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    Bridging the ‘saying–seeing’ gap

    Accountability Conferences Corporate Governance Decision Making Effectiveness Governance Management Performance Strategy Value Creation
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    Recently, during a meeting with a company director, I was asked if I'd be interested in seeing the company’s production facilities, to provide context for an upcoming assignment. Context is everything, so I gladly accepted the offer. As we walked, we chatted about a wide range of things. At one point, I asked how things were going since the board's decision to embrace a strategy to become a higher-performing business. His response was as telling as it was succinct:
    They say ‘high performance’, but all I see is ‘average’.
    The melancholic admission was unexpected, but not surprising. Apparently, the most recent board report showed that staff turnover had been creeping up, and engagement scores were trending downwards. And yet the atmosphere in the boardroom was sanguine when I visited. Clearly, something was amiss.
    This vignette highlights one of the great challenges in business—strategy execution; ensuring that strategy planned becomes strategy executed. Regardless of the motivation for creating them, intentions and strategies are not worth the paper they are written on if desired outcomes are not achieved.
    When things go wrong, the problem can often be traced back to one or both of two things: lack of will (the "won't" barrier), and lack of know-how (the "can't" barrier). Both are indicators of a failure of leadership; a failure to equip staff, and motivate and engage them to embrace the call to action. But the root cause may lie elsewhere. If strategy implementation is OK but expected outcomes do not follow, the problem is more likely to be one of governance. This is because ultimate responsibility for organisational performance [outcomes] stops in the boardroom, not the executive suite. Some may challenge this, on the basis that the executive is responsible for running the business and implementing the strategy. They are, but for the avoidance of doubt, responsibility of determining purpose, setting overall strategy and ensuring results are achieved lies with the board of directors. There’s no getting away from it: the buck stops at the top.
    If there is a gap between what the board says it wants, and what is subsequently observed as reality, the likelihood of great outcomes is low. The ‘saying–seeing’ gap must be bridged, and the board needs to own this. 
    Here are some questions the board may wish to consider:
    • Are the expected beneficial outcomes clearly defined and agreed, as part of the strategy approval process?
    • Are the expected outcomes explicitly aligned with approved corporate strategy, purpose and values?
    • What measurement and reporting mechanisms will be used to monitor effort and verify progress?
    • Is staff culture (how we do things around here) and engagement consistent with corporate values?
    • Are the lines of communication throughout the organisation wide open, to create an environment whereby concerns and problems can be reported without fear or favour, and dealt with early?
    • Is the board prepared to hold the chief executive directly accountable for progress and results, as the approved strategy is implemented?​
    So, to the direct question: Is your board across this?
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    How will you spend your two billion heartbeats?

    Accountability Decision Making Effectiveness Performance
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    Did you know that every living creature on Earth has approximately two billion heartbeats to spend over its lifetime (yes, 2,000,000,000)? I never knew that until I read this article recently. Brian Doyle writes so well. He brings science to life. Of heartbeats, he writes:
    "You can spend them slowly, like a tortoise and live to be two hundred years old, or you can spend them fast, like a hummingbird, and live to be two years old".
    This article set me thinking. How I should spend the rest of my two billion heartbeats? Part of my answer is to continue to help boards govern well. Another is to nurture important relationships.
    As a leader, how will you spend the rest of your heartbeats? And what impact do you hope to have?
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    Good things take time, sometimes a very long time

    Accountability Corporate Governance Effectiveness Governance Leadership Performance
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    We live in a fast-paced world, where the only constant seems to be change itself. Nine months ago, messages promoting the latest and greatest scheme (or product or idea) bombarded our senses daily, imploring us to embrace something better. Hope prevailed. Now, with the outbreak and impact of coronavirus, the situation is quite different.
    Despite the ebbing and flowing of seasons and circumstances, even the onset of crises, some things remain remarkably constant; stable despite great turbulence and the best intentions of enthusiastic advocates to move things along. The corporate boardroom is one such example.
    Earlier this year, during the early days of the coronavirus, I re-read Making it Happen, Sir John Harvey-Jones' reflections on leadership. Harvey-Jones, a successful businessman and industrialist, was perhaps best known for leadership of British firm ICI, culminating in his chairmanship from 1982 to 1987. His insights are timeless; arguably still relevant today, 32 years after they were first written. To illustrate the point, here is a selection of salient comments Harvey-Jones made about boards in 1988:
    • Many boards are unclear as to whether they are merely a coordinating committee, or whether their primary responsibility is to intentionally make decisions to take the company into the future.
    • Board members are often chosen from amongst the most successful executives. But governance is different from management.
    • Many incumbent board members assume that new appointees will 'pick it up as they go along'.
    • Boards do not easily set for themselves the sort of criteria of success that they unhesitatingly apply to every other part of the business. Unless a board continuously reviews and criticises the way it is working, it is extraordinarily difficult for it to improve its performance.
    • It is important not to go in to a meeting without some clarity as to what you are expecting to achieve. If you attend because the meeting has been called, with little personal aim, you should ask yourself why you are going at all (to the extent of asking why you should continue as a board member).
    • It is perfectly possible for boards of directors to meet regularly and never discuss any creative business at all—a "severe abnegation" of both personal and collective responsibility according to Harvey-Jones.
    Do any of these points sound familiar? They probably do, because, sadly, many of Harvey-Jones' observations are still prevalent today. Given the duties of directors, why are some boards still reluctant to embrace change when circumstances change, or a crisis strikes?
    Is it time your board took stock, not only of the company's strategy and business model, but of itself?
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    Company Director: a profession in waiting?

