GET THE MOST OUT OF YOUR BOARD

While internal boardroom politics are the bane of many an executive’s existence, getting your board members working in the same direction can be a vital step towards a successful CEO tenure.

Corporate governance has brought with it greater scrutiny of the board, its role, its composition and its effectiveness, and we are ever more aware of the importance of independence and ethical guidelines. And when one looks at the composition of several boards, there are general rules of thumb that are followed. But looking across a number of organisations, it can be seen that although some companies’ boards have the “right” mix in terms of backgrounds and skills of the individual directors, some have more of an impact than others.

So, if it is not structure, what is it that makes a good board? Research documented in the Harvard Business Review stresses that the key ingredient is the social element as opposed to the structure per se.

Just as the chemistry in a well-functioning, successful team cannot be quantified, it nonetheless is a key, determining component that is present in effective boards.

There are five key elements that can help a CEO foster the optimum environment in which the board, and each member within it, performs at their best: creating a climate of trust and candour; fostering a culture of open dissent; harnessing the mix of different roles; ensuring individual accountability and performance evaluation.

Climate of trust

Creating a climate of trust and candour is a virtuous cycle whereby board members develop mutual respect, therefore developing trust, and hence enabling the sharing of difficult information. The CEO needs to be transparent and open in information sharing, providing documents with ample time for them to be read and digested. This will enable all members to have the same level of information and so allow for more balanced discussion and a better- informed decision process.

The CEO should also give board members free access to people who can answer their questions, such as creating opportunities to meet key company personnel and inspecting company sites. Encouraging different board members to engage in this kind of activity and spending time together creates more unity and minimises the exposure or risk of factions. Providing free access to information and key personnel also eliminates the need and/or desire of individual members to create “back access” to information leading to them breaking away from the team and creating possible factions.

Open culture

In an environment of trust and mutual respect, healthy debate is encouraged where assumptions are challenged. This ensures issues are thoroughly discussed and each member has the opportunity to voice his viewpoint.

The CEO should not punish or discourage rebels or nonconformists, but instead use the opportunity to learn. It is through these interactions that people’s perspectives are challenged and horizons expanded. The CEO should leverage the knowledge and wisdom of the members of the board. Having a thorough understanding of members’ positions and their justifications opens opportunities to new conclusions and stronger decisions.

Research conducted by Eisenhardt and Bourgeois, found that the highest-performing companies have extremely contentious boards and regard dissent as an obligation, treating no subject as a taboo topic.

Roleplay

CEOs, along with other board members, should encourage members to play a variety of roles thereby giving them a wider perspective of the business. Viewing a scenario from a different perspective and developing alternative scenarios to evaluate strategic decisions not only broadens the number of possibilities and opportunities but also inhibits members developing a rigid point of view. Hence, members should be encouraged to play devil’s advocate, at other times delve into the details of the business and also be given the opportunity to act as the project manager. A case that demonstrates the impact this can have on a business was at Pepsico in 1997 when the board decided to sell the various components of its well-run restaurant group.

CEO Roger Enrico had previously turned around the unit which had been the brainchild of two of Enrico’s predecessors and must have had great pride in the division. Yet, he eventually convinced all that the restaurant unit should be sold and so that it could flourish freely beyond the controls of the parent company. It proved to be a brilliant idea.

Accountability

Ensuring accountability is probably one of the toughest challenges a CEO faces. In a survey conducted by the Yale School of Management and the Gallup Organisation, 25% of CEOs claimed that their board members did not appreciate the complexity of the businesses they oversaw. In recent history we have seen cases of individuals blaming others, proclaiming ignorance, Enron being a case in point.

Directors should take their duties seriously and encourage others to do the same, setting the tone for acceptable behaviour and performance.

Behaviour breeds behaviour and although the CEO and chairman of the board can assign tasks to get individuals fully engaged, peer pressure will play a major influencing factor in further enforcing positive behaviour.

Tasks can take on various formats and could involve collecting external data, meeting with customers, anonymously visiting plants and stores in the field and cultivating links to outside parties critical to the company. The exercise will then require members to impart knowledge and findings to the rest of the board and allows them to become better versed in strategic and operational issues the company faces.

