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    Who[ber] took their eye off the ball?

    Accountability Decision Making Governance Performance Strategy
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    So, Travis Kalanick has left the building, no longer the chief executive of Uber, the company he co-founded. The company, which makes money through the use of a ride sharing application, has grown rapidly in recent years. From a good idea, the company has become a colossus valued at over US$65 billion. Kalanick deserves credit for Uber's rise. However, Uber's reputation is not without tarnish; reports of a toxic culture, sexism and several scandals have blotted its copybook. The co-founder's pugnacious style hasn't helped either. 
    Uber's widely-reported missteps raises some challenging questions about the role and function of the board of directors; questions that are strikingly similar to those asked following the Wells Fargo fake accounts scandal and the collapse of Wynyard Group, both in 2016:
    • Why was shareholder direct pressure necessary for action to be taken?
    • Why did the board not act earlier? The problems were not a secret (they had been widely reported over many months) and several managers have departed recently (a strong signal of underlying problems).
    • To whom did the board think it was accountable, or was accountability not a consideration?
    • In law, directors get one vote each, so why did one director (the CEO) wield so much control over the board? (That debate occurred within the boardroom, from one director anyway, is acknowledged.)
    Uber was founded on a strong vision and its grew rapidly. The board was technically diverse and debate did occur in the boardroom at times, yet the evidence suggests that board lost its way and became ineffective.
    Though tragic, the Uber situation is instructive for directors and boards elsewhere. Power seems to have been a significant factor.  ​If directors are serious about fulfilling their duties well—especially acting in the company's best interests and pursuing the future performance of the business—some shared understandings are crucial:
    • A commitment to pursue the agreed purpose of the company
    • A clear and coherent corporate strategy (to achieve the agreed purpose)
    • The role and function of the board (i.e., the practice of corporate governance)
    • A commitment to the tenet of collective responsibility
    • A strong and healthy workplace culture
    However, the presence of these factors is insufficient in terms of predicting effectiveness or performance. Ultimately, the effectiveness of any board is a function of what the board does and how directors behave. Research is starting to understand the mechanism of corporate governance, but causality remains elusive. Directors take their eyes off these considerations at their peril.
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    Speaking engagement in London

    Accountability Conferences Decision Making Governance Performance Research Strategy
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    This is a brief note to advise that I will be in London next week, to speak at the ICSA Annual Conference. The conference is being held at ExCeL, London, over two days (4–5 July).  Programme details are available here.
    I'll be speaking on the first day of the conference, at 12noon. My topic is strategy, from the board's perspective. Here's the session summary from the programme:
    Good strategy vs bad strategy
    ​Often in business, boards confuse lofty ambitions, challenging goals and enticing vision with strategy. Good strategy encompasses these elements but also offers a compelling road map to achieve goals and overcome barriers to success. Here we look at some of the key points to consider when establishing strategy.
    Sound interesting? Come along, I look forward to meeting you.
    Note: I'll be in London Monday 3rd to Thursday 6th inclusive, with some free time both during the conference, and immediately before and after. Please get in touch if you'd like to meet up (day or night) to ask a question; discuss an aspect of corporate governance or strategy; learn more about my research on boards and business performance; or, simply have a chat over a coffee or a drink. I'd be delighted to hear from you.
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    Boards and strategy: taking in the long view

    Accountability Decision Making Governance Management Performance Strategy
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    During the last month, I have had the privilege of working with four different boards and management groups, helping them wrestle with why the company they govern exists (its purpose, or reason for being) ahead of formulating strategy to pursue the agreed purpose. All four engagements have been invigorating, revealing many insights and much passion (and debate!) within the assembled groups. 
    However, three troubling signs became apparent amidst the boards' commitment to the cause. These signs, which are not uncommon, have the potential to stymie the quality of the resultant strategy and management's ability to implement the approved strategy. The following comments highlight the issues:
    • A propensity for detail: Most of the discussions quickly devolved to specific examples and detailed aspects of the company's products, customers and staff: the perception being that more detail is helpful for effective implementation and to mitigate risk. This is not uncommon: strong leaders like solving problems. However, humans tend of overestimate their ability to predict the future, and boards and managers are no exception. Further, implementation is a task for management, to be actioned after purpose is determined, strategy formulated and resources appropriated. Also, a strong focus on detailed elements has the unwanted effect of taking the gaze away from the big picture, the wider context within which the company operates, and in so doing introducing new risk not mitigating it. Left unchecked, the resultant strategy is more characteristic of a detailed list of activities than a high-level, contextually relevant overview of how resources will be deployed to achieve the agreed purpose.
    • Confusion over the board–management nexus: The usage of the term governance over the last 15–20 years has become widespread (in both appropriate and inappropriate contexts). Usage has reached the point that 'governance' has become a panacea for all manner of corporate ills including poor company performance. The board–management relationship has become clouded, with the two parties claiming or denying tasks, often based on a poor understanding of what governance actually is. If the board and management are to work well together, a well-defined of division of labour is required, to allocate to tasks explicitly to the board, to management, or to both.
    • Shortening the horizon, to reduce the odds of failure: This sign is closely related to the first one. If those responsible for formulating strategy are not looking well into the future, identifying emerging trends and possible responses, they are doing themselves and their company a gross disservice. Audacious goals and Roger L. Martin's words are ringing in my ears: "True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success." 
    The temptation to embrace detail, confuse the roles of the board and management and shorten the view remain very real challenges for companies around the world. If boards are to fulfil their responsibilities well, a clear sense of purpose supported by a coherent strategy is vital—regardless of the company's size, sector or span of operations.
    The great news is that increasing numbers of boards are starting to realise that material benefits are available if they contribute directly to both the process of determining purpose and formulating strategy. However, boards have some way to go before the value they have the potential of adding is actually realised, if the evidence of the past month is any indication.
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    Closure

