Cutting Through The Grey

Building Better Boards

 

Multiple lists specify the knowledge, skills and experience that boards need in order to perform their role effectively. There is no universally applicable formula for building a better board. Good approaches suggest that establishing a framework relevant for your own organisation is the foundation for succession planning, development and recruitment of directors. Excellent approaches also provide granular strengths analysis to specify the diversity of attitudes, beliefs, thinking approaches and behaviour that contribute to board performance. 

Enabling directors to play to their strengths improves contribution. Effective Chairs recognise the different strengths which each individual could contribute and create the environment in which imaginative discussion and constructive challenge take place prior to decision making. 

The canvas of strengths is broad and complementary. For example, to deliver a robust strategic process, your board requires a range of different strengths to analyse your organisation and environment, explore different strategic options, choose a path to the future, excite stakeholders to join in that journey and track progress and performance. 

Over the last 18 months, the level of external scrutiny of strategic process, board decision-making and behaviour has increased. Focusing on one aspect - Attitude to problems - astute observers ask: 

“Where are your problem anticipators, your opportunity spotters? ‘ 

In times of crisis, problem solvers often get most headlines. They are the individuals who are quick to act to recover difficult situations and mitigate risks. Stories are told of their success, they prosper.

Less overt are the individuals who quietly prepare plans to take advantage of strategic change, selecting the opportunities to maximise value and minimising the risks associated with the changes. 

Whether on the board or informing the board, both sets of strengths are essential. Well done to the Chairs who enable a board culture that allows both approaches to be heard and applied. Their boards invest concurrently in modifying their current organisation model, developing new models and designing innovative approaches to the emerging macro environment.

True 'Customer' insight

True ‘customer’ insight  is a hot topic around boardroom tables, but often subsequent to a review of financial performance.  Strategic thinking involves understanding the perceptions and intentions of many stakeholder groups in order to create value propositions and engagement strategies. Failure to deliver perceived value to ‘customers’ tends to negatively impact the ability to deliver value to any other group of stakeholders. 

Who is the customer?

The first challenging question.  Determining who you want to provide value to may involve modifying the market segments you target. Identifying the customers you don't want to serve is also critical. Consider inviting these elegant but invasive Green Parakeets into your garden and watch the small birds leave.

Who knows?

Decisions on who to target need to be informed by evidence so critical questions include ‘ how can we hear our customers first hand? And ‘who knows the history, perceptions and intentions of each customer?’

Who listens?

Consultancies and academic researchers have advocated an increased exposure of executive committees and boards to customers who reinforce organisational beliefs AND those that challenge assumptions. Listening to perceptions first hand can be educational but also uncomfortable.

Boundary workers with unique insights to share need to be invited to speak directly to strategic decision makers and supplement the real voices of customers. The voices of those who know may be filtered out before they reach the boardroom. 

Reliance on Big Data without the addition of human intelligence can lead to misinformed strategic decision making. Sifting messages from noise and recognising patterns is a critical board competence. 

Creating opportunities to listen to customers and boundary workers may require 'Leading by Wandering About' as opposed to MBWA (Managing by Wandering About). Physical and virtual wandering about are habits cultivated by effective directors and enabled by governance professionals.

What happens 

If you engage in conversations with customers, you build an expectation that change will happen. You also build an expectation that the conversation will continue. This presents challenges in establishing who is responsible and accountable for deciding and delivering changes and how performance and perception of value delivery will be monitored. 

Ensuring that change is visible and supported by necessary hard wiring and soft wiring of your organisation involves adopting systems thinking, understanding the inter-connectivity of all parts of your organisation.

Establishing which stakeholders are consulted before strategic decisions are taken and which stakeholders are informed after decisions are made, provides the foundation for an effective engagement strategy. 

So now after a year of courting a charm of Goldfinches to our garden, I am off to persuade the Green Parakeets to move on.

Strategic Insights

Digital connectivity has made the World a much smaller geographical space. Curiosity drives many organisations and individuals to explore strategic options in new territories with potential new partners.

The inherent biases we all have tend to result in conversations about possibilities which misinterpret intention and aspiration.

It takes time to develop a common understanding of what you are trying to achieve and a collaborative approach enabled by a shared vocabulary.

Surfacing implicit assumptions and discussing their impact on all parties is valuable in creating a foundation for more complex conversations.

 

The Brand:Reality gap

Teflon leaders

Toxic cultures

Tribal behaviour

 

Trust dissipates. 

Reputations tumble

Performance in trouble. 

 

But how long does the impact last and are lessons learnt to prevent repetition? 

Regulation and legislation may be a blunt and slow instrument for dealing with systemic dysfunction. 

