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    Xero: a considered approach to boardroom succession

    Governance Leadership Performance Strategy
    Xero is a young company with a clear mission: to become a global leader in on-line (read: cloud-based) accounting systems. While the company has some pretty serious competition, its stellar rise on the stock-market and ebullient CEO has seen it enter the consciousness of the general public in New Zealand, Australia and, increasingly, other countries as well.

    Part of the company's success appears to be due to its mature and considered approach to governance, and succession in the boardroom in particular. Phil Norman was appointed to the chair prior to the company being listed. Phil is a startup specialist, he got the company underway. Subsequently, Phil was replaced by Sam Knowles who established Kiwibank and grew it to become a viable player in the New Zealand market. Sam, who chaired the Xero board through the company's initial expansion beyond New Zealand, oversaw the repositioning of the company, from a great little company from Wellington New Zealand (where?) to a growing global company. Recently, Sam left the board to be replaced by Chris Liddell. Chris has had a long and successful leadership career in large companies including General Motors, Microsoft and International Paper. He lives in New York and is well connected with the movers and shakers there. Two independent directors have just been appointed—San Francisco-based Bill Veghte and Australian-based Lee Hatton. Hatton is Xero's first female director. Both will bring a fresh perspective no doubt. 

    With the benefit of hindsight, it is easy to see that these appointments have been considered and intentional. Xero has sought specific individuals with specific capabilities to provide leadership in the boardroom. As new capabilities and connections have been required, changes have been made. Xero is trying to become a world-class company. If it succeeds (and even if it falls short), I suspect a future generation of MBA researchers will identify governance quality and succession in the boardroom will have been important building blocks. Regardless of how it plays out, startups and more mature companies would be well advised to take a look at Xero. The company's approach to leadership, governance and succession is refreshing.

    Disclosure: While I am known to some current and former members of the Xero board, I do not own shares and do not have any commercial relationship with the company.
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    On ego, knowledge and effective governance

    Governance Leadership Management Performance Research Societal Wellbeing Strategy
    Do people that promote themselves heavily—by describing themselves in glowing terms; providing long introductions; and, embellishing their accomplishments—annoy you? People that behave like this are relatively easy to spot. They are often quite loud, and their large egos generally signal their presence.

    Interestingly, a recently published article has suggested an inverse relationship between ego and knowledge—which suggests that those with large egos have little to contribute. This is somewhat alarming, as many corporate disasters over the last forty years can be traced back to failures of governance, fuelled by hubris and overactive egos. Just how knowledgeable were the directors in these cases? The message in the article is relevant for everyone in the business community, particularly those directors that see themselves as being above the law and beyond any form of accountability. How long will it take, and how many more lives will be lost, before someone takes a stand?
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    Achieve more by doing less

    Governance Leadership Performance Research Strategy
    Every entrepreneur and active business owner that I know dreams of building a business capable of achieving sustained profitable growth over time. However, maintaining continuous profitable growth is hard, and there seems to be a wide gulf between the dream and the reality. Just ten per cent of companies manage to do it over a continuous ten year period. I haven't found any research that explains why companies experience such difficulty achieving sustained growth, although one research report I read recently suggested those companies that do achieve it appear to have three characteristics in common:
    • They reduce the scope of their business
    • They look for profitable opportunities within their existing core business boundaries
    • They set high performance targets

    Interestingly, these three characteristics are increasingly being associated with effective governance: the determination of strategy and the setting of performance targets. While not mentioned in the report, the boards presumably implemented a structured monitoring regime as well. 

    These characteristics challenge conventional wisdom that you have to do more (diversify the product mix and/or enter new markets) to get more. They also enhance the credibility of the proposition that the board’s active involvement in strategy development and performance monitoring is crucial to a company achieving and sustaining profitable growth over time.
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    ICMLG'14: closing remarks

    Conferences Governance Leadership Management Performance Research Strategy Teaching
    Well, ICMLG is over for another year. The ACP organisation, and hosts Babson College (Phil Dover and Sam Hariharan, in particular), organised a great conference. Delegates assembled from over 20 countries from the five major continents. The theme of entrepreneurship provided a linking thread between the keynote speakers (Isenberg and Schlesinger), the paper streams and many conversations over coffee and food.

