Familiarity in the boardroom doesn’t always breed contempt, but it can encourage complacency and assumptions that alienate directors from a business and its wider market. A good chairman, in conjunction with the CEO, will be fully aware of this and won’t be afraid to shake things up.
In the UK, the Corporate Governance Code states that listed companies are required to carry out annual board reviews. When executed in the right way, they can provide a catalyst for change and an injection of new ideas.
“If the chairman wants to get something done then the board review can act as a tool to make it happen, or if board members want the chairman to behave differently it can assist the delivery of that message,” he explains.
Adding to this assessment, Judith Nicol, Director of Leadership Services at executive search firm Warren Partners, says: “Board reviews provide that time to think. Being made to stop and reflect opens up possibilities for the business.”
According to Judith, reviews generally have the most impact when “you have a new chair, new directors or a new set of challenges that the board is facing”.
Glen Moreno, Chairman of international publishing and education company Pearson and FTSE 250 bank Virgin Money, explains how he carried out his first review at Pearson after he had been there a year: “I led the effectiveness review with the support of the board… We decided that to add value we should focus on four key areas that would make a difference to the company: governance, strategy, business performance and people. We built our entire board cycle and agendas around those four themes.”
The code also states that FTSE 350 board reviews should be externally facilitated every three years. For Glen, specialist external advisors can help address softer issues, like board chemistry. “People need to be able to open up and say someone speaks too much, the chairman is too dominant or not dominant enough; a good external advisor can help facilitate that,” he comments.
“Like most things in life, board reviews are what you make of them. They can either be expensive, time consuming and useless, or they can be creative and valuable. It’s the chairman’s job to ensure the latter.”
Making the most of it
Boards are often criticised for box-ticking their way through evaluations, carrying them out purely as an act of compliance.
Glen says: “Practitioners ignore the code’s unique flexibility and attempt to apply it rigidly. The phenomenon we all refer to as box-ticking is spreading like wild fire… whether the review is internal, external or externally assisted.
“Boards are there to create enduring businesses that benefit customers, employees, shareholders and other societal stakeholders… We need to reconcile good practice with the realities of business life.”
Some board directors cite a lack of time as the reason for taking a prescribed approach to evaluations. Ian vehemently disagrees and says it’s down to attitude: “Some boards view the way they do things as satisfactory and don’t think anything needs to change.
“Board evaluations need to be viewed as a useful forum and a democratic process for improvement. Circulate the report after the review and give members time to go through it. The board may dismiss some points, but you have to discuss them and decide what should be actioned and why. Then, it’s up to the chairman to make sure they are pursued.”
For Charlie Wagstaff, Managing Director of Executive Membership at Criticaleye, it’s important to note that even the most competent individuals can learn how to improve, both from an individual and collective perspective.
“Bringing together successful people does not guarantee a successful board – the two are not necessarily aligned,” he says. “Constant evaluation is a necessity, as it can all too easily drift off course.”
While the success of a board evaluation rests heavily on the shoulders of the chairman, the chief executive must fully participate because it’s the CEO and executive team that will ensure change is felt across the company.
As Rob Margetts, Chairman at Britain’s mapping agency Ordnance Survey, says: “All reviews start and finish with the chairman; it’s their job to make it work and to get the most out of them.
“No one can argue over the virtue of improvement; you need a chairman who is both humble and self-confident so they can drive that. And if you show a real commitment to enhancement and effectiveness at the board level, it should echo throughout the organisation.”
These comments were taken from a recent Criticaleye Discussion Group, Board Effectiveness Review – Why Bother?, held in association with executive search firm Warren Partners.
By Dawn Murden, Editor, Advisory
Do you have a view on this subject? If you have an opinion you’d like to share, please email Dawn at: firstname.lastname@example.org
Knowing how to manage a board can be a tricky proposition for a new CEO. There may be a sneaking sense that the board is something of a distraction from running the business. This shouldn’t be the case and it’s up to the CEO, in conjunction with the chairman, to get the interaction right so everyone understands how these meetings can be productive.
Gareth Davis, Chairman of Wolseley, William Hill and DS Smith, remembers his first board meeting when he was appointed CEO of Imperial Tobacco Group: “We were re-floating out from a conglomerate as an independent, straight into the FTSE 100… there was a huge agenda… and it was a bit daunting.
