WHEN BOARDS GET IT WRONG

“God made the idiot for practice, and then He made the … Board”
American author and humourist Mark Twain (1835-1910)

Source: 1890 painting by James Carroll Beckwith; via Wikimedia Commons

Source: 1890 painting by James Carroll Beckwith; via Wikimedia Commons


I have come to realise that quite a few boards of directors don’t add much real value to the company that they are meant to be helping to steer, and that instead of helping, a dysfunctional board can actually seriously hinder a company’s ability to succeed (see “Why many company boards are ineffective” posted July 4, 2011).

Part of the problem appears to be that many executives, on their retirement from corporate life, seem to believe that joining a board is a natural next step, without really understanding why they want to do so, nor what value they need to add beyond their business experience, nor as to what is the true function of a non-executive director.

This means that many boards can get it seriously wrong in some critical areas.

Interfering in operations … Other than its fiduciary and legal responsibilities, and the importance of protecting the interests of all the stakeholders of the company, one of the main functions of a board of directors is to advise the CEO and the executive team on direction and strategy, and to review progress. It is not the role of the board to interfere in the operational areas of responsibility of the executive team. I recently came across a board where the Chairman has little respect for the CEO, but where they have to live and work together as they are equal, and jointly, the majority shareholders. To try to overcome his view of the CEO’s operational weaknesses, the Chairman, without any buy-in from the CEO, keeps recruiting COOs. Not surprisingly, none of these have lasted more than 6 months as the CEO and the executive team have no commitment nor buy-in to their existence in the company or to their success. The role of the board is to advise and support the executive team, not to take over their responsibilities and, if there is no confidence in their ability to deliver, the board must act to find replacements for non-performing executives to ensure that stakeholder interests are protected.

Author: Areyn (own work); CC BY-SA 3.0 license; via Wikimedia Commons

Author: Areyn (own work); CC BY-SA 3.0 license; via Wikimedia Commons


Not guarding confidentiality … I sat on a board where two of the founders, who were also employees, were the staff representatives on the board, the other founders also still being company employees, and collectively still the majority shareholders. It meant that everything discussed at the board meetings was speedily and automatically relayed to their founder colleagues, and therefore was quickly disseminated into the whole organisation, often with disastrous results. For example the joint weight of the majority employee shareholders would often be used to not only continually discuss and dissect, but also to disagree with board direction, and would therefore also often result in pressure on the board to reverse some of its decisions. As a result the board could not function effectively, and I did not stay very long. Just as in Las Vegas, what happens in the board needs to stay in the board.

Wrong VC representatives …. VCs need to be more than just interested equity partners who sit on the board to protect their investment. It is important that the right people are appointed at the right time, based on the need of the company at its particular stage of development. Having a VC board member who only focusses on the numbers when the company needs advice and direction in building go-to-market and/or globalisation strategies will not add much value at that time, and will mostly just duplicate the skills that one would rightly expect from the CFO. There is no question that a “number cruncher” can be valuable, but timing is critical. All members of the board must be there to add value or they should be replaced, and as for CEOs, should not be allowed to serve for more than about 5-6 years maximum, to ensure that they do not get too comfortable nor too complacent (see “How do you know when you should step aside” posted April 2, 2012).

Author: World Economic Forum; CC BY-SA 2.0 license; via Wikimedia Commons

Author: World Economic Forum; CC BY-SA 2.0 license; via Wikimedia Commons


Friends of the founder(s) … I have seen too many early boards that are constituted mainly from friends of the CEO/founder in the belief that the friendship will ensure their commitment to the success of the company. Unfortunately this rarely works, as their tendency is to support the Founder/CEO in whatever s/he does rather than to act as sanity, performance review and sounding boards for the executives. Friends will tend to prefer to work on sustaining the friendship rather than being prepared to hold the executive team to task for their actions. To be effective a board needs to be constituted by people with a broad set of skills including financial savvy, some entrepreneurial spirit, good business experience and also be “connectors” that have the ability to introduce the company into some required strategic markets and companies, as well as the presence to elevate the reputation and standing of the company. It must also have a Chairman who can manage the board effectively and with integrity from within both business and legal frameworks.

Being a board member is not necessarily a valid next step for all retired executives no matter how senior or experienced they may have been in their corporate life. It takes people who not only have the skills and knowledge that are needed, but who also fully understand their roles and responsibilities as a non-executive board member, and who have the right mind-set to take a strategic and advisory role, rather than retaining the operational mind-set that they have held for the previous 35-40 years of their working life. As not all executives will find it easy to make this transition, it is important that boards be constituted with considerable planning to meet actual needs, as well as with wisdom, caution and forethought.

