Research - Peter Crow | Helping boards govern with impact

Published on: 15 November 2014

ECMLG2014: The importance of values to performance (day 2 keynote)

Jadranka Ivankovic, a Croatian businesswoman and VERN' University scholar, opened the second day of ECMLG 2014 with an important message: that values, and a strong values-set, are often the difference between success and failure in business.

Speaking from an informed point of view (as a member of the Management Board of Podravka, a food manufacturing company), Ivankovic provided a timely reminder that the best strategy and management systems alone provide no guarantee of business success. Rather, successful business performance requires hard (management: plans, systems, actions, results) and soft (leadership: attitudes, values, culture, behaviours) expertise, at least.

Ivankovic outlined how Podravka went through the process of creating, adopting and embedding a set of values in the very heart of the company. Something like 500 of the 5000 staff were directly involved, in focus groups; in informal discussions; in presentations and in communicating and championing the adopted values once they were agreed by the board. She suggested that the most successful companies are values-driven, and that if a company truly values its values set, there is actually only one boss: the values!

While Ivankovic's message was not ground-breaking per se, it provided a timely reminder that businesses are actually constructions of people, and that without committed people, aligned to a common way of thinking, behaving and acting, then business success can be only but a dream.

Published on: 15 November 2014

ECMLG2014: Boards need to start valuing information as an asset

Nina Evans, of University of South Australia, presented an interesting paper on the importance of information as an asset to business. In so doing, she commented on the difficulties that managers often have in justifying the effective management of information assets.

Information assets are intangible resources used in business including all tacit and explicit knowledge and information that is generated by, held by and used by the business. Information assets can be stored in a plethora of forms including in a person's mind; in hard or electronic format; and, on computers or in libraries. They are one of just four classes of asset (and therefore, levers) that managers have available to drive business performance (physical assets, information assets, human assets (people) and financial assets).

Evans suggested that if information assets are managed well, then operating costs can be significantly reduced, and business credibility can be increased. However, many managers treat information assets as being within the domain of the information technology department of businesses, and technical people often like to 'control' access. Further, while executive managers and boards often ask about the status of the other asset classes, they rarely enquire about the status of the information assets of the business. She went on to suggest that several barriers exist:

Lack of awareness of the value that information assets can deliver
Poor enabling systems
That information assets are highly contextual—that a piece of information might have high value today but low value tomorrow
Poor management and communication capability within the technology teams (particularly the CIO), to demonstrate how the effective management of information assets can enhance the achievement of business strategy and company performance

Evans closed by sharing the results of some preliminary quantitative analysis work. She said that companies that manage their information assets well stand to gain at least $20,000 per employee per year in direct operating benefit. This means that a 1000-person company can expect to add at least $20,000,000 per annum to its bottom line, if the information assets are managed well. If this is correct, this is huge! Nina Evans and I had a preliminary conversation after her talk. It would appear that a collaborative project, to combine Evan's work with my board performance research, may well generate some useful guidance for boards and executives in the future. Watch this space!

Published on: 15 November 2014

ECMLG2014: Enterprise Architecture, a bridge to business performance?

Marco Halen (Aalto University, Finland) is an interesting character. Like me, he came to research after a successful business career—in his case via information technology. He was the CIO of a major company before he embarked on a PhD recently, and his subject expertise is enterprise architecture.

Marco's paper was enlightening. He said that enterprise architecture is not well understood, but that those that do have a view think it has or is something to do with the IT department. From my very basic understanding, enterprise architecture is something that is discussed amongst IT-types and that it lacks any real credibility beyond the technical departments of companies.

Halen asserted that enterprise architecture (EA) can be valuable to business, if it is reconceptualised as a bridge that spans between corporate purpose and strategy, and technology and information systems. However, any move towards effectiveness requires leadership. The CIO, who is commonly the 'owner' of EA, needs to work hard to reposition EA from an IT framework to a business framework; one that exists for the sole purpose of supporting and enabling strategy implementation.

The unanswered question is how? The board and the executive of most companies are busy people. Proposals to implement yet another framework are unlikely to gain any tangible traction or support unless they demonstrably advance the business towards the achievement of its goals and objectives. Halen implied that the CIO needs to take a deep breath, learn a new language (of business); begin speaking in terms of strategy and performance; release EA to business executives; and reposition the EA experts as service providers to business (cf. fiefdom builders and cost centres).

