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    Three-weeks of busy-ness...

    Conferences Governance Phd Research
    I'm working my way through a busy three-week period in my PhD programme: a period of gathering data, attending meetings, writing papers, preparing speeches and testing ideas. Having successfully navigated a travel-heavy programme last week, this week is a little more orderly, with another round of interviews and meetings in (just!) two cities. However, the travel kicks in again on Saturday, with a flight to Klagenfurt Austria, via London and Vienna, to attend and speak at the 9th European Conference on Management, Leadership and Governance (13–15 Nov). The programme looks very interesting, with a wide variety of peer-reviewed papers to be presented by some very capable scholars. One of my papers will be presented on Thursday morning, and the other later the same day.

    Despite the busy-ness of the period, the opportunity to meet some of the world's leading governance scholars, to further test the ideas that are starting to emerge from my research, is one I am very much looking forward to. For readers interested in the ECMLG conference, do pop back next week, because I intend to share my thoughts and insights here, as I did at the ICMLG conference in Bangkok earlier this year. 
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    Swimming in data...but some clarity is starting to emerge

    Governance Performance Phd Research
    I'm sitting at my desk looking at a fantail flitting between the branches of the tree just outside the window. It's a great distraction from what I should be doing: cataloguing the pile of data gathered in the last week, including 900MB of sound recordings and 28 pages of handwritten notes, from two board meeting observations and three interviews. The insights from this latest data need to be compared with insights from data gathered earlier. While this process is akin to swimming in data, there is some good news: five "causal powers" (that may explain how boards influence business performance) are starting to emerge. However, I keep reminding myself not to jump to conclusions, for there is more data to gather and more analysis to conduct. The ideas forming in my mind could be significant, or they could be a mirage. Time will tell. The fantail has gone now, so it's back to work. I'll keep you informed.
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    Who should drive the development of corporate strategy?

    Governance Management Performance Phd Research Strategy
    The selection and implementation of strategies that enable a company to compete effectively appears to be crucial to value maximisation. Given this, who should drive the development of corporate strategy? The value that boards can contribute appears to lie in their active and ongoing involvement in the strategic management process—through the consideration of strategic options; the development of strategy; the making of strategic decisions; and, the adequate monitoring of strategy implementation and subsequent performance. It seems to improve the quality of environment scanning; minimise the chance of selecting poor strategies; and, improve decision-making. Assertiveness and knowledge about the business also appears to be important, even though many CEOs believe their boards do not fully understand the strategic drivers to their company's success. The question of who should drive the strategy development process is less clear however.

    My recent research suggests there is a fine line between the board having an active involvement in strategic matters (seen as desirable), and the board being seen to impinge on management's delegated responsibility to implement strategy. While the development of strategy is now widely recognised as a major task of the board, all of the CEOs that I interviewed claimed to control the process of strategy development, whether their board was actively involved or not. Also, company performance appeared to be enhanced when the division of labour between board and management was clearly defined and efficiently implemented. Further, the boards of successful companies appear to enjoy strong relations with management; they seek to make consensus decisions together in order to achieve strategic goals; and, the amount of political interplay between individuals appears to be low. The key point is that the board and management work together in a positive manner, and that they are both actively involved in the process of defining and deciding where and how the company should be headed.
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    When stamina and focus come together...

    Governance Management Performance Phd Research Time Management
    What's the best way to cope with (and survive!) a busier than normal work week? When I was out delivering pamphlets this afternoon—for Party-by-the-Lake, a Halloween alternative which is enjoyed by 3000 people in our local community—I found myself thinking about this very question, based on my own busy week ahead:
    • On Monday, I get to relax—with my wife—because it's Labour Day
    • On Tuesday, I fly to Dunedin for a board meeting, and home again afterwards
    • On Wednesday, I fly to Sydney Australia to collect data for my PhD research, after which I fly to Auckland New Zealand
    • On Thursday, I will collect more data, before flying home at the end of the day
    • On Friday, I have two CEO interviews scheduled, followed by a trip to visit my PhD supervisor to finalise details the trip to speak at ECMLG in Austria
    • On Saturday, I have a strategic planning workshop to attend (as a participant, not a facilitator)

