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  • Published on

    Humbled, honoured, privileged & thankful—at the same time!

    Governance Phd Research
    News arrived today that Massey University has seen fit to support my doctoral research by awarding a Doctoral Scholarship, worth $25,000 per annum. This is truly a blessing, and indicates that Massey sees value in my research. The funds will help offset costs associated with data collection (some of the boards I am observing require domestic and international travel). It also means that I can attend some highly regarded international conferences, to socialise my emergent ideas and solicit feedback. Overall, the scholarship means that the research can continue apace, which bodes well for a strong outcome. If you would like to learn more about my governance research, please contact me. 

    Thank you Massey University, I am deeply grateful for your support.
  • Published on

    It's time to put diversity in context

    Governance Management Performance Phd Research
    The calls for more diversity on company boards have become a cacophony. Researchers, commentators, shareholders, aspiring directors and wishful thinkers need to pause and take stock, lest political correctness, personal agendas and hearsay trump the real goal, that of driving company performance. 

    The most recent variant that I've seen is a call for increased diversity on selection panels, because this leads to more diverse appointments. Sorry, but I struggle with this. How will a more diverse panel result in a more diverse board (assuming of course that a more diverse board leads to increased company performance)? Surely, the primary goal of a selection panel is to appoint the best people to achieve the best result for the company and the shareholders—regardless of gender, creed, experience or any other 'diversity' attribute?

    Many have jumped on the diversity bandwagon in recent years, presumably because a number of correlations between visible variables (notably gender, ethnicity, independent directors, split CEO/Chair, but there are others) and company performance have been identified. I agree that some correlations have been identified, but they are not universal across all cases by any means. In fact, the research results are mixed, and we must not forget that correlations are not causations.

    The real challenge is to discover the underlying causal mechanism(s) that explain how boards actually influence company performance. I doubt the answer lies in the superficial correlations that have been observed to date. We need to dig deeper, beyond the current diversity arguments. We also need to admit that explaining how boards influence company performance is a very complex, socially dynamic problem—which means assertions that transient correlations are causal are unlikely to be correct.
  • Published on

    Governance and management: is a clear separation best?

    Governance Management Performance Phd Research
    I have been working on a paper which explores issues surrounding the separation of governance and management. The topic is potentially quite controversial, because it questions the basis of most modern governance practice. Hopefully, the findings will be presented at a conference in the USA early next year.

    The paper is needed because we have witnessed many corporate failures in the last decade, and autopsies suggest that a failure of governance was a contributing factor in many cases. Clearly, the separation of governance and management espoused by agency theory(*), and by many since, has provided no guarantee of success. Various defensive positions have been erected by Boards including lack of information; poor implementation of strategy; and, management fraud. Important questions lie just below the surface, including what role the Board should play, and whether a clear separation between governance and management is the best model to achieve the organisation's aims.

    The answers to these questions have potentially far-reaching ramifications. I would appreciate hearing your views and experiences, to inform my research. If you can share links or references to any prior papers, that would be great as well. Please feel free to provide a (public) comment here, or, if you would prefer, contact me via email.

    (*) The "traditional" view—that the roles of governance and management must be held separate—is based on agency theory. Agency was proposed by Jensen and Meckling in the 1970s. It has become the dominant theory of governance, in both research and practice. However, in the four decades since, no robust evidence to explain how such a model delivers better performance has emerged.
  • Published on

    On director effectiveness and "overboarding"

    Governance Performance Research Strategy
    How many directorships is it reasonable for any one director to hold at a given time? Recently, I met a gentleman at a function who introduced himself with the line, "I am a professional director, I sit on ten boards". Ten boards seems a lot. Is ten reasonable?

    If we think what a commitment to ten boards looks like, the following picture emerges. If you assume that each board has a monthly meeting (of one day), and that directors spend one hour in preparation for each hour in the meeting, then a pool of ten boards means 20 days' effort each month. That's without allowing for committee meetings, crises, or any time to understand the company or the market within which it operates. This last factor (understanding the company and its markets) is crucial if a director expects to contribute to strategic discussions or assess proposals in any meaningful way.