GE’s board members for instance, dine with the company’s largest suppliers and distributors the night before the annual meeting while Home Depot’s board members are expected to visit at least eight stores outside their home state between board meetings.

Evaluate performance

Not giving feedback to a team is self-destructive as there can be no learning without feedback. Findings from a combination of research and surveys show that directors rate their board’s effectiveness significantly more positively at companies where individual members are evaluated. Although, when individuals are in an interdependent group such as on a board, it is better to conduct a formal evaluation on the performance of the overall group rather than its individual members.

One reason for this may be that, as it currently stands, board members are typically replaced for performance reasons only in extreme circumstances (e.g., criminal misconduct, conflict of interest, active disruption, very poor attendance/participation record) – and if they are replaced, they are rarely given an early warning and a chance to improve. In most cases, boards wait for under-performing directors to retire, a more reactive than proactive approach. Since the Board is in effect a high-level team, no matter how good it is, it is bound to get better if  there is an evaluation process in place.

A good first step in director evaluation is to have directors assess only themselves. After two or three years, a peer assessment can be introduced, with directors evaluating one another. A simple pass/fail along several dimensions will ensure that the process is not too time consuming. The evaluations can be handed over to a trusted board advisor, such as outside legal counsel, who summarises the findings and provides individuals with their results. A next step is for the assessments to be turned over to the committee charged with director nominations, so that under-performing directors can be identified and action taken. Overall, this is good way of identifying who is truly adding value to the organisation, as well as making performance expectations clear. In evaluating directors, ask yourself the following questions:

• Do they understand the company’s strategy and business?

• Do they keep up to date with issues and trends affecting the business?

• Are they willing to challenge management when necessary?

• Do they have special expertise that is important to the company?

• Do they have an appropriate level of involvement in CEO succession and assessment?

• Do they attend boardroom meetings and discussions?

• Are they readily available for committee meetings?

• Do they contribute to board and committee agendas?

• Are they well prepared for meetings and discussions?

• Do they actively participate and contribution to the committee and boardroom deliberations?

• Are they available outside meetings to advise management?

• Do they effectively inquire about major performance deficiencies?

Although there are guidelines in how to formulate a board, the attitude a CEO takes towards the board is key in the tone that is going to be set. If a board is to truly fulfill its purpose of monitoring performance, advising the CEO, and providing connections with a broader world, it must become a robust team. Its members need to be actively engaged in seeking the truth and challenge each other to broaden their perspectives and viewpoints. The CEO should work in collaboration with the Board and all its members as opposed to viewing it as an obstacle that needs to be managed. Adopting an approach of transparency, honesty and respect will go a long way to building and nurturing a strong team, and a robust and effective board.

IN SEARCH OF WEALTH

I recall being at dinner with the Chinese Ambassador in Malta some years ago. My boss and mentor had invited me, so as they were in the throws of a discussion about power and money, I sat listening.

The conversation was leading down a path where there was no delineation between power and money. That money gives you power and being in a position of power brings you money.  I still recall the unease within me – the restlessness that comes with knowing there is another truth.

Not being able to hold my tongue any longer, I posed a question “Did Mother Teresa have power?”

They looked at me stunned, and then smiling, the Chinese Ambassador nodded at my boss.

I don’t know about you but discussions of this nature have always intrigued me, and how we all too simply assume that one brings the other. Of course, this is very much the truth in some cases, as can be seen amongst some of the regimes and heads of state that exist around the world. But it is not the whole truth.

A similar debate ensued with a group of Russians, some of which were sons and daughters of oligarchs. This time the discussion was around the difference between being rich and being wealthy. If a person is rich, are they necessarily wealthy? If you have lots of money but are not happy, are you wealthy? If you don’t feel free to do or be what and who you are, would you feel wealthy?

