Tags

  • Published on

    BAM2014: impact of board size and diversity on performance

    Conferences Governance Performance
    Adi Bongo and Alfred Akakpo presented updates on two oft discussed aspects of board structure and composition: board size and board diversity. 

    Bongo's paper considered data from Nigeria—his home country—to understand whether an optimal board size was apparent amongst listed companies. Previous studies have shown mixed results: some have suggested a positive correlation; some a negative correlation; and, some have shown no impact on performance. I was interested to see whether Bongo's research, which applied three different econometric methods would reveal anything new or different. The answer was no. Despite applying analysing the data in three different ways, Bongo found no evidence that board size has any impact on the financial performance of companies in Nigeria.

    Akakpo's paper explored the impact of diversity on board performance amongst companies in the retail sector in the UK. Using data from 2000–2012, Akakpo applied a range of analytical tools. His analysis showed a positive association between diversity and company performance in 46% of the companies studied, a negative association in 13% of the companies and nil or no discernible impact in the remaining 41% of the companies. Whereas other studies have suggested that diversity is generally good, Akakpo's study showed that a positive impact is certainly not automatic. 

    These studies add to the body of research that has investigated board attributes. I was hoping to hear suggestions of how or why board size or diversity might lead to increased performance, but such commentary was not forthcoming. These studies reinforce the impasse that confronts researchers; and the proposition that research methods other than the statistical analysis of quantitative data are likely to be necessary if the goal is to explain how boards influence company performance outcomes.
  • Published on

    BAM2014: Like ships in the night

    Conferences Governance Performance Research
    The workshop that I attended this afternoon shone the light—brightly—on a serious problem that has troubled the research community for many years: relevancy. That academic researchers want to study SMEs and SMEs want to access up-to-date research does not necessarily make for a healthy and meaningful interchange.

    Jo Lumb (Leeds University) hosted a great session which involved the lived experience of a SME business owner and a career academic. The role play (using live material) was delightful. It served to highlight the problem: that researchers and SME business owners typically talk past each other. The discussion went like this: researchers tend to be motivated by rigour, qualified statements and a drive to publish; whereas SME business owners look for quick results, clear recommendations and common sense language. Consequently, neither "side" respects the other to any great extent.

    The challenge for the delegates in the room was to identify options to address the problem. Our table thought that the primary issues were ones of communication and of achieving a common understanding of what was required. One one hand, researchers need to get off their high-horses, to produce meaningful research with clearly articulated answers to the "so what?"  question. On the other, SME owners need to accept that their businesses are not unique, and that off-the-shelf "instant" answers are unlikely to provide sustainable answers to their problems. 

    Another idea that was discussed was to ensure that researchers spend some time in the field, to get a feel for what their research subjects experience every day. Few if any of the career researchers present had spent any meaningful time at all doing this. Just imagine how reliable any medical research might be if the researcher was not a doctor or medical specialist? SME research strikes me as being no different. Perhaps the time has come for SME researchers to down their research tools to spend some time working in and amongst those that they wish to investigate. Maybe then research requirements and outcomes will have more meaning, and the two parties will no longer be as ships in the night.
  • Published on

    BAM2014: Opening sessions

    Conferences Management Performance Research
    BAM2014 got underway this morning, with a light breakfast of croissants, pastries and coffee to welcome first-time attendees (a great way to help break the ice, thank you organisers!). A series of professional development workshops followed. Seventeen topics were offered, across two workshop sessions, before lunch including:
    • The state of corporate responsibility and sustainability research
    • Developing senior leadership and management capability
    • Cognitive mapping: making sense of qualitative research data
    • Low-tech teaching
    • Researching and engaging with SMEs
    • Generating impactful research: Views from the field

    The workshop sessions were intentionally interactive, with the facilitators actively eliciting comments from, and the  experience of, the delegates in attendance. I attended the cognitive mapping session (quizzically, not really understanding much about the topic) and the generating impactful research (hoping to pick up some tips for my own research) sessions. The cognitive mapping session was really helpful. It exposed me to a method of moving meaningfully from the vast quantity of data that is typically gathered in observations and interviews toward some meaningful conclusions. However, a little knowledge can be a dangerous thing, because I now realise that I may have missed a trick in my research analysis—something that I'll need to give some careful though to in the coming days. The impactful research session was aimed at researchers seeking external (funding) assistance to support their research. This session was of less interest to me as I plan to return to professional practice and advisory work.