“It was my first board appointment, so you’re a little bit unsure of the role of non-execs. Most of them were very experienced board practitioners… but the reality is, it’s much less difficult than you think; what you forget is everyone wants you to succeed.”
If coming in as an external appointment, the CEO will need to explain what they expect from the board. Ian Tyler, Chairman of Bovis Homes and Al Noor Hospital Group, and former CEO of Balfour Beatty, comments: “I’ve just gone through a process where an incoming CEO was taking over in one of my companies. That’s more about making your presence felt on the first encounter.”
This was the case for Ian Bowles, CEO of Allocate Software: “I used that first board meeting to set my stall out clearly and draw a line as to what was board responsibility, what was exec responsibility, where the lines had blurred and how we would handle that… We agreed our respective roles: the chairman runs the board; the CEO runs the company.”
For those appointed as CEO from within the organisation, there may be less of a need to make a mark. Ian Tyler says: “I was already on the board – I had been the CFO and then COO. In reality it was just moving into a different seat.
“The issues that I was dealing with were a big chunk of the CEO’s overall responsibility. The only difference is that all eyes look to you as the CEO… But I had gone through a long succession process.”
Knowledge is power
Once expectations and responsibilities have been established, the focus should be on how to get the best out of discussions. “A CEO has to understand why [they] need the board and non-executive directors, and why corporate governance is useful,” says Theresa Wallis, Chairman of medical technology concern LiDCO Group.
“Some people, when they first go on the board of a company… think: ‘Why do we need non-execs? What do they do?’ You need to explain the obligations of the non-execs; how they can contribute and be useful.”
Gareth says: “A CEO has to tell it as it is, warts and all. Be very open, remembering you’re among people who want to help… If there’s bad news, get it out of the way.
“Don’t underestimate the ability of NEDs to absorb and contribute… It’s usually when boards come into their own – when bad news is shared and collective intellect is applied.”
It’s important that the CEO exercises leadership in the boardroom and gets as much value from the discussions as possible. Ian Tyler comments: “I appreciate the chairman formally leads the board, but the chief executive has to be taking the board where he or she wants to go… that’s when you get a healthy dynamic where there is respect both ways, but the chief executive is clearly the prime mover in the discussion.”
Anthony Fletcher, CEO of online snack retailer Graze, says: “You prepare this enormous board pack, you prep all these people to come in and present. Then, you need to capitalise on all this information and the views people have brought around the table with their different experiences.”
When the CEO and board dynamic is healthy, the chief exec accepts challenge and listens to what is being discussed. “That’s when it works, the diversity, the debate – management brings something forward and it’s ultimately improved,” adds Anthony.
Charlie Wagstaff, Managing Director of Executive Membership for Criticaleye, says: “The CEO should be able to use the chairman and NEDs as a sounding board, drawing on their collective experience to provide guidance when necessary.”
“They are there to hold management to account, but also to support and guide you. Getting them up to speed sooner, rather than later, can only be a good thing.”
Cracks appear in the relationship between the chief exec and non-execs when the information provided is poor or selective. “There are recent examples with governance accidents where executives were not terribly welcoming to non-execs,” says Gareth. “They are directors of the company, they should have complete access and [the CEO] should facilitate that.”
James Crosby, Criticaleye Board Mentor and former Senior Independent Director of Compass Group, comments: “The chief executive has to take the initiative in putting proposals and ideas to the non-executives as early as possible… You can’t just dump a whole pile of fait accompli on them – if that’s how you treat them, you won’t have the right relationship of collaboration and challenge.”
Ultimately, the manner in which the CEO and chairman work together will set the tone for everyone else. As Ian Bowles of Allocate Software says: “If those two aren’t collaborative, then the board is going to be dysfunctional from the get go.”
A solid track record of excellence in an executive role, traditionally that of CEO or CFO, has been mandatory for anyone looking to become a non-executive chairman. While that still holds true in many cases, the qualities required to run a board are arguably growing in complexity, and this means that gaining NED experience before seeking to make the transition has become more important than ever.