    On this analysis, directors with ten concurrent appointments are seriously "overboarded". They cannot hope to be effective. Think about it. You'd have enough trouble getting through the reading, let alone have time thinking, learning and assessing options. So, how many concurrent board appointments is reasonable? Experts suggest that a reasonable upper limit is four boards. Chairmen, with their heavier workloads, should limit themselves to three or possibly even two boards. 

    While such reductions are likely to be contentious in some quarters, some serious benefits are likely. These include a larger pool of directors; a more diverse set of contributions; higher levels of engagement; and, crucially, better decisions (less groupthink). Overall, directors would have more time to govern well. The only downside I can see is the reaction from the very directors who wish to protect their positions and status. But that's probably a fight worth having, don't you think?
  • Published on

    The Fonterra crisis: a failure to learn from past lessons?

    Governance Management Performance Research Societal Wellbeing Strategy
    Fonterra, dairy industry giant and also New Zealand's largest company, has been in the news of late, for all the wrong reasons. Fonterra processes raw milk and exports 97% the resultant products for further processing and consumption in countries around the world.

    The cause of the recent events was a suspicious product test, which raised the possibility that the bacteria that can lead to botulism was present in a 38-tonne batch of whey product manufactured in early 2012. The whey product is used in the manufacture of infant milk formula, and botulism can be fatal. Understandably, the event became front page news, with flow-on ramifications in political, economic and tourism circles, very quickly. 

    At this point, I want to acknowledge that mistakes, unexpected events and crises happen. This is a fact of life. The test of one's mettle comes in the response.

    On the surface, it would appear that Fonterra has failed to manage the crisis well, despite an exemplar case being widely available. In 1982, packets of the then market-dominant Tylenol product were laced with cyanide. Seven people died from unknowingly consuming poisoned capsules. Johnson & Johnson's response to the crisis was exemplary. They immediately withdrew every box of Tylenol from sale, established a 1-800 helpline and actively sought media coverage. While Johnson & Johnson took a short-term hit, they emerged stronger than before. Compare that with delays in reporting the possibility of the problem to the authorities, and seemingly poorly briefed representatives at press briefings. And where was the Chairman?

    No doubt a review (or, more probably, several reviews) will be conducted to discover how the problem occurred; why it was not discovered earlier; what processing, communications, information sharing and other processes failed; and how the whole affair was managed. I hope that, in the process, someone thinks to look to other similar cases—like the Johnson and Johnson one—and to learn from them!
  • Published on

    Project management: why can't we get it right?

    Management Performance Research Societal Wellbeing Time Management
    Many years ago, when I was just a few years out of university, I heard an alarming statistic: that most projects (70% or more) were delivered late, cost more and provided less than originally planned. Some were never completed at all. I recall discussing this with my then colleagues and associates, because it seemed like an important problem that needed to be solved. My colleagues said that new systems and processes were being developed, and that this would alleviate the problem. 

    Fast forward a generation... Many systems and processes have been introduced—including MS-Project, PMP, Prince2, PMO and others—but have the expected gains been achieved? Sadly, they have not. As a recently published KPMG report indicates, most projects are still late, cost more, provide less or fail outright. On this evidence, little has changed. Much time and effort has been spent developing and promoting new systems—and millions of dollars are still being wasted.

    So, what's gone wrong, and why haven't things improved? In my view, most project management systems and processes have failed to deliver any material gains, because they do not address the vagaries of the most crucial factor: people. A more holistic approach is required. Rather than spend more effort refining systems and introducing yet more processes, attention needs to turn to the people factors. The research literature is replete with information to guide a new generation of people-focussed effort. However, until someone takes up the challenge—to deal with the motivational, behavioural and other psycho-social factors—I suspect the wastage will continue.