Cutting Through The Grey

Sentiment

In difficult trading times we are advised to track both the tangible and intangible aspects of our businesses. In tangible terms, a real understanding of money flows is essential. In intangible terms, we follow sentiment. What is the quality of our relationships along our value chains? Are we delivering value to all our stakeholders? Do they want to travel further with us?

Sentiment is viral. It spreads quickly across boundaries. Sentiment impacts our reputation and bottom line. Sentiment is often driven by interest not logic. Sentiment is not static.

How much time is your business devoting to tracking and analysing the impact of stakeholder sentiment on the formulation and delivery of your strategy?

Who is bringing insights on stakeholder sentiment for debate in the boardroom?

Are the messages being filtered or distorted?

Which image do you see?

 

How to develop Board effectiveness

The business press is full of stories of Boards that have failed in the governance of the organisations they lead. Less space is devoted to the many Boards that believe they are on a continuous path to improve effectiveness and invest in building their capability.

Recently working with a large audience of lawyers and company secretaries, we explored their experiences of building Board development agendas, identifying initiatives that really create director capability and establishing the measures that establish return on investment.

The discussions highlighted three key lessons:

1. Annual Board reviews can build Board development agendas but need to go beyond structure and process to explore capability and dynamics. Board development needs to be pragmatic and produce real change, recognising that the starting point for each Board differs.
2. The commitment of all Board members is critical before embarking on the Board development journey. This takes time to build and the active engagement and sponsorship of the Chairman is essential. Preparing the ground properly was a precursor to most successful initiatives.
3. The insights provided by Company Secretariats are invaluable in building the Board development agenda in that they are in the unique position to see the Boards they support in operation, during formal and informal proceedings.

See Anna Bateson - Articles and Testimonials for the full article 'A positive direction' which is available to download.

Speak TRUTH to POWER

'Speak TRUTH to POWER' - Recently, this simple message has been promoted from the platforms of the Annual Conferences of both the UK's Conservative Party and ICSA. Originally a phrase coined by The Quakers, most business leaders agree with the principle but recognise that factors intervene to make it difficult to execute.

The principle relies on the bravery of those transmitting 'TRUTH' and the inclination of 'POWER' to listen.

If an organisation creates a learning culture in which there are free flows of information and knowledge, experimentation and considered risk taking are rewarded and feedback processes recognise that  mistakes will occur and should be learned from, then bravery will increase.

If 'POWER' is accessible and engages in dialogue with stakeholders, an atmosphere of trust emerges and 'TRUTH' is more likely to be spoken.

If 'POWER' recognises personal strengths and the implications of being single minded and decisive, then insights and 'TRUTH' which do not fit with the preferred world view are less likely to be filtered out.

But it is worth noting that 'POWER' in the shape of the late Steve Jobs, widely admired for his passion and ability to impact the lives of whole populations, shared the message '...don't let the noise of others' opinions drown out your own inner voice...'

Our emerging governance and stewardship codes contain principles which discourage the concentration of 'POWER' in the hands of an individual or sub-group of the Board. We can point to high profile examples where such concentration has damaged the value of organisations and whole economies but also examples where concentration has been explained and has not had this impact.

Perhaps the key question to ask is whether 'POWER' is self serving or altruistic?

Strategic Decision Making

Beyond the purely academic study of strategic decision making, there is a pragmatic realisation in many Boardrooms, that processes must change.

Impacted by an increasingly turbulent business environment, decision longevity has shortened. Decison making bodies generally meet more frequently as they seek to develop a collective understanding of what Dr Laurence Lyons and I term 'The Rich Picture' of the context in which their organisations must perform. At London Business School, Prof. Don Sull characterises 'The New Normal' as like peering into fog and suggests that strategic timeframes need to recognise this uncertainty. Prof. Zeger Degraeve highlights the need to focus on the quality and process of decision making rather than just the results achieved.

Many business leaders, including Jack Welch, ex CEO of GE, highight geo-political, socio-economic and competitive dynamics as key trends to track in creating a better understanding of the context in which strategic decisions must be made and executed. They point to the emergence of new markets and the convergence of technologies as providing ethical challenges, which regulation and legislation regimes are seeking to address.

As Boards review their structures, processes and dynamics, three key questions arise:

Who can make strategic decisions? or How far along the control - empowerment continuum are we prepared to travel?

How can we ensure that alternatives and their consequences are explored? or How do we determine and revisit our risk appetite?

What criteria will be use to choose between alternatives? or How can we best use our capability to produce value?

The disciplines of strategic decision making are clearly under review.

UK Bribery Act 1 July 2011

The UK Bribery Act came into force on 1 July 2011. The coalition government has said that it wants the UK to take a leading role in the global fight against bribery and business corruption. Bribery is defined by the Ministry of Justice (MOJ) as "giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so."

The Act applies to all incorporated bodies in the UK, but not all foreign companies who are listed on the London Stock Exchange are automatically covered by the Act. Compliance requirements will depend on the operations carried out in UK. The Serious Fraud Office (SFO) with prosecute both individuals and companies for the criminal offence of giving or receiving a bribe and the corporate offence of failing to prevent bribery. Penalties are severe. Individuals can face up to 10 years in prison and an unlimited fine and companies can face unlimited fines.

And as with all legislation and regulation, there are grey areas which will preoccupy business leaders.

Hospitality should be 'reasonable' and 'proportionate.' 'Adequate procedures' should be in place to prevent bribery. Judgement will be called for in every Boardroom to establish some common view of 'reasonable' 'proportionate' and 'adequate.'

Other key questions will preoccupy Directors and their expert advisors. With new organisation structures which involve complex, global value chains, just how liable are you for the activities of other organisations you collaborate with and those of the subsidiaries you parent? What level of due diligence will be necessary in a World where 'Fractional Work' may be provided to your organisation by a multitude of individuals?

These Boardroom discussions need to establish some common ethical framework of operations; agreement on what good behaviour looks like. There has been an increased focus on the importance of aligned ethics and values in leading the delivery of business performance but equally there has been an increased focus on the importance of diversity and respecting difference.

In recruiting for diverse and balanced Boards, Nominations and Appointments Committees and their expert advisors will increasingly be exploring candidates' past behaviour in winning and doing business, in order to establish their attitudes to 'incentivising' business transactions. 

Many Board agendas will have an item entitled 'Bribery Act compliance.' Does yours also have 'Board development of ethical alignment?'