New leaders emerge to deal with the mess, and so we go on. 

 

Self interest and the loss of contact with reality seem to define so many stories. 

The Governance Echo Chamber

In the Governance echo chamber, we are biased to listen to voices that agree with our sentiments. It is challenging to recognise that our truths and perceptions are not universal. Our focus is often on the common view that it is no longer enough to target compliance.

We agree that more is expected by multiple different stakeholders. Governance is described and required by regulators and legislators. Investors lobby for better evidence of behaviour and intentions. Talent is drawn to organisations based on their positioning and messaging and consumer behaviour is similarly informed by perception of brands and reputation

We aspire to embed governance. We understand that this will involve developing a coherent story of how we align our organisation’s purpose, belief system, strategic decision making and governance behaviour. We recognise that success will depend on developing an effective and committed board, enabled by governance professionals.

In response to this challenge, academics call for more research to aid evidence-based decision making. Longitudinal studies of practitioner thinking exist, but forecasting the impact of current perceptions in changing circumstances is notoriously difficult.

Regulators, legislators and institutions provide rules, principles and examples of best practice.

And in each organisation, the leaders realise that there are no universal solutions to embedding governance. Time, effort, energy and judgement must be exercised by boards to establish 'Situationally Intelligent' responses. Three early insights generally emerge from our discussions:

It is necessary for us to curate the mass of information available in order to synthesise relevant and important messages and recognise patterns and trends.

We need to listen attentively to voices that challenge our perceptions and while this can be uncomfortable, it is valuable in developing better understanding.

Our strategic decision-making and behaviour will be widely scrutinised to ensure alignment with the beliefs we subscribe to and the intentions we have shared.

August often provides a welcome opportunity for individual reflection and catching up on reading. This year my Summer reading stack includes recent publications on strategy, governance and leadership and several rather dusty books from authors I have had the pleasure of working with over the last forty years. It will certainly provide food for thought.

And in September I return to participate in conversations with Boards and governance professionals who have scheduled time to think collectively about their capability and application. 

 

 

Perspectives on Governance

On 9 and 10 July, a global audience of governance professionals is gathering in London to explore ‘The Future Board.’ Multiple speakers from academia and practitioner communities will share insights on structure, composition, behaviour and dynamics. Central to much of the debate will be the perennial problem of how to embed governance in the hearts and minds of boards and their stakeholders.  A simplistic response is that in order to build trust in a world of instant, global connectivity:

Be clear about your organisation’s belief system

Ensure that it informs all strategic decision making

Individually and collectively evidence a commitment to your decisions and their underlying ethics and values

Whether you view the need to embed governance in your organisation from the perspective of a director or as a governance professional, there is a need for a new set of frameworks and tools to inform the choices you make.

In 2018, ICSA – The Governance Institute published a Competency Framework. It highlights the understanding, practice and values which equip individuals to enable their boards to deliver good governance. Building on the expertise required to apply knowledge wisely, the framework advocates anticipating and navigating board dynamics and ultimately influencing the practice of governance across the profession.

Competence frameworks have existed for the director community for several years. Investors, regulators, commentators and governments are paying significant attention to the contribution of board strategic decision-making and behaviour to organisation failures.  

Governments have updated the regulatory and legislative requirements for boards in public, private and third sector organisations to provide better evidence of their robust strategic decision-making processes and governance. Regulators provide guidelines on effective Board behaviour. Investors and other funds providers have increased their level of scrutiny and demands for strategic intelligence. Individuals sitting in those boardrooms can be in little doubt of their collective and individual responsibility, accountability and liability.

The logical case for embedding governance is known but universal application of governance principles is still a work in progress. Powerful individuals approach the conversation with different motivations. Beyond Aristotle’s ‘modes of persuasion’ (appeal to Logic, appeal to Emotions, appeal to ethics/Values) is a fourth factor. The need to establish whether an individual is motivated by self or collective Interest can help inform dialogue. By establishing each individual’s motivation in a given situation, it is possible to start to build consensus and commitment to going beyond compliance and embedding governance.

 

The LyonsBateson Motivational Risk Model © 2018 Laurence S Lyons and Anna Bateson

 

Motivational Risk Model

It was a pleasure to join a global audience of risk professionals and board members in November. We explored motivational risk and approaches to influencing boards of directors. This article appears in the Winter 2018 edition of Enterprise Risk Magazine

Download Enterprise Risk Winter 18 - Bateson

Board dynamics - a reality check

The sun-drenched weeks of Summer provided me with an opportunity for reading and reflecting. One recurrent theme was underpinned by client approaches from a variety of sectors and territories. Our conversations highlighted the need for realistic expectations, pragmatism and commitment. They went something like this:

‘We need to change the way our Board behaves.’