    Accountability Decision Making Governance Phd Research Strategy
    Monday 8 May 2017 shall, in our household anyway, be remembered as a significant date. It was on this date that a father and a daughter both crossed the stage to receive recognition for their respective achievements.
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    • Megan: Bachelor of Business Studies, majoring in International Business
    • Peter: Doctor of Philosophy, in corporate governance and strategic management
    While the day was special for close family members in attendance, the awarding of academic credentials is by no means an endpoint. Rather, it marks a weigh point on a long-term journey. The priority for Megan now is to build her career in international business, marketing and customer service (get in touch if you have an opening for a willing and able staff member). I will continue to encourage boards and directors to focus on what really matters: fulfilling their responsibility for company performance. 
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    Boards and firm performance: Full thesis now available

    Accountability Governance Phd Research Research Update Strategy
    Further to my recent announcement, the full findings of my doctoral research are now available. You can read the abstract here, or download the full thesis (all 359 pages!):
    The research is informed by a longitudinal multiple-case study of two large high growth companies. Data was collected from direct observations of boards in session, and multiple secondary and tertiary sources, creating a rich and rare data resource. The analysis revealed numerous insights, leading to a mechanism-based model of the governance–performance relationship and an explanation of how boards can exert influence beyond the boardroom including firm performance.
    If you would like to discuss the research (or raise a challenge), ask a question or explore how your board might benefit from the findings, please get in touch. I'd be glad to hear from you.
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    Insights from a #corpgov nomad, in Europe

    Accountability Decision Making Governance Performance Research Strategy
    In the last two weeks I have visited six countries spread across three timezones; slept in seven different beds; experienced snow, sunshine and rain; attended an intensive training course at Cambridge, one of the world's top universities; delivered six formal presentations; and, participated in more than 50 significant discussions about organisational purpose, corporate governance, strategy and board effectiveness. It's been invigorating! Along the way, I've been fortunate to gain many insights, a few of which are summarised in the points below:
    • The understandings of corporate governance and expectations of boards in Europe is changing. Whereas the focus in the past has been on ensuring management did its job well (an agency-based perspective), the boards and directors I spoke with indicated that they are starting to wrestle with the challenge of understanding the purpose of the company and how the value-creation mandate might be fulfilled. Several folk added that their usage of the term 'corporate governance' has changed, returning to the early usage: a descriptor for what boards (should) do when in session (i.e., in board meetings).
    • Related to the first point, boards in several European countries (well, in Belgium, Netherlands and Finland anyway) are starting to think more carefully about the longer-term implications of their decisions. This is in stark contrast to the short-termism that continues to pervade US and Canada boardroom and shareholder culture.
    • De Nederlandsche Bank (DNB, the Dutch Central Bank) is increasingly taking a formative view of supervision, expecting financial institutions to not only demonstrate compliance with established statutes and codes, but also to demonstrate how value is being added to the banking community and beyond in the future.
    • Many people (both in public forums and private conversations) volunteered that diversity is important if boards are to make high quality decisions. However, the same people quickly added that their usage of the term meant diversity of thought, not gender or any other observable form of difference between group members. 
    • KPMG, IIA and people from several other Finnish agencies were very interested in the implications of the proposal that board involvement in strategy is good for both effective board practice and business performance. It seems that the findings from my doctoral research hit a spot, with both strong support and many questions about the mechanism-based model of corporate governance and the opportunity the model presents to help boards understand how influence can be exerted from the boardroom.
    These are but five significant insights to emerge. If you'd like to know more, please get in touch. 
    This is the first of two postings, covering the first week of my nomadic journey. Here's the second instalment.