered earlier. While this process is akin to swimming in data, there is some good news: five "causal powers" (that may explain how boards influence business performance) are starting to emerge. However, I keep reminding myself not to jump to conclusions, for there is more data to gather and more analysis to conduct. The ideas forming in my mind could be significant, or they could be a mirage. Time will tell. The fantail has gone now, so it's back to work. I'll keep you informed.

Published on: 29 October 2013

Who should drive the development of corporate strategy?

The selection and implementation of strategies that enable a company to compete effectively appears to be crucial to value maximisation. Given this, who should drive the development of corporate strategy? The value that boards can contribute appears to lie in their active and ongoing involvement in the strategic management process—through the consideration of strategic options; the development of strategy; the making of strategic decisions; and, the adequate monitoring of strategy implementation and subsequent performance. It seems to improve the quality of environment scanning; minimise the chance of selecting poor strategies; and, improve decision-making. Assertiveness and knowledge about the business also appears to be important, even though many CEOs believe their boards do not fully understand the strategic drivers to their company's success. The question of who should drive the strategy development process is less clear however.

My recent research suggests there is a fine line between the board having an active involvement in strategic matters (seen as desirable), and the board being seen to impinge on management's delegated responsibility to implement strategy. While the development of strategy is now widely recognised as a major task of the board, all of the CEOs that I interviewed claimed to control the process of strategy development, whether their board was actively involved or not. Also, company performance appeared to be enhanced when the division of labour between board and management was clearly defined and efficiently implemented. Further, the boards of successful companies appear to enjoy strong relations with management; they seek to make consensus decisions together in order to achieve strategic goals; and, the amount of political interplay between individuals appears to be low. The key point is that the board and management work together in a positive manner, and that they are both actively involved in the process of defining and deciding where and how the company should be headed.

Published on: 27 October 2013

When stamina and focus come together...

What's the best way to cope with (and survive!) a busier than normal work week? When I was out delivering pamphlets this afternoon—for Party-by-the-Lake, a Halloween alternative which is enjoyed by 3000 people in our local community—I found myself thinking about this very question, based on my own busy week ahead:

On Monday, I get to relax—with my wife—because it's Labour Day
On Tuesday, I fly to Dunedin for a board meeting, and home again afterwards
On Wednesday, I fly to Sydney Australia to collect data for my PhD research, after which I fly to Auckland New Zealand
On Thursday, I will collect more data, before flying home at the end of the day
On Friday, I have two CEO interviews scheduled, followed by a trip to visit my PhD supervisor to finalise details the trip to speak at ECMLG in Austria
On Saturday, I have a strategic planning workshop to attend (as a participant, not a facilitator)

This schedule will see me in four cities, in two countries, in four days. Does reading it make you feel a little tired? In all, the week will involve ten hours in the air; at least seven hours waiting in airport lounges; and, several early starts and late nights. It will be mentally and physically draining, I'm sure. Hopefully, I will still be compos mentis by the end of the week! While I'm somewhat out of practice with such busy international schedules, I expect to call on several habits that have served me well when dealing with similar schedules in the past:

Focus: Block out everything not related to the work directly ahead. Prepare well in advance of meetings, and review notes the evening before. Plan to arrive at airports and meeting venues early, to allow a little time to relax and refocus. Check email and social media websites daily (only), lest they divert your focus.
Physical care: Avoid alcohol and big meals if possible. Get outside and walk, every day. Drink plenty of water, and get as much sleep as possible (flights are great for this).
Stamina: Think about the week as a whole, not just the day or the few hours directly ahead, and pace yourself. A tough week is akin to running a 10,000 metre race, not a 100m metre sprint. A short focus will put you at risk of not making it through the week. Good levels of physical fitness is a real blessing here—which is why I try to get out on my bike two or three times every week—although this requires a pre-emptry commitment because, unfortunately, physical fitness can't simply be "turned on".

So there you have it, some of my techniques for dealing with a busier than normal schedule. How do you cope with such weeks?

Published on: 23 October 2013

When "tongue-in-cheek" cuts close to the bone

A somewhat satirical opinion piece, written by Joe Bennett, caught my eye this morning. As I read it, over my morning coffee, I smiled, for the opinion piece is very well written. But afterwards, as I sipped on my coffee again, I winced, for the images conjured in Bennett's mind and exposed through prose, cut a little closer to the bone than many who are au fait with boards and governance would care to admit.

Most of the directors that I know, and boards that I am familiar with, work hard, as they seek to optimise business performance and build shareholder value. They read their board papers carefully and critically before meetings, prepare well and ask searching questions. They also spend time understanding the business of the business, so they can contribute meaningfully to strategic discussions, and make informed decisions about the strategic future of the business. In other words, they engage actively in the process of governance.

However, some (perhaps the majority?) directors and boards still don't engage in this way. They adopt a more passive modus operandi of monitoring past performance. They spend little, if any, time considering strategic options and marking out the future of the business. In extreme cases, they behave as Bennett suggests. Sadly, the self-serving, fat cat imagery described by Bennett will remain part of the psyche—for as long as it continues to describe how some boards behave at least. I long for the day that such imagery becomes folklore, of the way things used to be, but no longer are.

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