Research - Peter Crow | Helping boards govern with impact

Published on: 8 May 2013

Does conflict and governance go together?

Earlier today, I read an interesting article posted on the HBR blog site about conflict and governance. The author, Solange Charas, described two kinds of conflict: cognitive (task-oriented) and affective (emotionally-oriented) in her article. She asserted that cognitive conflict is essential in creating value, whereas affective conflict erodes value. Charas' research is consistent with other research which reports that cohesiveness, vigorous debate and creative interaction are hallmarks of a good strategy development process (refs: Levrau & Van den Burghe, 2007; Kerr & Werther, 2008).

My point in raising the topic of conflict/debate in the boardroom? Many of the boards that I'm familiar with or have been privileged to observe are devoid of cognitive conflict, despite directors themselves telling researchers that vigorous debate leads to improved decision quality. Discussions tend to be "nice", lest someone offends someone else. But are such genteel behaviours good for company performance?

Can I suggest directors need to put their reputations and any affective behaviours to one side, and focus their attention on what they were appointed to do: explore strategic options and make strategic decisions (some of which may be quite contentious), and maximise performance (through the CEO). Perhaps if they do so, and adopt cognitive conflict practices, then we will start to see some serious value being created from the boardroom.

Published on: 7 May 2013

Time to "come out"...

Over the past few months, I have been quietly testing some of my doctoral research ideas with a few esteemed members of the academic community. I've also chatted with some practicing directors as well. The discussions have been incredibly valuable, because they have generated a lot of interest and feedback, all of which has enabled me to refine and adjust the research.

On the strength of the feedback received, I have decided that it is time to "come out" as it were; to begin share my ideas with a wider community. To this end, I have submitted a paper abstract to ECMLG 2013. The abstract has just been accepted, so now I need to prepare a paper and start saving to get to Austria in November. How exciting!

And the ideas that have generated the interest? Here's a peek: Much of the governance research to date has involved the statistical analysis of large data sets, resulting in correlations between observable variables and rich descriptions. However, no definitive theories to satisfactorily explain how Boards contribute to performance have been produced. Despite considerable effort, researchers appear to have reached an impasse. A new research agenda in required if progress is to be made—one that moves from the study of isolated variables (structure, composition, behaviours) to the holistic investigation of governance itself. My reading of philosophy has exposed critical realism (CR) as an interesting basis for a new agenda. CR rejects the common view that social phenomena (of which governance is an example) are a mass of separable events or attributes.

When I re-read the literature through a CR lens, several discrete ideas that I've been pondering for some time started to come together into a cohesive picture. It seems that active engagement; an involvement in the development of strategy; and, the making of strategic decisions are somehow potentially significant causal mechanisms that explain how Boards actually contribute to business performance. Next step is data gathering and analysis. If validated, a new theory of governance which explains how Boards contribute to performance will hopefully emerge. Thankfully, I now have a philosophical framework to build upon. Yahoo!

So, there you have it—my ideas out in the open. Sorry if this summary was tough to read and understand! If however, you are interested in governance matters, and particularly in governance research, and would like to chew these ideas through, please post a reply, or contact me directly.

Published on: 22 April 2013

The difference a fortnight makes...

Three weeks ago I was getting a bit grumpy. I'd been battling the rather bureaucratic ethics process for several months and was starting to get worn down. This mandatory component of my doctoral research has taken far longer, and proved to be far more arduous, than expected. I couldn't understand what the problem was, and nor could my supervisors. The research fitted the low-risk criteria and approval was supposed to take two weeks. My supervisors agreed, however the ethics committee saw it differently. In addition, it seemed the committee had no sense of time, with 14 weeks elapsing since the original submission. Apart from continuing to do background reading while I waited, my doctoral research had stalled and I was left twiddling my thumbs.

Then, on 4 April, the email I'd been waiting so long for arrived. The brief note said the research had been approved. Finally! This was just the news I needed, because on 6 April my wife and I were leaving for two weeks holiday, and I certainly didn't want to spend the time away moping about a process I had no control over. Safe in the knowledge that the research had been approved, I read three books (The Beekeeper's Lament, and the two mentioned here) and quite a few governance articles, and relaxed with my wife and her siblings.

