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Nose in, fingers out: The role of the board

According to a recently published white paper entitled  “Accelerating Performance: How to Mobilise, Execute, and Transform with Agility”, boards need to be careful about wading into management territory as boards come under fire for corporate failures, they may be tempted to become more interventionist.

The report is, based on research into the highest-performing 23 “super-accelerator” companies in the FTSE 500 – such as Apple, Starbucks and Visa – sheds new light on the qualities needed in boards and executive leaders if they are to drive growth in a disruptive world.

Authors Colin Price, managing partner, and Sharon Toye, partner of the leadership consulting practice of Heidrick & Struggles in London, said the rule of thumb for boards of directors should be: “Nose in, and fingers out.”

“Directors should sniff around, and know what’s working and what’s not. They should understand risks, trends and issues, and keep their fingers out of the business to avoid disempowering management.”

But the authors said boards do need to lift their game. Their research shows that most boards are transforming gradually, relative to the speed of business transformation.

“If a board is to be a catalyst for acceleration – and it must be – it must focus on the issue [of acceleration itself]. A board that is not looking at acceleration will neither inspire nor require a top team to do so. Similarly, a management team that is being held back by a board that doesn’t appreciate the speed, scope, and significance of a shift is doomed to fail”.

Price and Toye acknowledge that activists are holding boards more accountable, and directors are more at risk from reputational damage, leading to a greater time commitment for directors as they struggle to get on top of issues.

“They cannot stay disconnected from corporate culture. They need to dig deeper into systemic issues.

“A culture of clarity and ownership seems to help boards become better at having awkward conversations with management when needed, while at the same time providing breathing room for them,” the book states. “Such cultures help the top team anticipate and adapt without having to ask the board’s permission at each step.” The authors make five key recommendations to lift board performance:

  1. Hire one or two “utility player” directors. Boards need a few wise, battle-worn leaders who have lived through multiple business transformations to ask the right question at the right moment. In a crisis, you need such leaders in the foxhole with you.
  2. Demand a strong CEO. The board is not running the company. Its most important requirement is to oversee the performance of the CEO, and it must insist on strength in the role.
  3. Focus on the relationship between the CEO and the chair. Do they know each other? Do they respect each other? Are their perspectives and experiences complementary? Can they honestly debate, disagree, and then move on?
  4. Give weight to industry experience. Boards need to be the headlights that light the way ahead, and need wider peripheral vision than management.
  5. Be willing to fire yourself. Boards that don’t monitor their performance will fail. Be aware of goals the board should meet and ensure you are holding yourself to account.

The white paper concludes that boards embracing an acceleration agenda are evolving faster than their peers. They are redefining the relationship between directors and the management, and will redefine corporate governance for the benefit of all.

Henri Eliot is CEO of Board Dynamics.

Henri Eliot is chief executive of Board Dynamics, a consultancy, which provides strategic advice to directors and boards throughout New Zealand and Australia.

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