Andrew Allner, Non-executive Chairman of transport concern Go-Ahead Group and landscaping manufacturer Marshalls, says: “It’s good for a senior executive to have at least one NED role while still in their executive function. That will really help, especially if they chair a committee, because they’ll see a board from a different perspective, learn how to influence as a non-executive and work with the executive team…
“It would be pretty tough to take on a chairman role without getting non-executive experience first, certainly for a bigger company.”
Debbie Hewitt, Non-executive Chairman of menswear retailer Moss Bros, glazing and lock specialist Evander Group and privately owned fashion retailer White Stuff, says: “It’s unusual for a board to take a risk with a first-time chairman. You’re more likely to get an opportunity from somebody who can strongly recommend you. If they have seen that you possess chairman-like qualities, they are much more likely to have influence in getting you appointed.”
When a position does become available, it’s a case of conducting thorough due diligence. Theresa Wallis, Non-executive Chairman of medical technology concern LiDCO, says: “You have to speak to the board and the directors. In my case, I spoke to the Chief Executive, the finance and sales directors, the outgoing Chairman, and I also actually spoke to a couple of the doctors who use the products.”
It’s a case of minimising surprises for both parties and doing everything you can to make sure your skills complement the business and its strategy. “A chairman will be taking a company through a particular stage and that will vary, so you need to understand whether you have the right experience and attributes for that journey,” she adds.
Philip Aiken, Non-executive Chairman of infrastructure services business Balfour Beatty and engineering software provider AVEVA, says: “A non-executive chairman has to think about what they bring to the table. Boards have to address strategy, corporate governance and succession, so you have to consider the general issues that the company faces and what you can personally contribute.
“It’s good to take a NED role while still an executive in order to understand what the responsibilities entail and broaden your experience away from your day job. It’s hard enough making the move to being a good NED but it’s a big stretch to suddenly being a non-executive chairman.”
Road to success
To be effective, a chairman might not necessarily possess deep sector knowledge but they will absolutely need to have experience of how a business works, what good governance and corporate reporting look like, and how to influence others.
Egos should also be kept in check. “A chairman needs to be able to provide ‘air cover’ to let the chief exec get on with what they’re doing but they must also be prepared to take tough decisions, cutting through complex issues,” comments Joëlle Warren, Executive Chairman of executive and non-executive search firm Warren Partners.
“A hugely important responsibility for a chairman is to appoint a CEO and then to really back him or her. They have to be able to act as a mentor, providing support, but also be prepared to challenge and, ultimately, be prepared to sack them if they’re not performing.”
The magic ingredient for a chairman is to understand where mistakes are often made and what slows a business down. “They’re not just there to chair meetings and be a figurehead,” continues Joëlle. “It’s a case of being much more attuned to what’s going on, so they’ll know if management are tackling the big issues.”
It’s a point that Andrew echoes: “My objective, as Chairman, is to look at how to draw the best from the people round the table who have a lot of skill and experience between them. You need to create an environment where people feel comfortable about raising questions and issues they believe are important. It requires real transparency and honesty.”
If there are risks to the business, they need to be identified and addressed. However, a good chairman will frame the dialogue so that everyone can reflect on the bigger picture too. “There can be an awful lot of focus on the short term, but one of the jobs of the board is to extend the horizon so that we’re thinking about strategy for the medium to long term as well,” says Andrew.
Underpinning all of this will be the relationship between the CEO and chairman. When the two aren’t functioning correctly, it can have a hugely damaging effect on the entire organisation. Debbie says: “The chairman is accountable for making sure that the company has the right CEO and that they are performing.
“Any chief executive, whether they’re highly experienced or new to the role, needs support, encouragement, a sounding board and a mentoring-type relationship. It’s fundamentally about trust – does he or she respect your judgement when they ask for advice? They need to feel that you have a helpful and constructive perspective and value the contribution you can make.”
Philip of Balfour Beatty stresses how essential it is to create a healthy dynamic: “I’ve had long discussions with CEOs before taking on a position so we clearly understand our roles… It’s very important, as a chairman, to know when to be firm and when to be supportive.
“There are times, I think, when the chairman has to be the leader and in other instances they will need to be the counsel.”
Andrew Minton, Executive Director of Criticaleye, says: “To think of the chairman’s responsibility as being solely focused on governance is to misunderstand the role fundamentally. The real value lies in providing support and challenge for the CEO, and ensuring the board prioritises what’s right for the long-term interests of the business and its stakeholders.”
