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    Stepping up a gear...another milestone reached

    Governance Phd Research
    This week marks a red letter point in my doctoral journey because, on Thu 13th, I will visit the Boardroom of Company Beta (*), observing and recording the meeting. Finally, after twelve months of reviewing the literature, proposal writing and careful planning, I've reached the milestone point where data collection can commence. It feels good! Over the next year, I will be gathering data from several sources within three companies (Board reports, minutes and meeting observations; Chair and CEO interviews; annual accounts; historical performance data), and trying to make sense of it. 

    To those readers not familiar with my doctoral research: I am investigating the relationship between governance and performance, with the overall goal of providing an explanation of how Boards actually contribute to business performance (because we don't know). The research design is a longitudinal multiple-case study, underpinned by a philosophy called critical realism, and the direct observation of Boards in situ. This combination has never been tackled before—hopefully I haven't bitten off too much! If you'd like to learn more, have a look at the papers on my Research page, or contact me directly.

    (*) Company Beta is so-named because it was the second company to provide approval to participate in my doctoral research. Anonymity is an important condition of this research, to protect the companies and give them confidence that what is reported in the final thesis is not identifiable back to source. I'm due in the Boardroom of Company Alpha in late June, and am still negotiating with a couple of companies to become Company Gamma.

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    On teaching and learning, undergraduate style

    Research Societal Wellbeing Teaching
    Today is the first Thursday I've had to myself since 14 February. I have been teaching 115.108 "Organisations and Management", a first-year paper at Massey University. This was my first teaching experience in an undergraduate environment, so I didn't really know what to expect. Would the students engage? Would they just sit there? Would they even turn up?

    Fast forward to today. The semester is complete, save the final examinations. Having now completed the assignment, I've learnt a lot—about myself, the students and the learning environment—so thought a few reflections would be in order:
    • Most young men and women are committed learners—if you encourage them, show them trust, and treat them as adults. The natural learning style of most adults is to share ideas and ask questions, a style I adopted this semester. In my experience, if you ask people questions, they will answer—surprise, surprise. In contrast, the standard modus operandi in a university context seems to be to lecture—a one-way transfer at best. I continue to be amazed that universities operate on the basis of broadcasting information in a lecture format. Is this conducive to effective learning?
    • I was stunned at the drop-off in attendance as the semester progressed. Attendance dropped by 50% over the course of the semester. Other Tutors said this was normal, and not to be alarmed or critical of my own effectiveness. I can't help but be alarmed. Were some students inappropriately enrolled at the beginning of the semester? Did the course and delivery not suit the learning preferences of the class? Were there timetabling clashes? Did the students get lazy? I don't have any answers to this one, but suggest university councils treat this as a real concern, as they grapple with their goals and seek to allocate limited resources effectively.
    • The ability of the class to think critically was well below what I expected. Our modern world is complex. We need leaders who think critically and make smart, informed  choices. I wonder whether the NCEA system, which dumbs down topics by separating the holistic subjects into parts, is to blame?
    • The assignment forced me to adopt a weekly rhythm, to ensure material was available and I was "ready to go" each week. But it was fun. I enjoyed working with a great group, most of whom were just embarking on the tertiary and professional careers, but can't see myself full-time in a university environment. The pace is too slow!
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    On vision, core purpose and related matters

    Management Performance Research Strategy
    What role does "vision" have in the modern organisation? Is such a thing still relevant and, if so, who should "own" it? The question of vision has been a bit of a hobby-horse of mine for over a decade now, particularly when I've been asked to help with strategic planning. A discussion on the Institute of Directors group page over at LinkedIn brought the issue to the surface again this week.
     
    I must admit to being a doubter when the wave of books, seminars, consulting engagements promoting the vision and mission statements first flowed across the business community in the 1990s. While considerable money and effort was expended on the creation of some quite wonderful statements, many of which were printed and displayed for all to see, the gains in productivity and business performance were questionable in most cases.