“In modern business it is not the crook who is to be feared most, it is the honest man who doesn’t know what he is doing.”
English poet, William Wordsworth (1770-1850).

THE RIGHT TO WORK

“It is the working man who is the happy man. It is the idle man who is miserable.”
US Founding Father Benjamin Franklin (1706-1790).

via Wikimedia Commons

via Wikimedia Commons


From Wikipedia “The right to work is the concept that people have a human right to work, or engage in productive employment, and may not be prevented from doing so. The right to work is enshrined in the Universal Declaration of Human Rights and recognized in international human rights law through its inclusion in the International Covenant on Economic, Social and Cultural Rights, where the right to work emphasizes economic, social and cultural development.”

For many years during my corporate life I had the opportunity and privilege to attend the annual Tallberg Forum in the village of Tallberg in Northern Sweden. The forum would pull together about 500 leaders from the worlds of commerce, politics, government, labour unions and youth representatives, as well as various thought leaders from all corners of the world, to meet, mingle and discuss issues facing the world.

From the Tallberg Foundation website “… leaders of over 70 nationalities break out of their daily lives and come together in the village of Tällberg. For five days, they talk about and reflect on global governance and the frameworks necessary for global sustainable interdependence. The Tällberg Forum makes no declarations and issues no recommendations. Its aim is to provide leaders from business, government and civil society as well as influential thought-leaders with a forum to discuss important issues in a calm and inspiring environment. The Forum’s result lies in the many initiatives and ideas that the participants bring back home and integrate in their actions as leaders.”

In the last year that I attended I was asked to take part in a panel discussion on “Globalisation and Human Rights”. The other panel members tended to focus on the impact of globalisation on some of elements in the United Nations list of about 30 human rights including the right to get an education, the right to medical care, the right to have access to clean water, the right to breathe clean air and so on.

Author: Wilfried Huss/anonymous; via Wikimedia Commons

Author: Wilfried Huss/anonymous; via Wikimedia Commons


I had taken a slightly different approach, as I had felt at the time (and do so even more strongly now) that we were tending to overlook one of the most fundamental rights that has always differentiated those with opportunities in life from those who will struggle, being the right to work.

In 1951 my family, of Polish extraction, emigrated from Europe (France) to Melbourne in Australia through the support of a refugee organisation. My parents wanted to escape the hardships in Europe after the war, and had heard that Australia was a land of opportunity with work readily available for people with skills. My father was a shoemaker and had no troubles finding a job. My mother took a job as a housekeeper for a local widowed professor, and my father worked in a shoe factory, standing at a shoe last for 10-12 hours per day, and brought piece work home for the evenings and weekends, to ensure that they could build a better life for the entire family. Initially they focussed on buying a home so as to build a stable environment, and also on educating their three children. They had real hope in their ability to build a better future life, in the belief that the role of every generation was to make life easier for the one to follow.

Photo © 2004 by Tomasz Sienicki; CC BY 3.0 license; via Wikimedia Commons

Photo © 2004 by Tomasz Sienicki; CC BY 3.0 license; via Wikimedia Commons


They had an unshakeable belief that the right to work was a privilege rather than a hardship.

I was reminded of this recently, when I was asked to speak to a group of young French university graduates on the subject of “The Global workplace”. Having spent my entire working life flitting around the world (New Zealand, Australia, USA, Singapore, Germany, France), I was invited to do this guest lecture, as being someone who had some first-hand experience with crossing national employment borders.

What I found most fascinating was that I got another reminder of the French obsession with retirement, (see “I live to work or I work to live” posted July 5, 2010), as one of the liveliest discussions that I had with this group of young people in their early twenties was their concern that based on changing global age-driven work patterns, they were most likely looking forward to actually having to work for over 40 years to a retirement age of about 70. They went even more a-twitter when I suggested that “if they were very lucky, the retirement age was more likely to be 75-80 (if there was a mandatory retirement age at all when they got to the 2060s), giving them more than 50 years of work ahead of them” (see “Why keep mandatory retirement ages” posted February 28, 2011).

The fact that young educated people in their 20s could fixate on retirement, when they were only just starting out on their careers really bothered me, as I have already worked for over 45 years, and am looking forward to working forever, if given the chance. As the wonderful comedian and wit Steven Wright says “I plan to live forever. So far so good”. I would just add “work” to his plan.

When we live in an environment in Europe where there are nearly 27 million people (11.0%) unemployed in the EU-27, with 6 million (24.0%) unemployed under the age of 25, the ability to be able to work at all (let alone having the right to work) has become a serious privilege rather than a hardship (Data from European Commission, Eurostat).