    Accountability Corporate Governance Governance Performance
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    The professionalisation (sorry, a horrible word) of governance has been a topic of discussion for many years. Some directors, when describing what they do, prepend the adjective form of the word, to indicate their full-time paid work is a [company] director, and to indicate their commitment to 'professional' standards (the implication being that some are not). Others abhor such usage.
    Many directors are diligent and highly engaged in their work. So why the felt need to professionalise? Studies of company and board failures reveal a consistent pattern of contributory factors, including hubris and overconfidence among directors; low levels of board-management transparency; lack of a critical attitude, genuine independence, appropriate expertise and relevant knowledge in the boardroom; and, tellingly, low levels of commitment by directors. Consequently, public confidence is mixed.
    If the practice of governance is to become highly regarded, standards need to be lifted and applied. But can or should governance (that is, the practice of directing) be elevated to the status of 'profession', as medicine, law and accountancy are? And what, exactly, is a professional director? How is one different from an 'ordinary' director (or any other type of director)? What difference might professionalism make? Are better outcomes any more likely? In considering these questions, let's first define some terms:
    • A profession is a paid occupation, especially one that involves prolonged training and a formal qualification. Members possess special knowledge and adhere to ethical standards.
    • Professionalisation is the action or process of giving an occupation, activity or group professional qualities, typically by increasing training or raising required qualifications.
    • A professional is a member of a profession. Typically, they are required to profess commitment to a code of ethics, and apply their knowledge in the service of others. 
    Individuals wanting to become a medical doctor, for example, must first successfully complete several years of university-level training, after which they become a trainee intern, are provisionally registered and start to practice. A commitment to the Hippocratic oath is necessary. Doctors are also required to formally register with an approved institution, pass professional member- and fellow-level exams and complete approved professional development (on-going). Usually, a formal disciplinary process is available if an individual is found to have flouted professional standards. Law is similar, and accountancy too. On this measure, it's clear that doctors (and lawyers and accountants) are professionals; stakeholders (patients, clients) can have confidence in their work.
    But what of directors and governance? Two observations are relevant. First, almost anyone can become a director, and do so with no training! In most jurisdictions, any person over a specified age (18 years old in New Zealand), who is not an undischarged bankrupt nor is before the courts, may become a director. That's it! There is no mandatory training requirement, nor is membership of a professional body or ongoing professional development necessary. Second, many directors' institutions around the world have, over the past few decades, sought to promote governance as a profession. Their good work has resulted in charters being established, and members being invited to commit to ongoing professional development and to operate in accordance with a code of ethics. But these well-intended efforts have been met with mixed success to date. Optionality seems to be part of the problem. Variable quality training programmes, and ambiguity around the primary purpose of the institution appear to have been contributing factors too.
    If governance is to become recognised as a profession, as many have argued is needed, minimum standards need to be instituted, and optionality withdrawn. Prospective directors should be required to complete approved (formal) training and pass exams; serve as an intern; gain (and maintain) formal membership of an approved institution; and commit to continuing professional development. Flawed understandings of the role of the director and what corporate governance is and how it should be practiced need to be corrected too, and the power games, hubris and ineptitude apparent in some boardrooms rectified.
    But, in the end, the question of professionalising governance remains contentious. Some experienced directors don't see the need, believing they are competent. Others don't want to be scrutinised. And some directors and observers continue to argue fervently in favour, because they think the likelihood of better outcomes should be much higher.
    What do you think?
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    What are the keys to effective leadership?