Looking back, the holiday came at just the right time. The time away enabled me to get my head back together, knowing that the roadblock I had been powerless to break through had been dealt with. Since getting home, two companies have agreed to participate in my research, with discussions underway with a third. Also, I have written an abstract for the ECMLG 2013 conference in Austria, attended a Board meeting, and moved a house-load of furniture ahead of new carpet being laid this week. It's great to be back on track, having cleared the ethics hurdle. What a difference one brief email—and a fortnight to reflect and recharge—makes!

Published on: 21 April 2013

Is it time for our business schools to get closer to business?

Acclaimed businessman, Rob Fyfe (formerly CEO of Air New Zealand), was reported this week as saying that business students don't understand leadership in the real world, and that universities should take a more authentic approach to leadership study. I agree.

Over the last two years, I have been immersed in post-graduate study—initially a post-graduate certificate in business, and subsequently doctoral study. In so doing, I have observed some rather interesting behaviours and patterns that, quite frankly, trouble me.

A large percentage (perhaps the majority, even) of the academic researchers and tutors I have come in to contact with seem to have a very relaxed attitude towards time. The importance of time that pervades business is not apparent in academia.
Many of the students I've met (both under-graduate and post-graduate) seem to lack any real appreciation of how business is conducted. Consequently, their ability to appreciate management concepts and theories, and think about them critically, is compromised.

The consequences of these behaviours and patterns appear in the assignment submissions, theses and research reports produced by students and faculty. Much of the material is technically correct but either hard to understand or lacking in any applicability to real-world situations. It's almost as if the "so what?" question has never been posed, let alone wrestled with.

In my opinion, all aspiring business students should be required to undertake at least five years practical experience in a relevant field before they are accepted into any post-graduate programme. Also, faculty should be required to do a significant period of field work on at least a sabbatical basis (every seven years). This type of requirement would ensure students and staff have at least a basic understanding of business in the real-world. Such a model may well be threatening to some faculty who sit comfortably in their learned environment. However, I suspect the quality and practical usefulness of the research produced, and calibre of graduates re-entering the workforce, would increase markedly.

What do you think?

Published on: 21 April 2013

Poor company performance: Boards need to be held accountable

Can shareholders and other stakeholders "blame" Boards for poor company performance? Should they? What is reasonable? If we accept that the Board is the ultimate authority in any organisation (and we should, because the legislation in most western jurisdictions supports this position), then the Board should be accountable for company performance.

This seemingly straightforward answer is not nearly so straightforward in practice however. Companies are open systems, and company performance is affected by many factors, some of which are external to, and beyond the direct control of, the Board. David Walker discussed this point in a helpful opinion piece which appeared in the Guardian this week. Notwithstanding the complexities discussed by Walker, the Board should never be excused from taking its responsibilities seriously; from being engaged; from understanding the company's business; from regularly considering strategic options and making strategic decisions; from actively monitoring performance; from making adjustments as necessary; and, from standing by its decisions.

The Board needs to understand how the company is performing at any time. If company performance fails for some reason, the Board should know about it and act decisively. This is what shareholders expect. If a Board cannot or will not act, or if it does not understand actual performance, it should be replaced. Ultimately, the buck has to stop somewhere. This is accountability.

Published on: 3 April 2013

Women on Boards: what is the real goal?

Interest in gender diversity in boardrooms and C-suites has been increasing over the last 12-18 months. In that time, many commentators have expounded the virtues of having women alongside men on Boards and in C-suites, in both the academic and practitioner literature. Lobby groups have been established and conferences convened, with good effect.

While such efforts are laudable, the suggestion that the presence of women (on Boards) leads to increased company performance—as has been asserted in the rhetoric—is a big call. I agree that a relationship appears to exist, however I am yet to see any robust evidence that supports the assertion that the presence of women on boards per se improves company performance.

Before you launch volleys in my direction, please read on. Governance is a complex, open system, and many inputs affect the operation of Boards and the outputs they produce. A single-minded focus on one structural variable—as has been the case with gender—is far too simplistic. Rather, attention needs to move away from bidding up the percentage of seats occupied by women (and expecting performance will reliably improve as a result), towards the holistic consideration of governance as a system, and to the causative factors that affect performance. Preliminary research efforts suggest that behavioural factors; high levels of engagement; vigorous debate; an involvement in the development of strategy; and, the making of strategic decisions, are far more likely casual mechanisms than gender or any other structural variable.

So, to my question. What is the real objective of placing women on Boards? Participation or performance? If it's the latter (and I hope it is), then the focus needs to move beyond counting the number of women around the table, to discovering what Boards actually do as they go about their work, and to how that contributes to performance (or not).

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