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    The board's contribution to strategy and business performance: Some thoughts to ponder

    Accountability Governance Performance Strategy
    The topics of strategy in the boardroom and the influence that boards have (or not!) over firm performance have been in the minds and on the lips of many people in recent months. From high-quality articles on websites and respected magazines, to academic research papers, speeches at conferences and symposia and casual thoughts expressed in private, the conversation has ebbed and flowed.
    That these topics remain on the radar suggests that directors are starting to recognise that the board might have a role beyond approving strategy and monitoring performance. But what role? To assist the discussion, here are some thoughts published on Musings in the last twelve months:
    I hope this collection of links is of some use. Please contact me if you would like to pick up on any of the points made here or elsewhere.
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    Even small milestones are important. They mark progress.

    Governance Phd Research Update
    Just over three years after first setting out, I arrived at a small but significant milestone on my doctoral research today. The candidate final draft of the thesis (a 'mere' 336 pages) was sent to my supervisors for their detailed review. I'm hoping that, subject to relatively minor edits and changes, this draft will be submitted for examination.
    Tomorrow will be my second day off in 2015. After a steady diet of 14 hour days, my wife is not sure what I'll do with myself. I've got a fair idea: it'll probably involve a Colnago, and I doubt there will be a word processor in sight! Thank you to everyone who has provided support to this point. The journey is not over yet, but I'm hopeful that the end is not too far away now.
    The personal satisfaction of arriving at this point is palpable: Some of the numbers: read over 1000 articles; listened to over 6GB of audio recordings of board meetings and interviews; read and analysed over 900 printed pages of documentation; untold hours spent wrestling with candidate theories; and, written over 83,000 words (this is what remains, I've probably written and scrapped at least 20,000 more than this). The going has been tough lately, because writing up a thesis, in an academic style is not my forte. A couple of months ago, I expressed some frustration. Today, the sun shone again, and it was good.
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    Diversity: what is the endgame?

    Governance Leadership Performance Societal Wellbeing
    Diversity is a topic that has gotten under people's skin, and rightly so. Much has been written, spoken and argued in recent times. Many blog rolls and column-inches have been expended by people arguing for or against various physical incarnations of diversity in the executive suite and boardroom. Clearly, the 'diversity' seed has sprouted. But for what purpose? What is the endgame? And, what should the endgame be?
    Many have argued that that the presence of women on boards is causative to increased business performance; others have argued that no such causation exists. Actually, the academic research is mixed: it shows positive, neutral and negative correlations. This should be of no surprise. That such a blunt stick (a single observable attribute: gender) might make a consistent difference in a complex, socially-dynamic system defies belief. I have mused on this in the past. 
    Thankfully, the argument is now starting to mature, beyond the physical aspects of diversity (gender, race, ethnicity, age, etc.) to the identification of underlying attributes and qualities of capable executives and directors, to understand how directors contribute and work together. However, another question lies in wait: the 'so what?' question. What is the purpose of appointing women onto boards and increasing the apparent diversity in executive suites? Is the motivation political (equality)? Or to maximise profit for shareholders? Or is there some other sustainable driver that needs to be brought into focus?
    Businesses exist to provide a product or service and, in so doing, provide a (hopefully!) healthy return to those who invested in the business in the first place. Is this the endgame? It might be for some. However, as diversity for diversity's sake is not sustainable, neither is profit for profit's sake. Shareholders do not live in isolation from others in the community. If shareholders 'win' (through the accumulation of profits), it stands to reason that losers will emerge elsewhere.
    The challenge for all of us to to lift our gaze beyond simple measures like the number of women on boards or quotas and, if we dare, beyond profit as the primary measure of business performance, to think about the endgame. Phil O'Reilly, CEO of Business New Zealand, recently said that the purpose of capitalism is greater than profit (although that is a reasonable and necessary output). He said that the objective was strong communities. Could that be the endgame we need to focus our attention on?
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    Petrobras initiates #corpgov review, albeit from the inside

    Accountability Ethics Governance Performance
    Petrobras, Brazil's state-owned oil company, hit the headlines today, saying that it intends to revise its governance and organisational management model. The company has had problems with corruption and, just recently, employed a governance, risk and compliance (GRC) officer, its first.
    Interestingly, the review will be conducted by a "group of executives with experience in various areas of the company". This sounds reasonable enough, until you consider that the stated problem is corruption. The review is being conducted by the very people that may (or may not) have been involved. How much confidence should one place in the internal panel isolating the problem(s) and, having done so, the Petrobras board making changes to get its house in order? Usually, such reviews are conducted by external parties, if they are to be afforded any credibility.
    This will be interesting to watch.
  • Published on

    On consultants and selling #corpgov short

    Accountability Governance Leadership Performance
    Why do consultants spend so much time on hobby horses, promoting their own capabilities and frameworks? Shouldn't the focus be on thinking about and promoting options that are genuinely in the best interests of the clients and marketplace they seek to serve? Take this example, which suggests that good governance is built on good information and data governance. The author cites several technical frameworks and acronyms (COSO and COBIT are mentioned), none of which I understand. 
    That a strong focus on standards and frameworks might be sufficient to ensure good governance (an oft cited but rarely defined term) is misleading in the least. Necessary maybe, but sufficient? No. The root of governance emerges from the Greek word kubernetes, which means to steer or pilot, typically a ship. This suggests governance is an activity associated with movement; with setting direction, navigating or guiding something—presumably towards a longer-term or major goal, or at least with a purpose in mind.
    I have no doubt that frameworks are necessary within organisations to support regular business activity. However, to imply that good governance (and, presumably, business performance, although the author makes no mention of this) will emerge from the application of standards and compliance frameworks is misleading. Looking backward (monitoring) or to standards (compliance) may satisfy egos that work is being performed, but to think that either will drive performance is folly. Compliance with standards can only ever achieve one of two things: compliance or dissidence. Compliance-based frameworks (Sarbanes-Oxley, amongst others) did little to prevent the GFC of 2007–08. Some say the focus on compliance may have contributed to the failures. If businesses expect to achieve certain desired outcomes, the board needs to look to the future by building appropriate plans (strategy); providing resources to the chief executive; and, monitoring and verifying the agreed strategy is being implemented and expected performance targets achieved.
    Consultants that continue to promote compliance-based technical frameworks as 'solutions' and associate them with 'good governance' are, quite frankly, doing their clients a disservice. Business leaders need to test consulting proposals thoroughly, by asking how (ask for specifics, don't accept general statements) the suitor's proposal will assist with the achievement of the business's strategy. This will probably be threatening to some consultants—but if it moves the focus onto business performance and economic growth, wouldn't that be a good thing?
  • Published on

    Paper accepted onto EURAM conference programme

    Conferences Governance Performance Research
    I am thrilled to announce that a paper written earlier this year, entitled Boards, strategy and business performance: Observations from inside boardrooms, has been accepted onto the programme of the prestigious European Academy of Management (EURAM) conference, to be held in Warsaw, Poland on 17–20 June. A copy of the abstract has been posted here. Some 1350 papers were submitted for consideration, so to be have been selected and asked to speak at the conference is truly an honour. Thank you to the reviewers and track chair who considered the paper sufficiently worthy.
    This conference becomes the third (of three) that I will be contributing to in June: 
    I will be on the ground in the UK and EU to continue the corporate governance discussion from 2 to 20 June, with some time available between conferences. If you would like to take advantage of my proximity—as a speaker or facilitator, or to seek some advice—please contact me.