    Accountability Corporate Governance Decision Making Director Development Effectiveness Leadership Performance Value Creation
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    As a devotee of life-long learning and a student of history, I keep an eye out for ideas and examples to share with boards and directors—in the hope that some might prove useful to help boards lead more effectively, from the boardroom. Amongst the news feeds and magazines that cross my desk (actually, computer screen), this journal often contains thought provoking articles. Recently, I was looking through some older issues and stumbled across this item, which explores effective leadership. The author offers seven 'keys' to effective leadership, as follows (I've taken the liberty of attaching a comment to each—a consideration for boards and directors):
    • Provide the why: Why does your firm exist? People get behind causes, not things. Simon Sinek makes the point better than anyone else I know. Purpose first, then strategy. 
    • Embrace variety and listen: Cookie cutter approaches to strategy rarely work. When your board and management team goes off-site to form strategy (yes, together), are customers, suppliers and industry experts invited into the tent, to explain what's important to them and their success? In my experience both as a director and a facilitator, the value these people provide is priceless.
    • Influence: Boards do not operate companies directly, that role is delegated to the chief executive. The only way boards can get things done is through the actions of others (who need to agree to act). Effective working relationships are crucial, and everything needs to be tied back to the agreed purpose and strategy of the enterprise.
    • Read, think, write: How busy are you as a director? Companies and the markets they operate in are complex and fluid. If directors are to contribute effectively and boards are to make good decisions, they need understand the business of the business. Getting up to speed and staying there takes time. 
    • Lead education and change: It all starts at the top. Bob Garratt made this point deftly about twenty-five years ago. His book should be on every director's reading list. Another suggestion: directors need to commit to continuing professional development (ideally, through an accredited provider or local directors' institute ). 
    • Understand failure and take risk: I re-read this article when preparing to facilitate purpose and strategy development workshops, or to complete a board effectiveness assessment: "True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success." Enough said.
    • Understand surprise and chaos: As much as directors and chief executives like to think they can, they cannot predict the future. If Covid-19 is to teach us anything, it is that. Companies that have endured over generations get this. Learn from them.
    Comments?
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    Boards and crises: seeing the bigger picture

    Accountability Corporate Governance Effectiveness Leadership Performance Strategy
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    The unexpected outbreak and spread of Covid-19 has had a seismic effect on the lives and well being of people, around the world. Politicians and government officials have activated crisis response plans (some more quickly and effectively than others) and business leaders have reached for their continuity plans. Amongst the turbulence, little if anything is clear—except that SARS-CoV-2 has our attention.
    Horizons have shortened, and most if not all resources have been diverted to deal with the situation. This is reasonable, but it also exposes the company to a significant risk. Business leaders (especially boards) need to keep one eye on the future, because the crisis will eventually pass. When it does, companies need to be ready to 'go' in the post-crisis environment, lest they be outgunned by others. 
    The most pressing questions for boards as they look to the future relate to the wider operating context, the answers of which inform strategic choices.
    • What has changed, and what might things look like after the crisis has passed?
    • How does this effect our ability to compete; and our ability to win?
    • What adjustments (both strategic and operational) are needed to ensure the company is positioned to thrive in the future?
    ​As boards work through these and other related questions, careful judgement (wisdom and maturity) is needed, to both balance competing interests (resourcing the crisis versus strategising the future) and to avoid traps that have the potential to stymie the company's recovery. Here are three pitfalls that can entrap boards:
    • Short horizon and great detail: While horizons are, naturally, shortened during times of crisis, boards need to begin looking further into the future early. But, when they do, they need to resist the temptation to dive into the detail (many directors associate detail with higher quality decisions and the mitigation of risk). This is a trap. A strong focus on perfection and detail diverts one's gaze away from the big picture, the wider context within which the company operates. Emerging but still weak signals and new risks will be missed. Left unchecked, the resultant strategies and decisions will be little more than long lists of activities. Roger L. Martin's words speak volumes: "True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success". If in doubt, play long—but refine often.
    • An over-optimistic outlook: Strong leaders like solving problems, but they are also prone to thinking they are better or more capable than they are. We see it in politicians, project leaders and business executives: humans have an innate tendency to overestimate their abilities, especially to predict future outcomes. Boards are no exception. One way of mitigating this is to ensure someone acts as an advocatus diaboli  (devil's advocate), to challenge the thinking at each step along the way. Another is to explicitly seek expert advice from independent sources. An external facilitator with a strong personality (to manage egos!) can also be very valuable.
    • Confusion over the board–management nexus: This trap is more common than most care to admit. Usage of the term governance over the last 15–20 years has become so widespread (in appropriate and inappropriate contexts), that is has become a panacea for all manner of corporate activity and ills. With it, the board–management nexus has become clouded, with the two parties unsure of who is doing what. If the board and management are to work well together, with the company's best interests to the fore, a well-defined of division of labour is required, to allocate to tasks explicitly to the board, to management, or to both.
    The temptations to look just ahead; embrace detail; mitigate all risks; confuse strategy and tactics; conflate the roles of governance and management; and be highly optimistic are very real—more than many would care to admit. But they are by no means insurmountable. 
    Boards intent on ensuring the company is well-positioned to emerge from a crisis intact know that high quality steerage and guidance is vital: a clear sense of purpose (reason for being), a coherent and appropriately resourced strategy that is relevant to the circumstances, a dedicated team and effective oversight. They also know that this principle holds regardless of the company's size, sector or span of operations.
    A much brighter future awaits those companies that do not lose sight of the bigger picture as they work through the mire towards solid ground.