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    Purpose & strategy: In pursuit of performance

    Accountability Decision Making Governance Performance Strategy
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    One of the joys of my 'work' is that I get to journey with boards and executive managers as they wrestle with some pretty challenging questions. Whether the journey involves briefings, phone discussions, meetings over coffee, professional development sessions or facilitated workshops, the goal is generally consistent: to gain understanding, in pursuit of increased effectiveness and, ultimately, better business performance.
    By way of example, I was recently invited to work assist ChildFund New Zealand (*), a social enterprise committed to the ideal of eradicating child poverty. The board and senior managers gathered in a modest setting—the administration office—to strip back the layers and, in so doing, re-discover the organisation's reason for being (purpose) and develop strategy to achieve the identified purpose. The intention was to reach agreement in principle on the core elements by the end of the day, so management could form up a coherent strategy document for discussion with the board and subsequent approval. 
    We got underway at 9.00am, as planned. Some 116 man-hours of focussed and, at times, intense effort later, it was 5.00pm. I won't mention what was discussed or decided, other than to say agreement was reached on most of the big questions. Once the strategy elements are drafted up into a suitable document and approved (there will be a couple of iterations between management and the board to tidy up loose ends, no doubt), attention will move to implementation. The ChildFund board intends to use the approved strategy as a frame, to both resource management and hold it to account (which will include monitoring strategy implementation and verifying that the expected outcomes and benefits are actually being achieved).
    Tips for effective purpose and strategy workshops:
    • Comfort zone: Purpose and strategy workshops can be draining, because they 'force' people to think about the future, often beyond the square. If possible, book an external venue to minimise disruptions (not possible for ChildFund).
    • Preparation: Workshops can be incredibly fulfilling, leading to a real sense of achievement, but only if participants have prepared well beforehand.
    • Structure: A straightforward agenda and a proven framework (not to mention good food and coffee!) let participants know what's coming up.
    • Mindset: High levels of engagement and critical thinking are needed if the group is to explore, discover, listen and debate effectively; maintaining an open mind in search of shared understanding.
    • Facilitation: The use of an external facilitator (who is committed to the goal but neutral on the result) enables the entire group to concentrate on the goal or task at hand.
    • Scope: The importance of resolving purpose and strategy cannot be understated. Purpose without strategy is, simply, an aspirational vision; and, strategy without purpose leads to busyness and wasted resources. 
    (*) It is not my usual practice to name clients! However, when one of the ChildFund NZ directors posted a picture on social media of the board and managers gathered around a whiteboard, the occurrence of the workshop and my involvement became public. Regardless, the details of the discussion remain confidential. 
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    Upcoming workshop series: Powerful Governance

    Decision Making Director Development Governance
    I am delighted to announce my involvement in the Powerful Governance director development workshops. Powerful Governance is the brainchild of Heidi Börner, an accomplished business advisor with a strong health and safety pedigree. The workshop is designed with the boards of privately-held businesses in mind, to help synthesise the essential elements of effective corporate governance and a strong health and safety culture, leading to a more complete understanding of how to achieve high business performance outcomes.
    The next workshop is being held in Rotorua on 15 August. For pricing  and venue details, and an outline of the workshop programme, check the Powerful Governance website. You can register here. NOTE: The workshop is approved for NZTE capability development credits, which means participants may qualify for up to 50 per cent discount, and claim CPD hours to boot!
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    On effectiveness: How is your board tracking?

    Accountability Decision Making Governance Performance
    Whether or not one is consciously aware of it on a daily basis, time marches inexorably on. Indeed, 60 per cent of 2017 is now consigned to history.
    That time marches on is a healthy reminder of the value of ongoing reflection, especially at the board table. It's really important for boards to understand and respond to actual performance in the context of agreed strategy, and to nip any variances in the bud early. To that end, how is your company tracking towards goals established for the year? And how is your board performing? Here's a few questions to kick start the board's reflections:
    • Is the company's approved strategy being implemented as expected?
    • Are the expected results being achieved?
    • Are the expected benefits being realised?
    • How effective has the board itself been in both fulfilling its duties and adding value?
    Beyond these questions, it may be helpful to think slightly more broadly. Earlier this year, I wrote several articles (below) to highlight some of the challenges that directors said they had struggled with 2016, none of which are independent from the questions above. As several boards have been in touch recently to discuss points mentioned in the articles (thank you), it seems appropriate to re-publish the links, as a resource for other boards reflecting on company performance and board effectiveness.
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    Who[ber] took their eye off the ball?

