Boards in management territory

Wednesday, 01 February 2017


    As boards come under fire for corporate failures, they may be tempted to become more interventionist. But according to a new book from Heidrick & Struggles entitled Accelerating Performance: How Organizations Can Mobilise, Execute, and Transform with Agility, boards need to be careful about wading into management territory.

    The board as a catalyst

    The book, 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 book 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.

    Reinventing the workplace for greater gender diversity

    More women in the workforce would increase Western Europe’s gross domestic product by US$2.1 trillion in 2025, according to a new study conducted by McKinsey & Company.

    The study, Women Matter 2016: Reinventing the workplace to unlock the potential of gender diversity, by Sandrine Devillard, Alix de Zelicourt, Cecile Kossoff, and Sandra Sancier-Sultan, surveyed 233 companies and 2,200 employees in nine European countries: Finland, France, Italy, the Netherlands, Norway, Portugal, Spain, Turkey and the UK. It showed that while the case for gender diversity is compelling, many companies still fail to ensure women are represented fairly in top management and that progress towards parity remains slow.

    The study found that in Western Europe, only 17 per cent of executive-committee members are women, and that women comprise just 32 per cent of members of corporate boards for companies listed in Western Europe’s major market indices. Comparatively, in the US, the figures are less heartening, with 17 per cent for executive committees and just under 19 per cent for boards.

    The study found that European women also work more unpaid hours and have more part-time jobs than men. The authors note a correlation between the representation of women in leadership positions and women’s employment rate, as well as their hours of unpaid work.

    “Increasing the number of women in top management requires tackling these two inequalities,” said the authors. “Governments have a strong role to play in addressing this issue and creating the conditions for equal opportunities. But companies also have to do their part.”

    Analysis showed that while the vast majority of companies have introduced measures to increase gender diversity at the top, many are yet to see significant results. Among the key findings were:

    • Although having a critical mass of measures is important, volume alone does not explain women’s representation in top management: only 24 per cent reported having more than 20 per cent of women in top management positions.
    • A mere 7 per cent of the companies ranked diversity among their top three strategic priorities.
    • Of the 2,200 employees surveyed, more than 88 per cent said they do not believe their company is doing what it takes to improve gender diversity, and 62 per cent do not know how to contribute to gender diversity.
    • Regarding the effectiveness of gender-diversity programs, only 40 per cent of respondents reported that these were well implemented in their companies.

    While previous research has outlined a comprehensive gender-diversity ecosystem that companies can put in place to increase women’s representation at each level of the organisation, the current study identified three game-changers that distinguish best-in-class companies:

    • Persistence
    • CEO commitment
    • Comprehensive transformation programs

    The authors concluded by stating: “It will take government and business-led interventions to create an environment that offers women better opportunities.

    “To achieve this, companies will need to transform themselves by re-evaluating their traditional performance models and by challenging the long-term viability of their prevailing leadership styles.”

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