    I particularly enjoyed the provocative sessions of Isenberg and Schlesinger, and appreciated the opportunity to test some of the ideas that are emerging from my research, especially with researchers from outside the Anglosphere. That feedback will result in some adjustments to the way that my thesis is written up. To everyone who offered feedback: thank you!

    I commend this conference to all management, leadership and governance researchers, and practitioners with an interest in these and related fields. Next year, the conference venue is in the southern hemisphere, in Auckland New Zealand. The co-hosts will be AUT and Massey University. Certainly, I am looking forward returning the hospitality afforded to me in the international conferences that I've been fortunate enough to attend in the last couple of years.
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    ICMLG'14: Visit to Cambridge Innovation Center

    Conferences Leadership Performance Research
    The organisers of ICMLG'14 provided delegates with a treat to cap of the first day of the conference—a guided visit to the Cambridge Innovation Center (CIC). After a somewhat circuitous transfer from Babson to CIC—in a yellow grade school bus no less—we were provided with a guided tour of the facility, after which we were given the opportunity to interact with many of the people that work there. The CIC is a huge facility. It's quite unlike anything I had seen before. Some notable points about the CIC (for me at least) included:
    • Adjacent to MIT, CIC is a serviced office facility on steroids. It is designed to bring entrepreneurs, startups and ambitious people and the companies together, into a community where they can work on their ideas, grow (if they are any good) and maybe even secure investment to really take off.
    • It claims to be the largest facility of its type in the world, with more startups clustered in one place than anywhere else in the planet
    • Approximately 700 companies, from one-person hot-desk type operations, through to larger established companies (including Apple and Google, we were told) are located there. Five hundred of them are startups, all of whom are ambitiously hoping to become scale-ups (a new term I learnt: it's the next level beyond a startup, once the company is underway).
    • Companies resident at the CIC have attracted over US$1.8bn of investment and venture capital (wow, that's a serious number, and is indicative of the calibre of the ideas and the people behind them).

    The concept of providing a large-scale facility for startups to come together, rub shoulders with each other and with supporting enterprises (from food, gym and back-office support, to funders, lawyers and other large-scale firms) makes sense. My early view is that this type of facility runs rings around incubators and small-scale clusters that you see elsewhere. The vital difference is the support of the large firms and the resources they bring. 

    We spent a couple of hours on the site, including receiving a briefing on the Smart Cities concept, before moving off to dinner at the Charthouse—a relaxing cap to a busy day.
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    ICMLG'14: We don't know what we don't know

    Conferences Governance Leadership Management Performance Strategy
    Peter Harrington, of Venture Simulations in the UK, presented an interesting talk on the value of simulation to enhance training and learning, particularly in entrepreneurial settings. One of the biggest challenges that managers and boards face is that they don't know what they don't know. When confronted with extreme or extremely rare situations, boards often don't know how to react or what a range of response mights might be.

    Many directors and entrepreneurs don't like being talked to or talked at. They like to do and to try. Harrington asserted that experimentation is good, and that the use of simulators is very useful for discovering what we don't know. Simulations help new pilots (for example) learn to fly without the expense or danger of using a real aircraft. They also help experienced pilots test themselves in extreme situations to practice, to make mistakes and to learn how to cope. Harrington provided a graphic example. The safe landing of US Airways 1549 in the Hudson River—the so-called "miracle on the Hudson"—can be attributed to, in part at least, the many hours Capt "Sully" Sullenberger spent in the flight simulator every six months, training himself to handle himself and the aircraft in extreme situations.

    Boards, entrepreneurs and managers may well be able to derive significant value from authentic simulation activities, to expose themselves and their company to extreme market forces, strategic options and other situations and, in so doing, improve their capability to respond well.  Such application would require greater levels of engagement in the learning and development process however, but I suspect the time spent would deliver a payoff quite quickly. If you want to to effect an introduction to Peter Harrington (he runs a commercial business developing and selling simulation systems), I'd be happy to do so. Please note I have no commercial or other interest in this offer, it is simply an offer to refer.