We ask a prominent director to share three important lessons from three different professional experiences. 

    Paul Zahra GAICD is CEO of the Australian Retailers Association (ARA) and former CEO of Australian department store group David Jones. He has also held senior leadership roles at Target Australia and Officeworks.

    His career as a non-executive director began at David Jones in 2010, when he became a board member at the same time as he became CEO, as per the rules for ASX-listed companies. Over the past 15 years, Zahra has served on the boards of a wide variety of organisations, including ASX 200 companies, not-for-profits, private equity firms, startups and professional services. His work experience covers the retail, hospitality, personal services, education and arts sectors.

    Zahra is also a corporate diversity advocate and an ambassador for the 30% Club Australia.

    The Lesson: Ensure that the board has signed up to a clear set of corporate values

    At the time I was the CEO, MD and a board member of David Jones, I went on the record as supporting marriage equality, ahead of the national vote in 2017. I was one of the first people from a corporate entity to take a public position. It was an issue important to me personally, but also to my staff and our customers.

    After I made the public comments, several board members were furious with me. In their mind, I had used my position to comment on a social issue. They took a traditional, conservative approach — they believed corporates should not have a view on social issues.

    My perspective is that I used my background and expertise to spotlight an issue that was core to our cultural and business success. Remaining silent on this topic would’ve been a risk for the business because of the impact on our staff. I was on the right side of history, but it was a stressful time. By the time the plebiscite took place, over 600 companies had signed up in support of marriage equality.

    Companies need to know what they stand for, but there should also be a documented set of corporate values the board has signed up to. This gives management a licence to operate, internally and externally. Values need to be lived, they can’t just be put in a folder on a shelf.

    Leadership is about stepping up on the important issues and putting your head up above the parapet.

    The Lesson: Ensure the company’s constitution is fit for purpose

    Having a fit-for-purpose constitution is important in every organisation, and this is particularly true for NFPs. Sometimes, people accept board roles on NFPs because they want to build their board portfolio — but if someone is new to the world of boards, they don’t really understand the rules and boundaries.

    Often, they are well-intentioned, but not necessarily outcomes-driven. There can also be a sense of entitlement because they’re not being paid.

    I was previously the chair of an NFP that had a constitution drafted when the foundation began. It was no longer fit for purpose. A few directors had been on the board for a long time, without any sign of them moving on. One director was continually undermining the CEO and myself as chair. The chair is the first among equals, but he or she is not a line manager and cannot performance manage directors.

    What I could do, though, was lead the way in redrafting the constitution. We created terms of three years. After each term, the director had to present their achievements to the rest of the board, which included their contribution to fundraising efforts. The board then voted anonymously on whether they should stay. We retained the quality directors and the problematic ones either resigned, left or were ousted.

    The Lesson: Make sure you have a CEO succession plan

    Not long after I joined the board of an equity firm, its CEO suddenly left. There were no succession plans in place. I was the only board member with experience of running companies, so I was asked — and felt obligated — to step in while a replacement CEO was recruited. I had several board commitments, so a CEO role was a significant undertaking. But if I hadn’t taken over as interim CEO, the company would have been thrown into a crisis- management situation. It took six months to appoint the CEO and was a rushed appointment in the circumstances. The CEO did not last the distance.

    Often, boards don’t take succession planning seriously enough and yet it is one of the most important things they do, outside of risk and governance. Doing a yearly review isn’t enough. Succession planning needs to be a regular item on the board’s agenda. Having a smooth leadership transition affects the reputation of the full board as well as protecting the legacy of the former CEO and C-suite. It’s in everyone’s interests to get this right.

    Succession planning for CEOs is crucial for several reasons. Continuity ensures a smooth transition of leadership. Risk mitigation is another factor, as a leadership vacuum can harm shareholder value, employee morale and stakeholder confidence. Also, identifying potential leaders within the organisation gives them opportunities to learn and grow.

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