Say Goodbye to Group Think

Comm update_22 Oct

With growth back on the agenda, it’s time to reassess the strength and depth of boards and to start going on the attack. This entails taking a fresh look at the qualities of directors, deciding whether they possess the knowledge and insight to help break into new markets, while also getting the blend of skills right so risk is adequately managed in what remains a period of great uncertainty.

It’s a case of having the vibrancy and dynamism that nullifies group think while keeping the focus on supporting the executive team, so debate in the boardroom doesn’t become combative and counterproductive. David Shearer, Senior Independent Director of media concern STV Group, comments: “Too many issues through the crisis were compounded by like-minded directors from similar backgrounds arriving at the same and often wrong conclusions.”

Andrew Tallents, Director of executive and NED recruitment specialist Warren Partners, says: “There’s a new generation of chairmen coming through who, as CEOs, demanded more in terms diversity of experience and geography and are [therefore] more empathetic to today’s executives in terms of what they need from their board composition… the make-up of the board must reflect the diversity of its stakeholders, whether that’s through the supply chain, customers or the shareholder mix.”

A fresh perspective can make a world of difference. Allan Cook, Chairman of engineering consultancy Atkins, says: “We’ve a number of people on the board who have little or no engineering expertise but add significant value to the running of the board, providing different perspectives.”

There will be sectors where this won’t be so desirable, but chairmen are beginning to appreciate the need to shake-up the skill-set of the board. Vanda Murray, Non-executive Director at construction and support services company Carillion and formerly Chairman of alternative energy concern VPhase, comments: “Be very clear with the recruitment consultant about what you’re looking for… in terms of skills, and be open minded about the type of person that might be appropriate for your company.”

Kevin Lyon, Chairman of printing concern Wyndeham Press, says: “The challenge is to make sure that between them, the individual directors have relevant experience across all key issues – and that the right atmosphere is created to ensure they all contribute constructively. Challenge and tension bordering on disagreement is great – but no politics or point scoring.”

Global view

The quest to strengthen a presence in high-growth markets is one of the reasons for a changing of the guard in the boardroom. Andrew Walker, Senior Independent Director of filtration and environmental technology concern Porvair, says: “Somebody who has had the experience of going to that country before and has contacts there is certainly useful… even if they don’t know the solution they can say, ‘Try this person’; it’s just a good starting point.”

However, there are, according to Mike McTighe, Chairman of project management consultancy WYG Group, certain realities that need to be considered: “When you’re trying to run ten board meetings a year, which is the norm for a UK public company, it’s impossible to get people who live in, say, India or China, to attend all those meetings… phone calls are not the way to run an effective board [as] already you’re compromising the capability of the board… You need to look for [the] skills and experience but you need to be pragmatic and recognise that a board is a working unit and people need to be available to allow it to work.”

As ever, the threats to the business and its integrity should be front of mind, particularly when a company moves into new markets. Leslie Van de Walle, Criticaleye Board Mentor and Chairman of building material company SIG, says: “You need people that are good entrepreneurs and know how to take risks, but at the same time you need people that are good at evaluating and minimising risk.”

A sound company secretary certainly has a role to play, as does the audit committee chairman. Mike says: “I always look for an audit chair that has the experience to be able to contextualise what they are finding and not just saying ‘look at the numbers’…  It’s what I call ‘the sleep at night factor’, because you’re pretty comfortable that there’s not going to be a significant life-changing event from an accounting and financial point of view.”

Once the risks and issues around governance are in order, a dynamic board will be addressing questions of strategy and a competent chairman will keep the debate productive. Vanda comments: “You need to look at the needs of the business, the strategy going forward and the type of skills that will be helpful to the board, and you want to put a complementary group of people together.”

Sir Michael Lyons, Criticaleye Board Mentor and Chairman of the English Cities Fund, says: “It isn’t enough to have diversity of views if that leads to ongoing competitive tensions among members of the board… you need to make sure folks have a high regard for each other so that they are capable of working in a collegiate fashion.”

The priority has to be to keep a business relevant and nimble enough to take opportunities. Mike comments: “What you’re seeking to do is to adapt the make-up of the board to the circumstances that it is likely to confront over the medium to long term, without losing the institutional learning and experience. The way most good boards accomplish that is through the staggering of the rotations of directors on and off, so you have a mixture around the table which balances the old with the new.”

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeuk

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