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    What should boards do about the emerging "Internet of things" trend?

    Leadership Strategy
    Boards need to get their heads around this development, and quickly, lest the companies they govern get overtaken as consumer preferences change. The pressing question is "how":
    • How should boards respond to this seemingly significant trend as they consider strategy and the future of the businesses they govern?
    The desire to connect everything to everything else, via the Internet, appears to be alive and well amongst some sectors of society. The name that's been given to the emerging trend is the "Internet of Things". Essentially, the concept is one whereby everyday devices have embedded computers and two-way Internet connectivity, thus enabling them to send and receive data. If this proposal gathers sufficient steam—certainly the term seems to be entering the mainstream of business consciousness if these Forbes and Guardian articles are any indication—uber-connectedness is likely to have a significant impact on businesses and business models and, consequently, the strategic choices that boards need to make.
    My suggestion: Find a business strategist with expertise in this area (not just a populist consultant or local self-styled "expert"), and a respected academic, and invite them to lead a discussion at your next board strategy day. If you need an independent facilitator, I'd be happy to help. Ask a few of your customers, suppliers and staff to join the conversation as well—their comments may surprise you!
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    What's actually more important: Longer-term value creation or shorter-term gains?

    Accountability Governance Leadership Performance
    Big box retailer, The Warehouse Group, is experiencing a bit of turbulence just now. The company has had a dream run over the past couple of decades. From its genesis as a single-store, The Warehouse Group has grown to become New Zealand's largest retailer. However, some tensions are starting to emerge. Some investors (actually, funds managers) are not happy.
    The company is currently rebuilding its business model to meet emerging customer and market demands. In 2011, the company embarked on a five-year 'turnaround' strategy under Group CEO Mark Powell. The strategy, which involves both acquisitions and a major refit programme in existing stores in order to provide enduring longer-term returns and capital growth, was approved by the board and it was well signalled to shareholders and the market. Yet some shareholders are making their expectations of ongoing share price growth and dividend returns quite clear.
    The emergent tension has the potential to be a major distraction for the board and management. Clearly there are two views on the table. The pressing priority for the company is that the shareholders, board and management are united in their pursuit of one agreed strategy. So, which view should prevail?
    I'd like to suggest that the longer-term view needs to prevail, because that's the agreed strategy and it's probably the option that better suits the best interests of the company. However, I am not a funds manager trying to eek the most out of my 'product', the investment in the business. Ultimately though, if they are not satisfied with the performance of the business, the funds managers have several choices available including these three (amongst others, no doubt):
    • Make representations to the board and ask the board to review the strategy
    • Seek to appoint new directors to represent their interests in the boardroom
    • Offer their holdings for sale and pursue their interests elsewhere
    What do you think is an appropriate course of action, and why?
  • Published on

    Women on boards: more rhetoric

    Governance Leadership Performance Research
    The board and business performance discourse has been maturing over the twelve months or so: beyond various "blunt stick" theses that link certain structural and composition attributes of boards with improved business performance (women, board size, independent directors, CEO duality, et al), towards more general (and more subtle and far more complex) notions of diversity, behaviour and interactions in the boardroom. The maturing that has started to occur is welcome. Most of the time, when we don't understand something, we start by investigating the obvious (what we can see). Then, if answers are not forthcoming, we dig deeper. The maturing that I referred to in the opening sentence is the start of the digging deeper phase.
    The discourse has evolved in recent months, as people have begun to realise that answers to social problems rarely involve inanimate constructs like percentages. However, the conversation took an unexpected turn this week, with the publication of this well-written article in the Washington Post. It picked up one of the blunt sticks that I thought had been put down. The rhetoric is laudable, and it may well sell newspapers, but the argument is somewhat misguided.
    McGregor and Schulte's article starts by commenting on the percentage of US board seats occupied by women: 19.2 percent. So far so good. It's only when you read the article for a second or third time that the underlying (and unstated) thesis—that more women on corporate boards is good—becomes apparent. It may be, but I doubt that the presence of women in boardrooms per se is the answer to the question of how boards can or should influence business performance. Rather, women are far more likely to be a proxy for another underlying quality or social mechanism that cannot be spontaneously observed. A diversity of opinion and life experience, to enhance boardroom debates, is one likely possibility. However, we don't know that yet.
    More research is needed, including longitudinal studies of what actually occurs in boardrooms (silent observation), to identify the underlying qualities of directors, social mechanisms and tasks completed by boards that, importantly, actually make a difference to business performance in certain circumstances. Then, and probably only then, will the rhetoric start to gain substance amongst directors and the wider community. In the meantime, articles like those written by McGregor and Schulte need to be consigned to the cutting room floor, so that there is plenty of space available for articles that dig deeper.
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    Boards and accountability: honoured to have article published