There are now some countries in the western world that have numerous and growing examples of 3 generations of unemployed in the same family. This is the single greatest destructive force of human hope that I can imagine, notwithstanding the importance of education, clean air and water, and medical care.

As said so well by the 26th President of the US, Theodore Roosevelt (1858-1919) “Far and away the best prize that life has to offer is the chance to work hard at work worth doing.”

Author: Scott Catron (User:Zaui); CC BY-SA 3.0 license; via Wikimedia Commons

Author: Scott Catron (User:Zaui); CC BY-SA 3.0 license; via Wikimedia Commons


I believe that all work, no matter how menial, is worth doing, and worth doing well. A professional is not measured by what he does, as much as by how he does it.

THE MANAGEMENT ART OF MUCKING OUT HORSE STABLES

“Flaming enthusiasm, backed up by horse sense and persistence, is the quality that most frequently makes for success.”
Dale Carnegie (1888-1955), American author, trainer and lecturer.

As we are the enthusiastic owners of two horses, I regularly try to increase my knowledge about their care and feeding. I recently came across this vey old beginner’s guide to horse care, and couldn’t help but notice that it was still very relevant, and that with the changing of just a few words here and there, these four paragraphs actually had some good advice, and horse sense, along the lines of what I would say to managers about the care and feeding of their people. (See also “The management art of stacking firewood” posted March 18, 2013).

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Original version on horses

“Having horses is a big responsibility. By nature, these animals are easy to be with, and are fit to be together with their herd in open spaces. To care for them, you have to keep that in mind, and work your way towards helping them achieve a good disposition. You have to take the time and effort to give them the necessary activities that they require, as they can become discontented if they are not handled in a proper manner. Make sure that there are no hazards which can hurt them, such as holes and waste. You should also spend time and effort in training your horses well so that they can understand what you want from them. and to allow them to work better with you.

To avoid waste and other hazards, build a fence around their pasture. This ensures that your horses are in a safe and secure area. If a horse escapes, it might encounter problems such as injury or getting lost. Make sure that the fence you use is strong enough to secure your pasture, but not so hard that it may cause injury to your horses.

Aside from a secure and well-built fence, your horses should also have enough protection from the harsh environment. A tree grove will provide nice shade for when it is too hot, but for winds and rain, it is best if you have a three-sided enclosure which your horses can retreat into. Study the direction of the wind well, so that the back part will be able to protect your horses from coming winds.

Make sure that you feed your horse properly. They need a lot of water daily, so always see to it that they have access to drinking water all the time. And with the right diet and nutrients provided for them, your horses will have a good disposition and you will be able to enjoy their company much better. Caring for horses is a full time job, so be sure to learn as much as you can about them and how to look after them.”

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My version on management

Being a manager is a big responsibility. By nature people are easy to be with, and can work well together in their team, even if placed in an open-plan environment, as long as it has been built for people rather than being just in rows of mind-numbing cubicles. To care for them, you have to keep “humanity” in mind, and work towards helping them to achieve their life goals as well as their work goals, and work your way towards helping them achieve a good disposition. As their manager you have to take the time and effort to give them the necessary goals and motivation that they require, as they can become discontented if they are not handled in a proper manner. Make sure that you remove the barriers to their success, such as company political landmines and the sort of “holes and waste” that can come from all sides and that can hurt them. You should also spend time and effort in training your people well so that they can understand what you want from them. and to allow them to work better with you.

To protect them from external assault, you should build an environment that protects them enough to do their job well, but not so strong that they cannot wander out when they feel the need to find out what is going on around them. Your role as their manager is to ensure that they do not get “injured or lost”, and that they understand what it is that they find out in the wide expanse of the corporate wilds, and how it can affect them. The fence just needs to be strong enough to protect them from outside threats and time-wasters, but with lots of visible exits.

Aside from a secure and well-built fence, your team should also have enough protection from the harsh environment that can arise from elements like changes in corporate direction, tough economic environments, squeezed budgets, hiring freezes and even company downsizing, It is easy to shelter your people in good times, but a good manager will work to protect his team under the harshest of conditions. You need to be able to study the direction of possible ill winds, and plan ahead to ensure that your team will be well protected from all sides.

Make sure that you feed your people properly with everything that they may need to do their jobs well and to do them with energy, commitment and passion. They will need access to resources and information daily, so make sure that they have what they need all the time. And with the right tools and knowledge provided for them, your people will have a good disposition, and you will be able to enjoy their company much better. Caring for people is a full time job, so be sure to learn as much as you can about them and how to look after them.

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They say that a horse gallops with its lungs, perseveres with its heart, and wins with its character … so do people.