‘What behaviour would you like to change?’

‘Why do you behave in that way?’

‘Who has noticed the behaviour and its impact?’

‘Who agrees that it needs to change?’

‘Who wants to make it change?’

‘Our board doesn’t share a common philosophy or agenda.’

‘What governance processes do you have in place?’

‘How can you identify individual Board member motivations?’

‘How can you present evidence of differences effectively?’

‘How can you develop Board consensus on the organisation’s purpose, aspirations and beliefs

How can you develop the commitment to change?’

‘We need to do it now because….’

‘What has triggered this urgency?’

‘How much time and effort are you prepared to invest?’

‘How can you build on the existing Board schedule?’

‘How long will it really take?’

‘How can you monitor improvements?’

 

And the result

 

Situationally Intelligent programme plans with an increased chance of success.

ICSA The Governance Institute - Annual Conference insights

 

Purpose expresses why an organisation exists and provides meaning and reinforcement for strategic objectives and initiatives. Check out GSK annual report and responsible business supplement   and Unilever’s embedding sustainability report

 

Board commitment involves visible sponsorship. Rolls Royce board apprentice programme creates valuable conversations and relationships.

 

Governance is a common goal. Compliance is not enough. FRC Key dates: download the new FRC Corporate Governance Code on Monday 16 July and contribute to the Wates Corporate Governance Principles for Large Private Companies by 9 September.

 

Strategic decision making is subject to individual, Board and organisation bias. Robust process, the right board intelligence and the astute use of creative and analytical thinking can improve the quality of decisions Adrian Furnham shared insights. Rolf Dobelli’s The art of thinking clearly and Daniel Kahnemann’s Thinking fast and slow

 

Academics, executive search firms and organisations are reaching consensus that Board talent needs to come from a larger pool. The mindset for identification, attraction and selection needs to be challenged. The KPMG Inclusion and diversity philosophy was shared by David Gracie.

 

Personal growth requires learning, application, reflection and support. ICSA has run their Governance Leadership Programme since 2010. Plans to enable personal development include the publication of the competence framework for governance professionals and services to help connect communities and provide individual support.  

 

Building trusted relationships

Governance professionals enable their Boards to deliver governance. It takes time to build the trusted relationships which provide the greatest value. An ability to read situations accurately and develop elegant solutions together, differentiates the very best practitioners. They provide inspiration for the profession. They demonstrate the value of Situational Intelligence in practice.

 

 

 

Board effectiveness is about asking the right questions

 

Board effectiveness involves asking the right questions. Over the last quarter, my conversations with directors and governance professionals have raised and explored many common themes. It is interesting to note that most are not specific to geography, sector or ownership. It is also true that most of these indicative questions require reflection and thoughtful consideration rather than an instant response.

Board remit. ‘What are we here for?’ ‘Do we agree?’ Do we have a common purpose?’  ‘How do we create value?’ How brave do we feel?’ ‘How far into the future do we want to look?’

Board structure & composition. ‘Are we fit for the future?’ ‘How should we organise ourselves?’

Time. ‘How much time do we need?’ ‘How much time have we got?’ How can we schedule our time together to deliver our remit?

Support. ‘What support do we need?’ ‘Have we invested in our governance team?’ ‘Who should provide external expertise?’ ‘Do we already have this expertise internally?’

Scrutiny. ‘What do our stakeholders expect?’ ‘What standards do we hold ourselves to?’ Who is watching?’ ‘Are we compliant?’ ‘Do we understand how to engage in a digital world?’

Liability. ‘How could we, the board, be affected by our decisions, our actions and the results we achieve?’ ‘How could I be affected?’

Capability. ‘What capability do we need to lead our business now and in the future?’ ‘What contribution could I make?’ ‘What capability do we need to develop?’

Board intelligence. ‘What should we be asking the business?’ What format would help us analyse and synthesise the board intelligence?’ ‘How can we ensure the quality and timeliness of the intelligence presented to us?’ ‘How can we balance our need for concise board papers with a need for comprehensive evidence on which to base our strategic decisions?’

Board dynamics. ‘How should we all behave?’ ‘How do we behave?’ ‘What tone have we created as leaders of the business?’ ‘What environment have we created in the boardroom?’ ‘How well do we listen to others?’ ‘How effective is our strategic decision making?’

Board health. ‘How do we know whether we are healthy?’ ‘What do we think?’ ‘What do others think?’ ‘How do we intend improving our health?’ ‘How will we know if we have made any of those improvements?’ ‘Who will hold us to account?’

Investing in reflection, discussion and synthesis of insights helps to build a common agenda.