In my opinion, wealth goes deeper than the number of digits behind a dollar sign and is more closely linked with the quality and richness of life. By this I do not mean just about how we create a quality of life for ourselves by buying things. Rather how our character, way of being and manner of doing things impact the quality of our experiences internally and externally. In a way, wealth is more closely linked to legacy, purpose and our role as members of the human race – humanity.

Nelson Mandela had once said, “In judging our progress as individuals, we tend to concentrate on external factors such as one’s social position, influence and popularity, wealth and standard of education…but internal factors may be even more crucial in assessing one’s development as a human being; humility, purity, generosity, absence of vanity, readiness to serve your fellow men – qualities within the reach of every human soul.”

In doing your own search for what is important to you, here are some things for you to think about and consider:

  • If you were to find out a product you buy was produced in a way that conflicts with what you deem to be moral, fair and ethical, would you still buy it?
  • Do you care enough to ask the extra question and find out?
  • Do you consider and understand the ripple effects of your decisions and the impact they have?
  • Do you have the courage to speak your truth and not follow the status quo?
  • Do the means justify the ends, and how do you balance these?
  • Where do you draw the line about what and who you care about and what you are willing to do about it
  • In the final count, is wealth perhaps about our ability to enrich the lives of others?

 


 

Deborah has the ability to sense the underlying potential of people and their ideas. Previously a successful headhunter, she is a catalyst for business as a force for good, and works with founders, entrepreneurs, successors and innovators in building businesses with purpose and profit.

Did this resonate and you’d like to know more? Please get in touch for your confidential one-to-one.

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Small Thing Make a Difference

Sometimes we can be our own worst enemy – too afraid to follow our convictions, too fearful to trust ourselves.

A number of years ago, I was working on a project where part of our mandate was to create a place where people congregate, a place they felt they belonged, a platform from where they could be heard. We were open to everyone – from upcoming musicians and singers to charities raising awareness of their causes and everything else in between. We used to incorporate these happenings in our calendar of events. But little did we know this calendar would take on an additional purpose.

It was meant to be a monthly publication – a small leaflet promoting the activities taking place, some free, some paid, to which visitors could come. Having a strict budget, or should I say no budget, we were meant to find a sponsor who would place an advertisement on one of the pages. Time was ticking and no sponsor was found. Truth be said, being somewhat of a purist, I was rather glad, not wanting some ugly ad to ruin our lovely design. But there was something else – I had this feeling there was a different use for that page, something we had missed.

This leaflet would reach thousands of people. So the question was – what message would add the greatest value?

Some time before, my boss had given me a story entitled “The Star Thrower”. Always of the belief that every person matters and every action counts, the story really resonated. And as I sat at my desk, contemplating what to do with this extra page, there on my desk was a little starfish. That was my Eureka moment and the start of a new section entitled b-inspired.

Ensuring we had the right permissions to print it, we included the story. The typesetting was done, the printing was underway and the delivery date confirmed – there was no turning back.

When the boxes full of leaflets arrived, my boss called me into his office and asked me to bring the leaflet with me. I had a sense of trepidation – since I hadn’t included the ad I thought he wasn’t going to be too impressed and I would have to bear the consequences.

As I walked into his office, I handed over the leaflet. Knowing he could read me like a book, I explained what I had done. But it was too late. He had already started looking through it, turned it over, and there it was – the story in lieu of the ad. Much to my surprise and relief, he looked up, smiled and came over to give me the biggest hug.

“Well done, I am really proud of you,” he said.

I was stunned. There I was expecting to be berated and instead got a pat on the back.

There were so many other surprises that went along with the ‘b-inspired’ journey:

  • The stories people would send us to be included in future issues
  • People waiting expectedly for the events leaflet – to see what the story was going to be
  • Seeing one of the stories on a client’s employee notice board two years later

Never did I realise what could unfold from sharing a little story. So next time you wonder if what you are doing makes a difference, may I suggest you put aside the doubt and trust that regardless of how seemingly small it may appear to you, you do indeed make a difference.

 


 

Headhunter turned talent spotter, Deborah creates the connect between people of character and companies with principles. The Founder of AMANI™, she is an advocate for business being a force for good, vested in the impact business has in both economic and social terms across various strata of society.