NEVER RUSH TO RECRUIT

“I am convinced that little that we do as managers is more important than hiring and developing people. At the end of the day you bet on people, not on strategies.”
Laurence Bossidy, author and former COO of GE

Author: Thomas Alva Edison; {{PD-US}}; via Wikimedia Commons

Author: Thomas Alva Edison; {{PD-US}}; via Wikimedia Commons


Hiring the right people into the right positions is one of the most critical responsibilities of any manager, and yet it is one that most managers do extremely badly (see “Why are so many managers so bad at recruiting ?” posted December 12, 2011).

One would think that in today’s economic environment, with about four people unemployed for every job available, companies would have a wonderful treasure trove of candidates available to choose from, and would therefore find it easier than ever to bring in the right people to fill their vacancies. However, this does not appear to be the case, as studies show that on an average it takes twice as long to fill a vacancy today than it did just three years ago. In itself, this is not necessarily a bad thing, as I believe that we should not rush to recruit at any time nor at any level, but it also appears that the quality of recruitment has not improved much in that same time.

A recent study documented in the Harvard Business Review found that over 70% of staff turnover can be directly linked to incorrect recruitment. One problem is that companies still tend to recruit more for skills than they do for attitude, something that I have long felt is the wrong way around, as the needed skills can always be developed much more easily than can the right attitudes.

However, the real problem that I see today is that in most companies, managers tend to be measured more strongly on how long it takes to fill a vacancy in their area of responsibility, rather than on how well the vacancy has been filled, despite the fact that incorrect recruitment can have a devastating effect on a company. It is estimated that a bad hire can financially cost a company three to five times the annual salary, but over and above the direct cost there is also an impact on employee morale and productivity, as well as the potential indirect costs of the impact on customer and partner relationships if the role is an externally facing one.

To speed up the recruiting process, managers tend to give away most of the responsibility for recruitment to third parties. This is understandable, as few managers have the available time to sift through wads of CVs, and then do a raft of initial interviews to come up with a final shortlist, for personal and serious one on one interviews.

Author: Rkwriting; via Wikimedia Commons

Author: Rkwriting; via Wikimedia Commons


This means that the development of this critical shortlist is generally left to the HR organisation to deliver, which despite being skilled in interview techniques, and despite probably having some understanding of the role to be filled, may not necessarily be in total synchronisation with the attitudes, culture and values of the hiring manager and his team. And yet, this approach is meant to work, despite the fact that people tend to join companies but leave managers.

In my own experience, I have found that letting my own team vet the available CVs, and hence develop the shortlist, has had considerably more success than using HR for this task, even to the ultimate point of allowing my team to come up with the final candidate for me to meet.

While your team may not have the same level of professional interview techniques as trained HR recruitment specialists, they will have a better understanding of what characteristics and attitudes are needed in their team (rather than your team), and in reality I have found them to be even more significantly bloody-minded than I am about ensuring that the right person is added to their group.

Author: bpsusf; CC BY 2.0 license; via Wikimedia Commons

Author: bpsusf; CC BY 2.0 license; via Wikimedia Commons


If you have great people working for you, and you know that they can do their job well, who better is there to recognise someone else who could do a similar job, and who would fit well into the team ?

I have also been fortunate in my time to have some great PAs, and I never hired anyone without getting their opinion of the people we had shortlisted. If the interviews had taken place in our office, I would also check with the people on reception, as they generally had a good skill for recognising the arrogant and self-important.

Source: U.S. National Archives and Records Administration

Source: U.S. National Archives and Records Administration


This process of team recruitment may take longer than the normal one of using HR, but I have always found that this approach delivered a better end result than doing it myself, and had the added benefit of getting a team commitment to the new hire, even before they actually started on the job.

This also means that there are more people ready to volunteer to get involved in the new person’s induction, in the effort expended on them coming up to speed, their education about the land-mines and barriers that exist in most companies, and a greater commitment overall to their success. It also means that the team will take a greater responsibility for ensuring that team values and culture are maintained, without necessarily needing the team leader’s involvement.

If something is worth doing at all, it is worth doing well, and recruiting the right people into the team is such a critical part of an organisation’s success that responsibility for doing it well should not be parcelled out to HR. HR can be involved in ensuring that the net for recruits is thrown in the right ponds and HR should manage the relationships with external professional recruiters who are an increasingly important part of candidate identification, but their role is really just to give you some realistic choices.

It is ultimately a critical part of your role as a manager to make sure that you recruit those people that have the best chance of succeeding, and who will have a serious chance to add value to your team and your company, and you should therefore never rush to recruit.