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    Boards and ... mathematics?

    Accountability Corporate Governance Decision Making Governance Phd Productivity Research Tough Questions
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    Diversity of thought has been widely promoted in recent times, as a mechanism to supposedly increase decision quality in boardrooms. Superficially, the idea of thinking differently is a positive evolutionary development from earlier efforts (think: women on boards) to break what is often described as the Old Boys' Club. That the discourse and intent has begun to move beyond appointing directors on the basis of physical attributes is helpful. And yet, the idea of 'diversity of thought' has long troubled me. 
    How does anyone know what I am thinking, or anyone else in the boardroom for that matter? And what is diversity in this context anyway—me having different thoughts, or several of us thinking differently? Crucially, what of any link to the board's work and purpose, which is to provide steerage and guidance to achieve a strategic goal? ​
    Researchers have published correlations based on specific datasets, but the general case (a reliable linkage between demographic diversity and organisational performance) remains elusive. The somewhat amorphous 'diversity of thought' is similarly afflicted. ​Recently, cognitive diversity (that is, different ways of processing information and approaching problems) has been suggested as a more reliable mechanism to achieve higher quality decisions and, by implication, outcomes. This sounds positive, but reliable explanations are yet to emerge. 
    Why is this so hard? Could the paucity of reliable explanations (of the relationship between board work and company performance) be due to researchers, directors' institutions and others trying to explain board work and develop 'best practice' models looking in the wrong place or using inappropriate tools? What if hypothetico-deductive techniques (in search of a deterministic best practice approach to some aspect of board work) are laid to one side and methods more common in social science used (critical realism or contingency theory, for example)? Should researchers embrace the idea that boards are social organisms, and that governance is a mechanism activated by the board?
    For the record, I employed critical realism, long-term observational techniques and contingency theory when researching boards a decade ago, as part of my doctoral research. The study was ground-breaking for it revealed new insights about board work including an explanatory framework. If you want to learn more about this study, check my thesis (academic-speak) or this article (plain-speak).
    In the past few weeks, I have picked up the question again (thanks to a wandering mind on long haul flights!), and have begun to wonder if fractals and chaos theory might offer a viable pathway to developing a theory of board work. Whether this might be a fruitful search or a blind alley remains unclear. Regardless, my mission is to help boards govern with impact, so the least I can do is dig further. And dig I shall.
    One request: If you know about fractals, or know of anyone who possess such expertise—especially in relation to social phenomena—could we schedule a call please? I'm starting from a pretty low base!
  • Published on

    On writing well:

    Accountability Corporate Governance Decision Making Management Tough Questions
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    One of the great challenges for board directors and executive leaders concerns written expression. How might one cast vision, report progress clearly, make a request unambiguously, or argue a point convincingly if the key messages are not clearly stated? Directors and executives owe a duty to their colleagues in this matter, for written reports are the primary vehicle for sharing ideas, proposals and data before each board meeting. 
    To suggest the quality of the report (especially, the clarity of the message within) may be the difference between success and failure (that is, acceptance or rejection) is, probably, a truism. ​So, if we are to be convincing in our argumentation, we need to write well. But how?
    The first thing to acknowledge is that writing is a craft. And, as with any other craft, proficiency is something that emerges over time, as principles are learnt and applied in practice. Look to others who write well, and glean from them. Seek feedback from your readers too, and make adjustments. 
    I have long relied on the guidance of William Zinsser (1922–2015), especially that offered in On writing well​. Another great source is the Blue Book of Grammar and Punctuation, which provides specific instructions. How do you ensure board reports and business proposals are well written, and what tools and approaches do you use?
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    Do you have a question about governing with impact, or driving organisational performance?

    Accountability Corporate Governance Decision Making Director Development Effectiveness Governance Leadership Performance Tough Questions
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    One of the great joys of being an independent advisor is the opportunity to spend time with people from a wide range of backgrounds; business and social experiences; walks of life; and, in my case, countries and cultures. The depth and breadth of humanity never ceases to amaze me. Paradoxically, a common thread runs amongst the diversity: people intent on improving organisational effectiveness and making a difference spend lots of time asking questions, lots of questions.
    When a question is asked from the floor after a keynote talk, during an advisory engagement or professional development workshop, or as part of a confidential discussion or informal chat, something mysterious happens: Both parties learn! This should come as no surprise, for no one has all the answers—although some people behave as if they do.
    Recently, I posed several questions board directors may wish to consider. ​The response to that musing has been overwhelming, so I thought an open invitation might be in order.
    ​If you have a question about any aspect of corporate governance, strategic management, board craft or the challenge of governing with impact—either personally or on behalf of a board you serve on—please ask and I will gladly respond. Use the comment link here or, if you prefer, send an email. Let's learn together!
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    The questions we ask matter, do they not?