Halen's preliminary work is interesting, in that it provides a solid base from which to develop some alternative models; do some empirical research; test some ideas; and, potentially, improve business performance. If EA can be reconceptualised as a bridge as Halen proposes, then it stands a chance of becoming adopted more widely as a useful management tool. If not, the most likely outcome is that EA will be consigned to the scrap heap of esoteric ideas that have emerged from the IT department—solutions looking for a problem. I look forward to seeing how Halen develops his ideas.

Published on: 14 November 2014

ECMLG2014: Service as a required leadership competency

Noel Pearse, of the Rhodes Business School, Grahamstown, South Africa, presented the next chapter in what is rapidly becoming his magnum opus. I first met Noel twelve months ago, in Vienna, when he presented a paper on servant leadership. This year, he spoke on service as a specific leadership competency.

Thinking of leaders and followers, most people understand that an important role of the follower is to serve. In a business context, that means to serve other colleagues; managers; and, customers. The same people would probably suggest that leaders are to be followed and, by implication, to be served. However, emerging leadership trends provide an interesting juxtaposition, whereby leadership responsibility is being distributed; so-called celebrity leadership status is being rejected; and, ethical leadership is becoming increasingly valued. Further, servant leadership is quite common in high-performance organisations.

With this background, Pearse posed an interesting question: whether service is actually a required leadership competency. Building on the seminal work of Boyatzis (1982) which identified attributes and competencies of effective leaders, he asked whether certain underlying attributes (my phrase, not Pearse's) are necessary. I was fascinated by Pearse's work—still at a theoretical stage—because it appears to bisect my work on underlying personal qualities of effective effective directors as they seek to exert influence in the boardroom. We plan to stay on stay in touch.

Published on: 14 November 2014

ECMLG2014: Family businesses and international growth

Mariasole Banno (University of Trento, Italy) presented a very interesting paper on the approaches taken by family businesses to international growth. Her research explored whether family businesses tend to enter foreign markets through greenfield investment or acquisition (so-called establishment mode), or through wholly owned subsidiaries or joint venture (so-called entry mode).

The research was important because family businesses dominate the commercial marketplace, particularly the SME sector. Banno analysed data from 1571 foreign direct investments of family-owned Italian firms. She discovered that the share of family ownership appears to be an important influence on behaviour on the decisions made by the board of directors as they execute international growth strategies. More specifically, boards of directors controlled by family owners tend to favour the greenfield investment approach (establishment mode) when seeking to grow beyond the national border, even through a joint venture or shared ownership mode might enable faster or stronger growth. Banno noted that families with influential younger successors seem to be more open to exploratory or joint-ventured modes of international growth, which suggests risk appetite might be an important factor in strategic decision-making. However, this would require a more extensive data set, and a longer term view of performance.

Published on: 14 November 2014

ECMLG2014: Perceptions of board effectiveness and influence on performance

Denis Mowbray (New Zealand) reported the results of his research into perceptions of the board's effectiveness and its influence on organisational performance. He surveyed the directors and executives, and analysed the financial performance, of publicly-listed companies in Australia and New Zealand; and he analysed the data using something called fuzzy-set qualitative comparative analysis (fsQCA). This tool is useful for understanding the influence of particular variables and attributes being investigated.

Mowbray's noted—correctly—that because boards are constructions of people and that effectiveness is likely to be dependent on how well directors and managers work together. Important elements appear to include intellectual capital, team effectiveness, knowledge sourcing and the leader-manager exchange. However, there is a distinct lack of evidence supporting how boards exert influence, even though effectiveness appears to be dependent on the board exercising control and service tasks. High levels of synergy, trust and confidence—between the board and the managers—also appear to be important. Notwithstanding these observations, the perception of the board's effectiveness appears to be related, in some way, on the current performance of the company being governed:

When company performance is high, the perception of the board's view of its own effectiveness and of the manager's view of the board's effectiveness is closely aligned
when company performance is low, the perception of the board's view of its own effectiveness and the manager's view of the board's effectiveness is poorly aligned

Mowbray's insight was interesting, in that it identified an interesting disparity between the board's perception of its own effectiveness, and the executive's perception of board effectiveness, when company performance is poor. However, while some contributing factors were identified, no suggestions as to why the disparate views exist were proffered. The subject of Mowbray's work is important to our understanding of how boards contribute. I hope he and others pick up on the good start made by this paper, because we need to understand how if and how boards can actually influence the achievement of company performance outcomes.

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