    This schedule will see me in four cities, in two countries, in four days. Does reading it make you feel a little tired? In all, the week will involve ten hours in the air; at least seven hours waiting in airport lounges; and, several early starts and late nights. It will be mentally and physically draining, I'm sure. Hopefully, I will still be compos mentis by the end of the week! While I'm somewhat out of practice with such busy international schedules, I expect to call on several habits that have served me well when dealing with similar schedules in the past:
    • Focus: Block out everything not related to the work directly ahead. Prepare well in advance of meetings, and review notes the evening before. Plan to arrive at airports and meeting venues early, to allow a little time to relax and refocus. Check email and social media websites daily (only), lest they divert your focus.
    • Physical care: Avoid alcohol and big meals if possible. Get outside and walk, every day. Drink plenty of water, and get as much sleep as possible (flights are great for this).
    • Stamina: Think about the week as a whole, not just the day or the few hours directly ahead, and pace yourself. A tough week is akin to running a 10,000 metre race, not a 100m metre sprint. A short focus will put you at risk of not making it through the week. Good levels of physical fitness is a real blessing here—which is why I try to get out on my bike two or three times every week—although this requires a pre-emptry commitment because, unfortunately, physical fitness can't simply be "turned on".

    So there you have it, some of my techniques for dealing with a busier than normal schedule. How do you cope with such weeks?
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    On the separation of governance and management

    Governance Management Performance Phd Research Strategy
    The assumption that governance and management should be held separate has been a cornerstone of boardroom practice for decades. Statements like "We can't go there, that's management", and "Is that management or governance?" are commonplace in boardrooms. The assumption, which is based on the agency theory of governance, has dominated governance research as well. But I think the assumption is flawed. Allow me to explain:

    Agency theory describes the situation where the board is a proxy for owners who are not involved in the day-to-day affairs of the business. The separation of owners and managers, as described in Fama and Jensen's seminal paper, can lead to conflict because the actions of managers can depart from those required to maximise returns to owners. Structures and control mechanisms can supposedly mitigate the problem of divergent objectives. Much research has been undertaken to understand this, to try to identify the best configuration through which to minimise the problem and optimise company performance. Correlations between observable variables have been produced (independent directors, board size and gender, amongst others), but no consistent improvements in, nor predictions of, company performance or value creation as a result of these mechanisms have been reported.

    The dearth of any conclusive evidence to link separation of governance and management with performance should not be a surprise. Structures and controls cannot guarantee effective governance, nor can they assure any future company performance. In fact, an inspection of corporate failure data suggests that the separation of governance and management has been the source of much confusion. The various defensive screens that have been erected by boards in response to failures—including claims of paucity of information; poor implementation of strategy; and, management fraud—expose the shortcomings of the core assumption. Consequently, the question of whether a clear separation between governance and management is the best model through which to achieve the organisation's aims needs to be revisited.

    I've been working on this issue for about 18 months now, as a core theme of my doctoral research. My thoughts are starting to take shape, to the extent that a paper I've written is being peer-reviewed for the International Conference on Management Leadership and Governance to be held in Boston, USA in early 2014. A copy of the abstract is available here. If you'd like to provide some feedback, I'd love to hear from you.
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    What types of decisions should boards make?

    Governance Management Performance Phd Research Strategy
    One of the crucial tasks of a board of directors—as they discharge their duties to optimise the performance of the organisation in accordance with the shareholder's wishes—is to make decisions. While most directors and boards (that I have spoken with) agree with this viewpoint, there seems to be far less agreement about what sort of decisions this means boards should, and should not, make. Should boards only make strategic decisions (those that relate to the achievement of corporate objectives and affect the long term performance of the organisation), or is the making of important operational decisions acceptable?

    I have been pondering this question for several months now, in the context of the data being collected for my doctoral research and the wider body of literature. I've concluded that boards should limit themselves to those decisions that have a direct impact on their duty (to optimise performance). As such, boards should make strategic decisions only. Boards that move beyond this and make operational decisions are, in effect, becoming involved in the operation of the organisation (the implementation of strategy)—which is dangerous because that is the job of management. Examples of strategically important decisions might include:
    • recruitment of a CEO
    • approval of corporate strategy / strategic plan
    • raising of new capital to fund the approved strategy

    None of these decisions are straightforward. They require time; the gathering of (often) considerable amounts of information; high levels of cognitive ability to analyse and process options; and, wisdom and experience. Given this, an effective board, operating on the basis of optimising performance based on the making of strategic decisions and the monitoring of performance against strategy, may only make 2–4 strategic decisions per year. Does that sound reasonable or feasible? I'd value some feedback on this one!