    Accountability Corporate Governance Decision Making Effectiveness Governance Strategy Tough Questions
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    The role of company director has become quite visible over the past couple of decades. From hardly rating a mention in the popular press or polite society fifty years ago, public awareness of boards and directors has blossomed in recent times. Questionable practices and failures of various kinds have seen boards become a source of board fascination and disdain—targets of criticism in the eyes of the business media, political class, regulators and, increasingly, the wider public. Activists, institutional investors, proxy advisors, and other stakeholders and supernumeraries have sought to exert influence and press various claims too, on both company priorities and board decision making (think: ESG, disclosures, DEI, climate change, net zero, and more besides).
    While some boards have responded well to changing circumstances, others have battened down the hatches. Defensiveness can be an important response at times, but it is not a sustainable tactic given the mandate to govern (provide appropriate steerage and guidance to achieve a specified goal).
    If directors are to steer and guide effectively, they need to consider information, ask questions to check progress and elicit missing information and, having debated various options, make decisions. This is crucial, for the questions directors ask may be the difference between effectiveness and ineffectiveness in role. The following list provides a useful starting point for boards intent on governing with impact:
    • Why does the company exist (purpose)?
    • Are we doing the right things, to achieve agreed purpose?
    • Are intentions, decisions and instructions being actioned as planned?
    • Are expected benefits [from a prior strategic decision] being realised?
    • How are we monitoring and assessing signals, disruptions, and trends?
    • Are we attuned to stakeholder expectations and preferences?
    • How will shareholders and legitimate stakeholders be kept up to date?
    • What of non-business matters, such as, funding family activities, or social or environmental concerns?
    • Is enough time being allocated to scenario planning and strategising?
    • Is resource allocation aligned with desire outcomes?
    Do you agree or disagree—I welcome your thoughts on this! Also, what other questions have you found useful?
  • Published on

    Our own worst enemy?

    Accountability Corporate Governance Decision Making Director Development Effectiveness Governance Performance Tough Questions
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    I have spent four days in Australia this week, meeting with directors, advisors and a couple of institutional leaders in two state capitals. While the weather has been great, a few storm clouds [metaphorically, on the governance horizon] were apparent. Whether these are serious problems, or just differences of opinion, they strike me as being worthy of discussion. I’d be delighted if you would ponder the following situations, and share your thoughts to help me understand why boards, more often than not, erode value.
    • Confusion over what governance is:​ A meeting with a sixty-something director, with over two decades of experience, set me on my backside. He explained that “most of my colleagues understand that corporate governance and compliance are, essentially, interchangeable words”. He went on to say that board directors don’t spend enough time thinking about the future (agreed), and that the solution is to give governance a radical overhaul. When I asked, he said that governance needs to be redefined, “because the expectation is unrealistic.” He suggested advisory boards have a significant role to play, for directors cannot hope to keep up with the pace of change, and someone needs to advise the CEO anyway. I opined that everything he suggested was, in fact, within the remit of governance (to steer, to guide, to pilot), but he wasn’t having a bar of it. Governance, in his mind, is compliance; and the board’s job is to keep the CEO “safe”.
    • Regulating one’s way to performance: A meeting in Sydney, with three people familiar with regulatory frameworks—all of whom are professionally trained as lawyers—caught me on the hop. All three agreed that the imposition of codes and regulatory frameworks was necessary, because “statutes don’t go far enough.” The implication was that rules drive compliance, and that compliance with rules equates to performance. In other words, follow the rules and the organisation will thrive. I was shocked. Rules are, I think, boundaries—nothing more. How can one possibly thrive if the extent of their contribution is merely to ensure they live within the rules?
    These examples demonstrate, to me anyway, that questions of what corporate governance is, the role of the board and how governance might be practiced are far from resolved. Directors and their advisors seem to be their own worst enemies. Flawed understandings of what governance is (the provision of steerage and guidance, to achieve an agreed strategic aim), and how it might be practiced, remain serious barriers to boards fulfilling their mandate, which is to ensure the enduring performance of the company. Why do some directors’ institutes, advisory and consulting firms, regulators, academics, and media commentators continue to discuss “best practice” and promote various matters that have little if any direct impact on achieving sustainably high levels of organisational performance? Surely attention needs to be on helping directors and boards do their job well, n’cest ce-pas? I have a few ideas to crack this problem, but I’m keen to hear what you think.
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    Artificial intelligence and board work