    Accountability Governance Leadership Management Research
    Several of the articles from the winter edition of Ethical Boardroom are now available online, including the one that the editorial board asked me to write, on accountability in the boardroom. Here's a snippet:
    The role of the director bears a weighty responsibility, so directors need to take their appointments, and the accountability that goes with such appointments, seriously. Most do, but some, clearly, flout the boundaries of moral, ethical, and in some cases, legal acceptability. Directors need to be beyond reproach. Clear demarcations of what is acceptable – and what is not – need to be established. This may mean that the curious propensity to collect directorships, as some badge of honour it would seem, needs to be called into question by shareholders and by the profession’s body. That directors with six or more appointments have any hope of providing any more than a cursory contribution is beyond us. The challenge, of course, is holding directors to account for this level of performance, among peers, in the public domain and through any legal processes that may be required.
    Click here to read the full article. Thank you to the editors for the opportunity to make a contribution. I hope it stimulates some debate and, in some small way, advances the understanding of how boards can and should contribute to business success. If you have any feedback, or would like to explore the issues raised in the article, please contact me.
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    That composition will be the #corpgov story of 2015: Really?

    Governance Leadership Performance Research
    Sorry folks, but I have just seen red. Rich Fields, a correspondent at Tapestry Networks, has just proclaimed that board composition will be the big corporate governance story in 2015. I'm surprised, really surprised. 
    For well over a decade now, the academic and practitioner communities have been exploring a wide range of board structure and composition options, in search of a causal link with business performance. Many attributes of boards and directors have been investigated including gender; CEO duality; independent director; board size; and, diversity, amongst others. Positive, neutral and negative associations have been reported in the research. Earlier this week, I wrote a thought piece on independent directors, and offered the following conclusion:
    A variety of conclusions are apparent in the research. Cause has not been established. It's a bit like saying that female directors cause companies to perform better. Increasingly, people are realising that board performance is more likely to be contingent on what directors do in certain situations than on who they are or any specific board structure or composition. Like gender, the independence attribute is likely to be a proxy for something else. We need to discover what that might be, so it can be used to qualify the suitability of director candidates and inform board performance assessments.
    Respectfully, I suggest Mr Fields needs to think a little harder about what is known already and what is yet to be discovered. Aspects of composition may be topical, but to suggest that board composition will be the hot topic is rather myopic. We need to move on, and turn over some other rocks, elsewhere.
  • Published on

    London and Europe, in early Spring

    Governance Leadership Performance Strategy
    I am sitting the United Lounge, in the new Queen's Terminal at Heathrow, awaiting the departure of my flight home after a very productive trip to England and Europe. In the last ten days, I have been fortunate enough to speak at the European Conference on Management, Leadership and Governance in Zagreb; refine aspects of the doctoral thesis; meet with executives from the US and UK to discuss board practice matters; discuss research opportunities with UK-based researchers; and, catch up with some research colleagues and make some new acquaintances. To top it off, I attended a Holy Communion Service at St. Paul's in London and was taken on a most wonderful tour of Winchester (the ancient capital of England), including the Cathedral where the da Vinci Code movie was filmed. While trips away can be physically and mentally demanding, and I am looking forward to returning home, my mind is thinking ahead to the next trip, such is the wealth of opportunity that presented itself over the last ten days. Here's a small selection:
    • I have been asked to address a class of Masters-level students at the University of Winchester.
    • A confidential recruiter has begun exploring the possibility of an appointment to a UK-based board.
    • An opportunity to collaborate on a research project, to explore the leadership–board nexus in multi-national companies has emerged.
    • I have been asked to make two presentations, to a board and to an executive team (two different companies), on the topic of strategy in the boardroom. 
    As a result of these opportunities (and a couple of others that I'm not at liberty to mention), I plan to return to the UK and Europe in the early Spring (probably in mid-March), hopefully with my freshly minted doctorate in hand. I expect to be based in London, and may stop over on the East Coast of the USA en route.
    If you would like to explore aspects of strategy in the boardroom, board practice or business performance; or to arrange a meeting or a presentation, please contact me directly. I can travel to any major centre in the UK, or in Western or Central Europe, if required. I look forward to hearing from you.