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    Applied research: Strategy in the boardroom

    Decision Making Governance Leadership Research Strategy
    My nine-day visit to the UK and Ireland to discuss board and corporate governance topics and to share emerging research with board directors, executives and academics is drawing to a close. From meetings in the hallowed halls of the Institute of Directors on Pall Mall, office buildings, various fine dining restaurants and cafés, and university premises in Wolverhampton and Ulster; to master class presentations and a guest lecture, it has been a delight to engage with people who are deeply interested in corporate governance and the board's role in business performance. Thank you.
    Now, the task of addressing the numerous requests for more information, and to schedule future meetings, speaking and advisory engagements beckons. This is my priority over the coming days.
    Amongst the enquiries and discussion notes, several people have asked for more information about strategy in the boardroom. While I have written about this in the past, and strategy has been a core element in my doctoral research, interest in up-to-date applied research appears to be high. Given this, my intention is investigate some of the practical challenges faced by boards over the coming months and to publish the findings. However, such research needs willing participants...
    If you or your company board might be interested in participating in research, please get in touch. I am particularly interested in publicly-listed firms, high-growth businesses and social enterprises; in the UK, Europe, the US and Australia. Your expression of interest and any decision to participate (or not) would be entirely confidential, and neither you nor nor your company or social enterprise would be identifiable in any research report that ensues.
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    Getting over ourselves: a crucial competence for directors?

    Accountability Decision Making Governance Leadership Performance Research
    Board meetings are uncompromising places of work and decision-making. Not only are boards themselves inherently socially-dynamic (they are make up of people, after all!), but every situation is different and directors meet infrequently and they generally need to act on incomplete data.
    Consequently, decision-making effectiveness is largely dependent on directors working well together when the board is in session. However, that is much easier said than done. In fact, recent research suggests that we humans struggle to understand the minds of others, even though we think we are good at it. This renders group dynamics difficult, at best. 
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    One of the biggest barriers to understanding is egocentrism—we can't get over ourselves. We over-estimate knowledge and capability, including that of others to understand what we say or mean. The problem is exacerbated by the technological world of electronic mail (which strips out tone and meaning), and even more so the abbreviated 140-character world of Twitter and text messages.
    If directors are to make effective contributions in boardrooms they need to get over themselves. Older and more experienced directors are not exempt from this problem—they are just as prone to making assumptions as their younger or less experienced colleagues. 
    Techniques that might be helpful for directors wanting to make effective contributions include meeting together in social settings to learn more about each other; asking questions during board meetings with open hands and a humble spirit; careful (reflective) listening, to limit assumptions and check understanding; and, the demonstration of a collective empathy amongst directors. Perhaps it might even be helpful to appoint a psychologist onto the board! Please note this is not a categorical list—if you have evidence-based suggestions, please feel free to share them.
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    The emerging role of the board in business performance

    Accountability Governance Leadership Research Speaking Engagements
    Fifty leading board researchers, directors and company secretaries assembled in London this week to consider the topic Corporate governance for a changing world: capturing long-term value. The event was hosted by Tomorrow's Company and Frank Bold, at Cass Business School. I had the privilege of joining the discussion.
    Dr Roger Barker, Deputy-Director at the Institute of Directors, provided the catalyst for a lively discussion amongst the attendees. He offered some rather provocative comments about boards, short-termism and business performance in the longer-term, as follows:
    • The current [conformance oriented] corporate governance model does not appear to be particularly conducive to longer-term thinking nor value creation.
    • Despite challenges and concerns raised amongst a broad constituency, many people who work in The City (of London) think that the current system of corporate governance is 'good'—they do not recognise short-termism as a problem.
    • Executive pay is essentially an issue of balancing short-term financial engineering against longer-term value creation.
    • Despite efforts by legislators, regulators and stock exchanges (not to mention the OECD itself), the notion of a one-size-fits-all model of company law and corporate governance is not well suited to all types and sizes of companies.
    Several interesting thoughts emerged from the group and plenary discussions that ensued:
    • That the predilection with short-termism is 'probably' the antithesis of sustained business performance over time.
    • That the conformance–performance pendulum has probably swung too far towards conformance. A renewed focus on company performance and longer-term value creation is needed.
    • Despite the best intentions of the authors, codes and associated regulations have not delivered any meaningful business value.
    • The shareholders and boards need to return to basics by focussing on (and agreeing) the purpose of the company and the strategy by which or through which the purpose will be pursued. [This point was music to my ears, for it is consistent with my research findings.]
    I came away from the meeting in good spirits. That a group of influential academics, researchers, directors and company secretaries are both in agreement that the current model of corporate governance is problematic (flawed, even?) and that a new model perhaps via purpose and strategy might offer hope if boards are to make meaningful contributions in pursuit of longer-term value creation and a sustainable future.
    The informal discussion and private comments over drinks after the roundtable session served to reinforce these points; especially that well-intentioned leaders are committed to realising the potential of the businesses they lead or govern and that there is a hunger for 'answers'. My hope is that these messages are both transmitted and heard amongst a wide constituency, and that people get on board. I am committed to playing my part. If you have questions or would like to know more, please get in touch.
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    Do you have a wicked #corpgov question?

