Bringing together a group of outstanding individuals can result in an assembly of good people rather than an effective board. Whether or not their potential is leveraged, and how they perform, will depend upon a number of factors, including the quality of board chairmanship.
Director and board development is covered in my book Developing Directors on building an effective boardroom team. However, there are three related areas I would like to cover based on my experience of working with over 100 boards to improve director, board and corporate performance – balance in the boardroom, abolishing trade offs and creating high performance organisations.
I argue in my book Shaping Things to Come that we need to balance factors such as change and continuity. Dangerous boards are often at one end of the spectrum. Effective boards know how to balance contending factors – such as the interests of different groups of stakeholders. Take the balance between head and heart. Directors should act on the basis of how people are, rather than how they might prefer them to be. Ignoring short-term perspectives and greed contributed to the 2008 financial crisis.
Too many directors go with the crowd, rather than thinking for themselves and challenging where appropriate. The focus of corporate governance needs to change from board structures to the conduct of directors.
Many independent directors are inwardly focused on governance arrangements and compliance with codes. They concentrate on the remuneration of executive directors rather than on what they do. Inadequate attention is paid to people and their performance, and external issues such as mutually beneficial relationships with customers, and impacts upon the physical environment.
More balance is also needed in board membership – what about business and social entrepreneurs, or people from academia and the media who question and probe? Financial institutions at risk are invariably led by “A list” directors. Far too many of them come from large, bureaucratic and quoted companies.
Some directors behave as if they have been paid to turn up, look distinguished, say the obvious to show that they have read the board papers, and agree with what the chairman and/or chief executive would like to do. The criteria employed to recruit them could actually have been used to show them the door.
Bringing people onto a board because of their networks, experience and contacts is counter-productive if they have been moving in the wrong circles, meeting yesterday’s people, and discussing outdated ideas. Maybe they have had a long experience of barking up the wrong trees, and voting through corporate initiatives that do not deliver.
Direction should be about thinking as well as doing. Activities like ticking a checklist box can be dangerous when they take the place of thinking, and especially thinking about what is best in new circumstances. Adopting a standard model of board can kill evolution and innovation in new governance models and approaches.
The details of derivatives, and the risks posed by slicing and dicing, seem to have been beyond many bank directors. Yet, when their own remuneration is at issue, these same people are often capable of absorbing small print, raising pertinent questions and seeking relevant advice. The primary focus of directors should be the best interests of the bodies on whose boards they serve.
Other balances to get right are those between aspiration and achievement, rhetoric and reality, and the formulation and implementation of strategy. Far too many boards hope for the best rather than make things happen.
Direction is more than visioning, establishing goals and values, and ensuring the right capabilities are in place. Boards need to ensure relevant capabilities are applied to what needs to be done to achieve corporate objectives. In short, the balance needs to shift from words to deeds.
Boards are opting for complexity rather than simplicity. Far too many directors have only known large, expensive, disruptive and time consuming ways of transforming corporate performance. They overlook simple, focused, and proven alternatives such as performance support that can quickly and simultaneously deliver multiple objectives, including huge returns on investment in a matter of months.
A crucial balance to get right is between compliance and avoiding risk, and the growth and development of a company. Excessive avoidance of risks can lead to missed opportunities, stagnation and decline. Smart boards look for practical solutions to such dilemmas.
Building controls into performance support can both liberate key workgroups, and prevent actions that cause commercial, technical, quality or regulatory problems. One can set people free, and at the same time reduce risk. One can also simultaneously boost productivity, cut costs, speed up responses and ensure compliance. Organisations, individuals and the environment can all benefit.
I will show in a forthcoming report how embracing performance support can avoid many of the dilemmas faced by boards. Take the choice between performance today and capability tomorrow. It is possible to deliver both, and remain relevant, competitive and vital throughout a journey into the unknown.
We should only want energetic boards when their strategies are sensible, stretching and achievable. Marconi was destroyed when a determined chairman and CEO pushed through a mistaken strategy. It was the wrong strategy, and they attempted it at the wrong time. Other companies survive in spite of their boards, because people ignore half baked corporate initiatives.
We need no longer struggle with historic dilemmas, management of change initiatives and corporate programmes that fail to deliver. Smart boards can help key workgroups to excel using approaches that are right for the age we live in.
We can create high performance organisations that avoid traditional trade offs, deliver multiple objectives, and provide people with relevant 24/7 support wherever they are. Average workgroups can be helped to excel at key corporate activities. Ordinary boards - even low performance boards – can build high performance organisations.
________________________
Prof Colin Coulson-Thomas of the University of Greenwich, and author of Developing Directors and Shaping Things to Come, is chairman of Adaptation, Bryok Systems and Cotoco. He gave his talk on building and leveraging a high performance board at the Global Convention 2011. The convention incorporated the 11th International Conference on Corporate Governance and the 2nd Global Conference on Sustainability.
