Leadership - Peter Crow | Helping boards govern with impact

Published on: 5 April 2016

Would you like to learn more about #corpgov and board effectiveness?

Are you based in or near London or Paris? Do you want to learn more about board effectiveness, corporate governance and how boards can exert influence from and beyond the boardroom? If so, please read on.

In a few weeks I will be visiting London (24–31 May) and Paris (1–4 June) to speak with directors and trust board members about board practices, board effectiveness and emerging trends in corporate governance; share the results of my latest research; attend meetings; and, to present a paper at the EURAM conference.

If you have a question (perhaps along the lines of these ones below) or a request and would like to take advantage of my proximity, please get in touch. I'd be delighted to hear from you and to schedule a meeting.

Do you want to increase the effectiveness of your board?
Would you like to know about my latest research on boards and firm performance?
Do you have a question about boards, board practice, corporate governance or a related topic?
Do you want to explore how to apply some of the suggestions I've shared on Musings?
Are you looking for a speaker to address an event or conference sometime in the next 12 months?

If you've answered 'yes' to any of these questions...you know what to do. I am at your service.

Published on: 29 March 2016

Does good governance require a fresh approach?

I've been pondering this question for quite a few years now, since reading a seemingly endless stream of articles about the global financial crisis of 2007–2009 published in the popular press and academic literature. Curiously, many authors identified the board as a source of failure (of corporate governance), yet few if any have offered positive contributions to put corporate governance back on the tracks. This apparent void was one of the motivations of my doctoral research quest.

However, from time to time, articles do stand out, because the authors speak out. Their comments may not be popular, but take a stand they do. Recently, the ICSA recognised one such author, Ruth Keating, who openly asked the question in a recent essay competition. Two sentences towards the end of her well structured and very readable essay say it all:

“Corporate governance can do better, and with significant investment, capital and jobs on the line, it must. Good governance requires a new approach, because governance has become a formality to be satisfied rather than something which can be hugely valuable."

My hope is that, by openly asking the question (as Ms Keating has) others might join the debate. One outcome could be a new understanding of corporate governance and a genuine commitment by the board to add value. Who knows where this might lead, perhaps even to a new normal, whereby boards expect to exert influence from and beyond the boardroom. If that is achieved, a new dawn might not be too far away.

Published on: 1 March 2016

What does the Age of 'self(ie)' mean for business?

One Saturday morning, about fifteen years ago, my elderly father-in-law and I sat in the morning sun, sharing a few stories over a cup of tea. He was asking about my then burgeoning advisory business and family life. I was interested in hearing him reflect on his experiences in business, particularly his career-long journey with the same employer—from a junior staff member to, eventually, chief executive.

As he spoke, Bill reminded me that he only ever had one employer, and that although he had been blessed to contribute at many levels he had only ever completed one job interview, that being when he first got a job. He went on to talk about the power of team over individual, and of loyalty to both your employer and your own principles. Much has changed since he retired in 1984, not the least of which has been the erosion of the values that served as Bill's North Star throughout his career.

Today, most things are negotiable. For many, the motivation has changed, from providing service (to the employer) to self-service. Never has this been more apparent in the everyday behaviours of staff, particularly the younger generation. If we don't get want we want, or if we get a better offer elsewhere, we act. That staff and customers are more interested in self(ie) has huge implications for productivity and value creation in the longer-term. While team productivity is a matter for the chief executive, value creation is the responsibility of the board on behalf of the shareholder. How is your board wrestling with this? Does your board regularly allocate time to understand the changing environment, consider strategic options and make strategic decisions? Companies that expect to thrive in the future need to address the emergent challenge of 'self(ie)'.

The best place to start the discussion is in the boardroom.

Published on: 14 February 2016

How can NEDs / board members stay strategic?

Much has been written in recent years about the governance of organisations, boards and directors. Many different views have been expressed. With it, different understandings of the function of boards have emerged. In some quarters, 'governance' has become a panacea for all manner of organisational ills. Others speak and behave as if the board is a beating stick to 'keep the executive honest'. Relatively few have held true to the original concept (kybernetes: to steer, to guide to pilot). Consequently, it is little wonder that some new board members can be unclear about their role.

The task of governance includes decision-making that affects the long-term future of the organisation. In other words, strategy and strategic decision-making. While the plethora of understandings abound, the question of how NEDs and board members ensure they stay strategic remains.