    Governance Research
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    Much has been written about corporate governance, board practice and business performance in recent years. Many claims have been made along the way as shareholders, directors, researchers, consultants and members of the business community have tried to understand what boards do and how they influence business performance.
    Despite the best efforts of many—and many claims that various observable attributes of boards are causal to performance—credible answers have been few and far between. That we cannot explain how boards influence the achievement of business performance outcomes remains a rather large blindspot, especially as boards hold the responsibility for business performance. Hopefully, help is not far away.
    In the meantime, we have much to learn from each other. If you are wrestling with some aspect of corporate governance, board practice or value creation that is proving to be a thorn in your side or the side of your board, I would like to help you wrestle with it and, perhaps, even resolve it.
    Please ask your wicked question (either by posting a reply or sending an email), and I will do some research and provide a reply as quickly as possible.
  • Published on

    Research update + heartfelt thanks

    Governance Phd Research Research Update
    Over the last month or so, I've begun to receive questions—several per week—about my doctoral research. Most have been variations on these themes:
    • Has the thesis been examined yet / have you get your PhD yet?
    • Can I have a copy (or a summary) please?
    That people beyond close friends and associates might be interested in the status of the research and in reading the outputs has been gratifying. Sadly, process delays have impeded the provision of affirmative responses for the time being. The background and current situation is as follows:
    On the examination: I had hoped to have some news by now, as eleven weeks has passed since the dissertation was submitted for examination (oral examinations normally occur about 8–12 weeks after submission). However, there was a problem with the examiner panel and some seven weeks elapsed before it was resolved. I've now been told to expect to expect the oral examination during the week of 19 October—another nine weeks away! Thankfully, my head supervisor is trying to accelerate the process, and I've got other things to be going on with.
    On the request for a copy of the full dissertation: A copy of the dissertation (The influence of boards on business performance: Evidence from inside the boardroom) will be posted here after the examination and emendation process is complete. A copy will also be available via academic search engines in due course. In addition, I plan to consolidate the main research findings into a slim (but readable, with practical implications) volume. If you would like to be added to a mailing list to receive a copy when it is available, please let me know.
    Notwithstanding the rather annoying delay, feedback from several people who know about the research findings suggests it will be worth the wait, both as a useful guide for boards and as a basis for future research. However, such claims are preemptive and presumptive in my view: the dissertation needs to emerge from the examination process first! 
    My heartfelt thanks for your interest in the research, and your patience while the examination process runs its course. My hope is that your interest and patience will be satisfied soon!
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    On the sources (and a possible remedy) of so-called "governance failure"

    Accountability Ethics Governance Leadership Performance Research Strategy
    The much-storied scandals at FIFA, HSBC and Toshiba have highlighted a plethora of weaknesses in the way large companies are led and run. Fingers have been pointed and blame apportioned. Management has copped a fair bit of flak, but the board has not been immune either. While the media has had a field day, finger pointing and broad statements provide little comfort to those in pursuit of long-term performance. Remedies are required.
    Reputability has studied a number of failures recently(*), in pursuit of remedies. The analysis identified nine prominent categories of weakness, the first six of which were influential in the majority of failures:
    • Board skill and NED control
    • Board risk blindness
    • Defective information to or from board
    • Leadership on ethos and culture
    • Risk from incentives
    • Risk from complexity
    • Risk glass ceiling
    • Charismatic leader
    • Poor crisis management
    When these factors are considered holistically, the stark implication is that failure appears to be associated with board weakness in at least three areas (engagement, strategy and risk). If boards are to make effective contributions, these weaknesses need to be resolved. And therein lies a challenge: a return to first principles, and a different conception of corporate governance is likely to be necessary. Will boards embrace such a change in pursuit of better business performance? Let's hope so.
    (*) The full Reputability Report, entitled Deconstructing failure—Insights for boards, is available here.