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    Where should thought-leadership for strategy lie?

    Governance Management Phd Research Strategy
    The development of strategy and strategic decision-making have emerged as core themes in my doctoral research in recent weeks. Regular readers will know I am investigating the governance–performance relationship, in an effort to explain the impact boards have on company performance (because we currently don't know).

    When one considers strategy and strategic decision-making, the question "Where should thought-leadership for strategy lie?" raises its head. One commonly-cited view is that the board should set vision and goals, management should develop strategy (for the board to approve), and then management should implement the approved strategy. Others say the board should drive everything and management should simply implement the board's wishes.

    Forming a view on this question is central to my research. So, what do you think? I'd value contributions from anyone with a story to tell!
  • Published on

    Expecting (start-ups) to fail is dumb

    Management Readings Societal Wellbeing Strategy
    One of the joys of being a researcher is that you get to read widely. Alongside the governance and research methodology material that comes across my screen every day, I see articles about related topics like philosophy, strategic management, start-ups and leadership. 

    One particular article about start-ups and venture capital caught my eye today. The WSJ correspondent cited new research from Harvard Business School that three out of every four VC-backed companies fail to return their investor's capital. That's right, three out of four. And that's the good news. The failure rate of non-VC-backed companies is worse.

    "Venture capitalists make high-risk investments and expect some of them to fail, and entrepreneurs who raise venture capital often draw salaries". Why is this? To my arguably naive mind, expecting a business fail is just plain dumb. Why aren't VCs more discriminating? Surely, some more effort up front, to assess an opportunity more rigorously and ensure a robust strategy is selected, would make sense? Or is that akin to asking an adrenalin junkie to avoid high-risk pursuits? Perhaps it is, but more so, perhaps it's time for the VC community to adopt a less cavalier attitude with what is often other people's money in the first place. I suspect the failure rate associated with pushing unsustainable ideas would decline. And if that happened, we'd all be better off, I'm sure.
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    When is a director no longer independent?

    Governance Management Research
    Does the holding of company shares automatically compromise a director's independence? And when is a director no longer independent?

    These questions have troubled shareholders, prospective directors, legislators, and researchers for many years. I suggest the answers depend on what one means by the words "independence" and "independent", because there is a world of difference between acting independently (independence of thought and decision) and being independent (no vested interest).

    If a director holds no pecuniary interest in the company then it is reasonable to expect them to act independently in their considerations, discussions and decision-making. Things can get a little more complicated when a director holds shares. They are no longer independent (by definition), however they may still act independently. In my experience, there is no hard-and-fast line, beyond which independence is automatically compromised. Some directors with small shareholdings (1–3%) struggle to act independently, whereas others with larger holdings (5–10%) seem to be able to act independently, even though they are not independent.

    I would be interested to hear the views of others, particularly behavioural specialists, to debate these questions, and determine whether finding answers actually matters (or not).
  • Published on

    Why do Boards focus on monitoring (vs. strategy)?

    Governance Management Phd Research Strategy
    A very interesting discussion is underway in one of the LinkedIn groups at present. It has arisen out of a survey conducted by PwC, which showed many discrepancies between what Boards actually do and what directors think they should be doing or concentrating on. While attitudes are starting to move, actual behaviours are lagging well behind.

    Several researchers and practitioners (including me) are exploring why Boards concentrate on monitoring and control, when the respondents said they want to spend more time on strategy. Others are discussing the Board's role in IT oversight.

    These are important issues for Boards. I suggest you have a look, and contribute your views!
  • Published on

    Detecting competitive threats early

    Management Strategy
    One of the challenges that many businesses face is keeping up with the moving competitive landscape—and matching strategy to the competitive environment. All too often, something changes and businesses don't see it coming.

    As with any potentially destructive natural events like earthquakes and tsunamis, businesses need to monitor the landscape carefully to detect the emerge of competitive threats early—to maximise their response. The helpful article published by HBR this week encourages strategists to think carefully about how tomorrow's industry could be structured. The world-class authors posed five questions to help work through this. I commend the article to you.
  • Published on

    Governance and professionalism: time to raise the bar

    Governance Management Societal Wellbeing
    Last week, I was invited, with 16 others, to help review a Competency Framework being proposed by the Institute of Directors. I commend this initiative, aimed at raising the bar. While competency of itself does not guarantee that any director will be effective, it is a move in the right direction.

    During the wide-ranging discussion, several participants suggested that governance should be professionalised, like medicine, accountancy, law and several other professions. I support these calls—strongly. Why? Well, stories like this get under my skin. While the majority of directors fulfil their legal and ethical responsibilities well, sadly there are a few bad eggs that discredit governance in the public's eyes.

    The mechanism would be relatively straightforward, involving perhaps:
    • entrance tests (competency, references and interviews)
    • maintenance of professional standards (on-going education)
    • periodic re-registration (two- or three-yearly)
    • tiering (a general registration, and a higher level for directors of large, widely-held or publicly-listed companies)
    • a disciplinary tribunal (with teeth and a propensity to act)

    The IOD's optional accreditation scheme provides a useful starting point, but it falls short because participation is optional. In my opinion, governance must be professionalised, with a robust body and process not dissimilar to medicine (Colleges of Practice, Medical Council of New Zealand, Disciplinary Tribunal). Perhaps then the concerns expressed in the article—that directors can dodge bans—will become a thing of the past. Here's hoping.