    Accountability Decision Making Governance Performance Strategy
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    So, Travis Kalanick has left the building, no longer the chief executive of Uber, the company he co-founded. The company, which makes money through the use of a ride sharing application, has grown rapidly in recent years. From a good idea, the company has become a colossus valued at over US$65 billion. Kalanick deserves credit for Uber's rise. However, Uber's reputation is not without tarnish; reports of a toxic culture, sexism and several scandals have blotted its copybook. The co-founder's pugnacious style hasn't helped either. 
    Uber's widely-reported missteps raises some challenging questions about the role and function of the board of directors; questions that are strikingly similar to those asked following the Wells Fargo fake accounts scandal and the collapse of Wynyard Group, both in 2016:
    • Why was shareholder direct pressure necessary for action to be taken?
    • Why did the board not act earlier? The problems were not a secret (they had been widely reported over many months) and several managers have departed recently (a strong signal of underlying problems).
    • To whom did the board think it was accountable, or was accountability not a consideration?
    • In law, directors get one vote each, so why did one director (the CEO) wield so much control over the board? (That debate occurred within the boardroom, from one director anyway, is acknowledged.)
    Uber was founded on a strong vision and its grew rapidly. The board was technically diverse and debate did occur in the boardroom at times, yet the evidence suggests that board lost its way and became ineffective.
    Though tragic, the Uber situation is instructive for directors and boards elsewhere. Power seems to have been a significant factor.  ​If directors are serious about fulfilling their duties well—especially acting in the company's best interests and pursuing the future performance of the business—some shared understandings are crucial:
    • A commitment to pursue the agreed purpose of the company
    • A clear and coherent corporate strategy (to achieve the agreed purpose)
    • The role and function of the board (i.e., the practice of corporate governance)
    • A commitment to the tenet of collective responsibility
    • A strong and healthy workplace culture
    However, the presence of these factors is insufficient in terms of predicting effectiveness or performance. Ultimately, the effectiveness of any board is a function of what the board does and how directors behave. Research is starting to understand the mechanism of corporate governance, but causality remains elusive. Directors take their eyes off these considerations at their peril.
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    Speaking engagement in London

    Accountability Conferences Decision Making Governance Performance Research Strategy
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    This is a brief note to advise that I will be in London next week, to speak at the ICSA Annual Conference. The conference is being held at ExCeL, London, over two days (4–5 July).  Programme details are available here.
    I'll be speaking on the first day of the conference, at 12noon. My topic is strategy, from the board's perspective. Here's the session summary from the programme:
    Good strategy vs bad strategy
    ​Often in business, boards confuse lofty ambitions, challenging goals and enticing vision with strategy. Good strategy encompasses these elements but also offers a compelling road map to achieve goals and overcome barriers to success. Here we look at some of the key points to consider when establishing strategy.
    Sound interesting? Come along, I look forward to meeting you.
    Note: I'll be in London Monday 3rd to Thursday 6th inclusive, with some free time both during the conference, and immediately before and after. Please get in touch if you'd like to meet up (day or night) to ask a question; discuss an aspect of corporate governance or strategy; learn more about my research on boards and business performance; or, simply have a chat over a coffee or a drink. I'd be delighted to hear from you.
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    Boards and strategy: taking in the long view

    Accountability Decision Making Governance Management Performance Strategy
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    During the last month, I have had the privilege of working with four different boards and management groups, helping them wrestle with why the company they govern exists (its purpose, or reason for being) ahead of formulating strategy to pursue the agreed purpose. All four engagements have been invigorating, revealing many insights and much passion (and debate!) within the assembled groups. 
    However, three troubling signs became apparent amidst the boards' commitment to the cause. These signs, which are not uncommon, have the potential to stymie the quality of the resultant strategy and management's ability to implement the approved strategy. The following comments highlight the issues:
    • A propensity for detail: Most of the discussions quickly devolved to specific examples and detailed aspects of the company's products, customers and staff: the perception being that more detail is helpful for effective implementation and to mitigate risk. This is not uncommon: strong leaders like solving problems. However, humans tend of overestimate their ability to predict the future, and boards and managers are no exception. Further, implementation is a task for management, to be actioned after purpose is determined, strategy formulated and resources appropriated. Also, a strong focus on detailed elements has the unwanted effect of taking the gaze away from the big picture, the wider context within which the company operates, and in so doing introducing new risk not mitigating it. Left unchecked, the resultant strategy is more characteristic of a detailed list of activities than a high-level, contextually relevant overview of how resources will be deployed to achieve the agreed purpose.
    • Confusion over the board–management nexus: The usage of the term governance over the last 15–20 years has become widespread (in both appropriate and inappropriate contexts). Usage has reached the point that 'governance' has become a panacea for all manner of corporate ills including poor company performance. The board–management relationship has become clouded, with the two parties claiming or denying tasks, often based on a poor understanding of what governance actually is. If the board and management are to work well together, a well-defined of division of labour is required, to allocate to tasks explicitly to the board, to management, or to both.
    • Shortening the horizon, to reduce the odds of failure: This sign is closely related to the first one. If those responsible for formulating strategy are not looking well into the future, identifying emerging trends and possible responses, they are doing themselves and their company a gross disservice. Audacious goals and Roger L. Martin's words are ringing in my ears: "True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success." 
    The temptation to embrace detail, confuse the roles of the board and management and shorten the view remain very real challenges for companies around the world. If boards are to fulfil their responsibilities well, a clear sense of purpose supported by a coherent strategy is vital—regardless of the company's size, sector or span of operations.
    The great news is that increasing numbers of boards are starting to realise that material benefits are available if they contribute directly to both the process of determining purpose and formulating strategy. However, boards have some way to go before the value they have the potential of adding is actually realised, if the evidence of the past month is any indication.