I had the honour and privilege of hosting an on-line forum recently to discuss this question. A large community of UK-based board members gather every week to discuss governance matters of interest. A summary of the discussion that I was involved with has been posted here, on Storify. Enjoy!

If you have any questions, or want to explore matters further, please get in touch.

Published on: 7 February 2016

Making smart decisions in the boardroom, on less-than-complete information

One of the enduring challenges that directors face every time they meet together as a board concerns decision-making. How do directors make smart decisions when 1). they often lack crucial information, and 2). the environment is fundamentally both complex and dynamic? The answer lies in the group of directors' (the board's) ability to make decisions, as one.

Why so? Legally, the board is a collective of directors. Individual directors make contributions to discussions and debates, but not decisions. It is the board that makes decisions. This transition—from the singular (individual directors, contributions, inputs) to the collective (the board as one whole, decisions, outputs)—occurs when directors meet (i.e., in board meetings, when the board is in session). If the transition is to occur well, all of the directors must be actively engaged their work—working together towards the decision, as one.

Group decisions are much harder to make than individual decisions. Reaching agreement can be a minefield, especially if information is missing, trust is low or if directors are more interested (sometimes covertly) in pursuing multiple agendas or representing constituencies rather than acting the best interests of the company (as the law requires).

How can boards get past this challenge, to make effective decisions on a reasonably consistent basis?

Recently, CGMA (Chartered Global Management Accountant, a joint-venture between AICPA and CIMA) tackled this question head on. Their report has just been released. You can read a copy of the executive summary here, or the full report here. The authors make eight key recommendations for effective group decision-making:

Build greater trust
Value the non-financial data
Extract relevant data
Promote collaboration
Incentivise the medium- and long-term, too
Engage external stakeholders
Review the outcomes
Be patient

I commend this report to you, especially if effective decision-making has been a challenge for your board over the past year or so. Share it with your board colleagues and ask the chairman to schedule a discussion at an upcoming board meeting. If nothing else, you'll bring the expectation of effective decision-making out into the open. Or, the board may find that some behaviours or expectations need to be adjusted, and that a formal board review is appropriate. The discussion may also expose some larger but hitherto hidden issues including that the board may not be clear on the purpose or the strategy of the organisation. If this is discovered, some external advice and assistance may be in order.

Regardless of the discussion and the outcome, I suspect it will time well spent.

Published on: 19 January 2016

Can strategy and execution be usefully distinguished?

Roger L Martin, a respected professor at Rotman School of Management and co-author of Playing to Win, has put the cat amongst the pigeons, with this commentary, itself a response to this widely circulated article. The authors of the original article reported findings from a study, which showed that only eight per cent of leaders are good at both strategy and execution. Martin contends that most leaders who are very effective at either strategy formulation are also very effective at execution. Quite a different view. Two different perspectives. Who is correct?

As with any report involving statistics, context is crucial. If you consider all leaders (as Leinwand, Mainardi and Kleiner did), only eight per cent are "very effective" at both formulating strategy and executing strategy. However, if you only consider only those that are "very effective at strategy", fully two-thirds are also good at execution (Martin's point). Thus, both authors are 'correct'. But which commentary is more helpful to leaders and those intent on achieving business success?

The shocking statistic is that just sixteen per cent of leaders are "very effective" at strategy formulation or execution or both. Turbulent times demand outstanding leadership, both to determine strategy and to ensure it is executed with excellence. Poor, neutral and even "effective" contributions have little chance of moving companies toward their goals if they are competing against "very effective" leaders. Consequently, 84 per cent of leaders will be found wanting (notice the Pareto Principle?). Rather than debate statistics, it may be more useful to move the discussion to discovering how to move more leaders into the "very effective" sector.

Another perhaps more important question—for boards of directors in particular—centres on Martin's assertion that strategy and execution are the same thing. Can the two tasks can be distinguished?

Strategy formulation and execution are two of the four pillars of strategic management (development, approval, implementation and monitoring). My research suggests that business success is dependent on two things: having a clear sense of purpose and an effective strategy, and great execution. The former is an important task that boards and managers should work on together and the latter is the domain of management (only) once strategic decisions are made by the board. However, some flexibility is required because things change. Decisions and adjustments are required from time to time. If companies are to react and respond quickly, strong leadership is crucial to avoid mayhem. So where does that leave Martin's assertion, that formulation and execution cannot be usefully distinguished? What is your experience?

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