    Accountability Artificial Intelligence Corporate Governance Decision Making Effectiveness Governance Research Update Tough Questions
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    Several times in the past six weeks, I have been asked to share some thoughts on artificial intelligence and board work; specifically, the impact of emerging AI capabilities on corporate governance and, even, the need for board of directors. The rapid emergence and now widespread awareness of ChatGPT has been a catalyst for many of these enquiries, it seems. I have been fascinated by the unfolding situation, not only because of a longstanding interest (I studied artificial intelligence at university nearly four decades ago), but also the speed by which awareness has spread, and expectations climbed to such stratospheric heights, is unprecedented. Claims have been made that computer-based tools will soon supplant the need for human directors and, with it, board meetings. Some, especially those with jaundiced perceptions of boards, their work and any value they add, have confided this may be a good thing. Others have reserved judgement—for now at least—saying the situation is far too fluid and complex to make anything approaching an informed or reliable decision, much less widespread change.
    That so many people are questioning 'conventional' corporate governance practices feels a little bit like ground hog day. While I do not claim any particular expertise in the topic of artificial intelligence, I have read widely, asked many questions (of myself and others) and pondered both the purported capability and potential impact (of artificial intelligence) on board work. ​
    The departure points for my enquiry has been, as always, definitional. What is artificial intelligence, and what conception of governance does one hold? My responses to these questions are as follows:
    • Artificial intelligence: the development of computer-based capability to perform tasks that normally require human intelligence. In effect, the simulation of [aspects of] human intelligence by machines.
    • Governance: the provision of steering and guiding an organisation [towards an agreed goal], by the board of directors. In effect, governance is the work of the board—the means by which companies are directed and controlled.
    So, the proposition to be considered is, "Can a computer replace a social group charged with steering and guidance an organisation in a complex and dynamic environment?"
    Those people wondering whether AI might be a viable mechanism to support or even replace boards have much to ponder. What is the role of a board of directors in companies? How might the operating context beyond the organisation be assessed? Where does accountability for statutory compliance and overall performance lie? And, to whom should the Chief Executive and management of the company report? If one holds the view that the board is the ultimate decision-making authority within a company (a responsibility delegated by shareholders), and that this (decision-making despite uncertainty and ambiguity) is 'core business', the board has a vital role to play.
    My early training in computers and technology taught me that computers respond to instruction; they cannot 'think' autonomously or handle ambiguity, and they lack feelings and intuition. They do what they are 'told'; if the 'telling' is poor, the result is likely to be poor: the phrase "garbage in, garbage out" springs to mind.
    But that was then. Computing power is far greater today than it was even five years ago, much less forty. Has the evolutionary development of computing capability reached the point whereby computers can displace humans? For a large and growing list of tasks  and activities, yes, of course. The analysis of data is a relevant case in point. But for many other enquiries, the answers remains a resounding no. How might a computer make sense of the unspoken feelings, intuition and biases of staff, customers and board directors, and reach a credible decision? For this, a much higher order of capability is necessary. And, with that, I stand with those reserving judgement. 
    What of the future? AI may become a viable mechanism to expedite board decision-making, of course. But the likelihood  of directors being supplanted any time soon is low (those failing in their duties excepted). For that, artificial general intelligence (AGI) is likely to be necessary, and some moral and ethical questions will need to be resolved as well. If that is achieved, I may take a stronger position.
    ​Regardless of whether this muse is sound or not, directors, shareholders, regulators and their various advisors need to be alert, because the situation may change quite quickly.