    Vision is typically expressed as some aspirational sense of what an organisation seeks to achieve (a big goal, if you will). It addresses "what", a key question that all stakeholders need answered. But people don't get behind things or targets, they get behind causes. It should come as no surprise therefore that vision "leaks", and that staff are naturally sceptical, particularly when vision statements are too ambitious as many are. 

    Vision alone is not sufficient however. For sustained effort, people need to know "what" and "why". Core purpose is much better, because it addresses both questions. Core purpose incorporates the vision (what) and the underlying driver/cause (why). A good statement of core purpose is succinct, self-evident and realistic. It should be developed by the Board because, ultimately, the Board is responsible for the purpose of the organisation, on behalf of the shareholders. The core purpose should be owned by everyone. Notwithstanding this, the challenge of motivating the people and aligning their effort to move the organisation towards the core purpose is no easy task. I guess that's one reason why good CEOs are paid so much! 
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    Should non-executive directors own company shares?

    Governance Performance Research Strategy
    I've often pondered the question posed in the subject line—not only from a personal perspective, but also from an independence/critical thinking perspective. This is a vexed topic, because many owners wish to occupy a seat in the boardroom themselves, either to influence company growth and development (a healthy motivation), or simply to keep an eye on their asset (not so good).

    The key issues to be grappled with when considering the question are influence and independence. Will the holding of shares influence the director to make certain decisions differently than if they did not own shares? The owning of company shares (by directors) is probably advantageous to engagement and commitment—so long as independence in decision-making is preserved, and decisions are made in the best interests of the company. However, if the answer is "yes" or "maybe", then the best answer to the topic question is probably "no". Either the non-executive director should not own company shares, or if they wish to continue to own company shares, they should consider resigning their position.

    The reasoning for my conclusion is as follows. Directors are required to act in the best interests of the company (in New Zealand, at least). In so doing, a primary task of a director is to make decisions. If a director was to make a different decision based on their ownership of shares, then clearly their decision-making is influenced (and potentially conflicted) by that ownership. Arguably, they are no longer acting in the company's best interests, but those of the shareholder, of which they are one. In such cases, the director is no longer meeting the legislative requirement. I wonder how many directors, particularly of smaller companies, inadvertently find themselves in this position?
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    Boards of directors: is form or function more important?

    Governance Management Performance Research Societal Wellbeing Strategy
    Much has been made in the business press in recent weeks of the possibility of splitting the Board Chair and CEO roles at JP Morgan. Arguments for and against have been made, and now a non-binding shareholder vote is imminent. I can't help but feel disappointed by all this rhetoric, because arguments about Board form (structure) miss the point.

    For the last 40 years or more, researchers and practitioners have searched for "the ideal Board structure" through which high performance will occur. Despite considerable effort, attempts to produce an ideal structure, or explain how Boards contribute to business performance, have failed to produce definitive results. If we pause and reflect, this lack of clarity should not be a surprise. Governance is a complex, socially dynamic phenomena, not a predictable closed system or a mass of separable attributes. As such, empirical knowledge (of the past, or of form) cannot be used to credibly predict future performance.

    Rather than continue to argue over form (that is, argue over structural variables including Chair/CEO duality, gender diversity, non-executive directors), attention needs to move to the holistic consideration of governance itself, and what Boards do (how they function). Then, and probably only then, will we start to gain a clear understanding of how Boards actually contribute to business performance. But is that asking too much of the JP Morgan Board and other Boards? I guess time will tell.
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    Company directors: what are your real responsibilities?

    Governance Management Performance Readings Research Societal Wellbeing
    Two posts on corpgov.net have caught my eye this week:

    Together, these articles present a significant challenge to the corporate governance community, and company directors in particular. To most Boards, the purpose of the company is to achieve growth and to maximise shareholder value, period. But is this narrow focus appropriate? Does it help society, or does it add to its burdens?

    As I read the articles, I found myself thinking about the relationship between economic growth and societal wellbeing. You don't have to be a rocket scientist to understand that a narrow focus on profit or growth is a rather selfish win/lose strategy. Shareholders win and the rest of us lose. Is that fair? Perhaps Boards should be compelled to take account of wider societal factors as they fulfil their important role. What do you think?