How do you start to summarise the intense exploration of a theme, a folder full of articles, slides and 7 pages of notes from a two-day programme at the Cranfield School of Management?
Well to coin a key phrase, from the Non-Executive Director Seminar, “it depends”. Much like the successful operating of the board, the success of these notes depends on the purpose of these notes, the context of the notes and me, “the Chair” of these notes.
My primary reason for writing them is to remind me of my own learning and experience, hence why I am sharing them on this particular site. In sharing them, I hope to engage the reader (and anyone who is thinking of setting up a board for their own business) in the thinking that sits within. In order to achieve these two aims, I must first filter through the plethora of data to find key concepts and themes before capturing the key questions that they raise.
So here goes.
First the key themes …
Of all the information we received about the structures of boards, the governance codes and the legal requirements there was one element that simplified and connected the strands – the story about the origin of boards. I am not great at remembering detail but the essence of the story stuck a real chord with me.
Original stakeholder boards (it must have been a long-time ago as I am sure Pope Pius IV was mentioned!) were set up to govern the creation and distribution of wealth. As investors entered the fray the principles of agency theory were born – “I don’t trust you with my money, so I am going to appoint someone on my behalf to look after it.”
Stakeholder boards, and the law that govern the legal duties of a director, were founded on the basis of trust. In contrast, shareholder boards were founded on the basis of mistrust. Perhaps after hundreds of years of practice, and repeating stories within the press, you could assume that these mistrusting behaviours may well have become habits!
If stakeholder boards display less inequality and perform better, how do we ensure independence, trust and responsibility within all boards?
Winning wars versus battles
Engagement is a real buzz word at the moment. You might believe that strategic thinking is a thing of the past. However, the two have always gone, and continue to go, hand in hand: yin and yang; hearts and mind; hard and soft; Ant and Dec!
An intellectually sound strategy may win the odd battle here or there, but the winning of a war requires a focus and resilience that can only come from the longer term engagement and alignment of the people. So what is there to learn about engagement?
Well according to Andrew Kakabadase’s research, engagement is the key function of a formula that determines a board’s value proposition. If boards are to enhance the value that they create, they must engender engagement across the board, the organisation and its key stakeholders. It is the strategic context of the business along with the core purpose, values and vision of the business that form the central strand of this engagement.
What is the fundamental purpose of the organisation and how do we continue to fulfil it in a changing world?
Commit to the committee(ment)
The nomination committee, the remuneration committee, the health & safety committee, the investment committee and the audit committee bring up images of endless meetings, rubber stamping, bureaucracy and paperwork. However, the structure and approach is simply to ensure engagement, alignment, independence and trust. It is the way that these structures are used that determines their success.
How does the Chair contribute to a board culture that encourages the success of the committee?
The findings of the research highlight the important role of the Chairman, emotional intelligence, the ability to deal with ambiguity and six key disciplines:
- Discipline 1 – defining boundaries: between the Chair and the board, the Chair and the CEO / management
- Discipline 2 – sense making: the Chair must communicate and champion the purpose, values, vision and strategy so they make sense to internal and external audiences.
- Discipline 3 – questioning the argument: management submit the ideas whilst the board question the argument behind the ideas.
- Discipline 4 – influencing outcomes: through a complex management of the social system of, the Chair helps the board reach decisions rather than the issues of commands.
- Discipline 5 – living the values: the Chair plays a crucial role in ensuring alignment between what is stated and believed with what is acted and lived out.
- Discipline 6 – developing the board: every Chair and every board needs to be developed.
How does the board agenda reflect the discipline, the purpose and the values of the board?
“Sometimes, the most successful executives are the most disastrous non-executive directors.” NED executive search professional
Through each of the sessions, and in answer to the various questions, the striking commonality was that an excellent non-executive director:
- is curious and worked hard to understand the real business context
- has the ability to work with complete ambiguity
- knows how they added value to the business context
- asks great questions and keeps asking them
- has the independence of mind to pick the right battles
- prepared well and displayed sober judgement
- was skilled in relationships and influencing outcomes inside and outside meetings
What value do you need from a NED?
… and so on to the questions …
So you want a board do you? Well based upon this experience it might be worth thinking through some of these questions first:
- Why does the organisation need a board, what purpose will it have?
- How will the chair set the right tone for the business and unlock the collective value of the directors?
- What value does the business want and need from individual non-executive directors?
- How will the business engender a real sense of curiosity, responsibility, due diligence and independence within the non-executive directors through their selection and their induction and through the chairing of the board?
- How do you plan to bring the real voice of the business into the board room?
- How will you create the space and time for proper debate?
- How will the board ensure that the value that is created is distributed fairly in a way that motivates the right behaviours for long-term success?
- How will the board develop and renew itself?
- What value do you bring to the board?
I’d like to thank Jayne for reading this and emailing the following additions.
1.The founding principal of any good business relationship is that of Trust. You touch on it briefly but I think it needs to be emphasised. It isn’t specific to Board room interaction of course, but Andrew did stress how fundamental it was to successful enduring relationships and also as the precursor to Engagement. Also if trust is not present between members of the Board, how does the organisation expect to build trusting relationships with its clients and customers? Again, there is much research that suggests that Trust is the most critical aspect in buyer/selling relationships. I could bore you to death for hours as it was the topic of my thesis for masters.
2. The social aspect .. ie Chairman and CEOs who actually liked one another and engaged socially as well as in the business context achieved more. Again, only touched upon but further emphasized in the course pre-reading paper.