    After the lunch break, several business and academic speakers will open the conference. They will address the conference theme: The role of the business school in supporting economic and social development. In my rather limited experience, one of the shortfalls of many business colleges relates to relevance. That business research conclusions often have limited practical application is an indictment on business schools and on the research process. This should be an interesting discussion.  
  • Published on

    New #corpgov code in UK: Will it make any difference to company performance outcomes?

    Governance Performance
    A new corporate governance code will be introduced in the UK later this month. The CEO of the Financial Reporting Council, Stephen Haddrill, says that the code requires boards to consider and report on strategic risks that could affect the long-term viability of the business they govern. This sounds like a positive development: that measures designed to refocus the attention of the board on the long-term viability of the company can only be good for company continuity and performance. However, I'm not convinced.

    Compliance type regimes were insufficient in averting the corporate collapses of the early 2000s; the global financial crisis of 2008–2009; or some of the more recent failures of corporate governance. Statutory reforms and codes of practice, introduced in response to corporate failures and the behaviours of recalcitrant directors and boards, appear to do little to protect against failure, or improve the quality of corporate governance or company performance. Indeed, the sharp focus on monitoring and control that often occurs as a result of statutory reforms and codes may actually reduce performance and, in more extreme cases, contribute to corporate failure. Compliance-type regimes tend to do that. Will the new UK code be any different?
  • Published on

    Outsource the board? I don't think so.

    Governance Leadership Performance
    The contentious topic of board performance seems to be getting more and more attention in the popular press. The attention is great, because boards are responsible for company performance, in accordance with the wishes of owners, and they need to be held accountable. However, not all of the discussion is helpful. For example, this provocative article appeared in the Economist recently. While the article was well-written, the proposal it contained—to outsource the board—was irksome. I remember tweeting about it at the time.

    The board is a proxy for absentee owners, to represent their interests. Why any owner (shareholder) would allow a board to (re)outsource what is, in effect, an arrangement that is already outsourced is beyond me. If the board is not delivering the results the owners want it should be replaced, not outsourced. Thankfully, an influential commentator has provided this rejoinder to Schumpter's article, and in so doing reintroduced some much needed balance and a modicum of sensibility.

  • Published on

    "Big firms fail to match growth of economy"

    Governance Leadership Performance Strategy
    Bryan Gaynor shone the light on a very important problem today—that many large firms in New Zealand simply are not growing in line with the growth of the economy. In other words, they are going backwards. Gaynor's analysis is insightful: to lose ground when the flow is good suggests that something is amiss. This raises several important follow-on questions: 
    • What have the boards of these firms been doing over the last few years?
    • Why have the boards not held the Chief Executive accountable for performance?
    • Who is actually in control and who is driving strategy? (It's unlikely to be the board, from what I can see.)
    • What changes are required to get these firms, and the economic contribution they make, back on track?

    While the issues before each firm will be unique, there are some constants:
    • The board is responsible for business performance.
    • The board needs to ensure that an appropriate corporate strategy is in place
    • The budget is not the strategy, it is a measure of progress.
    • The basis of performance should be achievement of strategy, not achievement of budgets.

    Hopefully, the boards of these firms will take stock, ask some quite tough questions, and make appropriate adjustments to get back on track. High company performance has many positive flow-on benefits beyond shareholder wealth, and these need to be realised if at all possible.