For anyone considering the move, they should never think of the position as simply being a facilitator or box-ticker. As Philip says: “I was once taught years ago that it’s very important that the CEO runs the company and the chairman runs the board.
“If there is conflict between the desires of management and the board, the chairman needs to be the one who tries to arbitrate, mediate and, in the end, he’s probably got to bite the bullet and make the final decision.”
I hope to see you soon.
As new technology continues to turn traditional business models upside down, the onus is on executive teams to embrace change while encouraging employees to think and act differently. It means challenging conventional approaches, testing ideas and creating a ‘digital culture’ within an organisation which is attuned to and reflective of changing customer expectations. It’s inevitable that the companies that fail to adapt will struggle to compete effectively.
For large, well-established organisations, deep-rooted changes are required. Julian Payne, Line of Business Director for Solutions at De La Rue, a supplier of identity and product authentication services to governments and multinationals, says: “If you’re a first-generation digital start-up business or technology company, you don’t have to think about digital culture, you just have it. You have an agile development team… and you are open to change.
“Whereas if you’re working in a bigger business or a business with a significant non-digital legacy… you’ve got to think about the DNA of the culture that you want to create… It means thinking about what’s happening in the wider context around everything from hosting, to the cloud and big data analytics.”
Laura Haynes, Chairman of brand consultancy Appetite, explains that digital needs to be part of the core business: “People think about digital as being something outside their regular business issues, but it is time to think differently and recognise that the first way to reap the benefits of a digital culture is to break down silos and integrate digital thinking and processes throughout the business.
“Sure, there will be parts of digital that may need new technical expertise, but there is the opportunity to explore the potential to improve processes and communications, but this means embracing digital.”
It’s about connecting the established practices with the new, and reaching a balance which allows digital to enhance or adapt the traditional offering. Bal Samra, BBC Commercial Director and Managing Director of BBC Television, who is leading major digital projects such as BBC3 Online, the iPlayer and BBC Store, comments: “Our values at the BBC are always going to be the same… but we are in a different world – it feels like everything is speeding up… You need to create a culture in your organisation to evolve from the old to the new.”
Executives on point
Senior executives in an organisation need to take the lead on digital. Bal says: “The CEO has to set the pace of the vision… So that means constantly talking about the world around us and how it’s changing, and moving that from being scary to being an opportunity.”
Leaders need to be open-minded. Laura says: “The challenges are understandable because if you take a lot of senior leadership, they’re having to relearn a way of thinking that doesn’t come naturally… it’s not just about learning techniques; it’s about learning to think differently about processes, about truly interactive and real-time communications, about the utilisation of information and how to analyse what’s in front of us, as well as new media.”
Julian says you have to “remove fear and de-risk digital” through experimentation and education: “Get them to play at home more. Ask them to use some of the modern apps that, frankly, kids are using.
“You need an interpreter role, it might be your CTO or it might be head of R&D. Someone who can take relatively complex concepts of digital and introduce them to a board… [Crucially] you have to be really clear about where the customer value lies, the cost to achieve it and the steps to take.”
Younger employees are increasingly being turned in order to share their digital expertise, acting as reverse mentors for an older generation. Paul Brennan, Chairman of cloud infrastructure software provider OnApp, comments: “You need to utilise younger people who are going to be the consumers of your products and services in ten years’ time, to understand how they want to communicate with you.”
Allied to this, employees should be allowed to experiment and test ideas. “You fail fast and learn,” says Bal. “What you want is an innovation kind of culture which says if you fail… and if something doesn’t work, you move on. You’ve got to create a culture that allows people to challenge the conventions.”
For this ‘digital culture’ to be meaningful, it has to be joined-up with how the information generated by technology is being used to bring about collaboration, experimentation and to inform decision-making. “New technologies enable us to act in a very different way,” says Emma Cooper, Managing Director of UK Health and Public Sector, and Organisational Change Lead for the UK and Ireland, at Accenture.
“They allow us to tap into workers anytime, anywhere… Digital is changing organisations, silos and hierarchies.”
Helen Murray, Chief Customer Solutions Officer at Webhelp UK, a company that provides outsource customer services, says: “Huge insights can be gained from analysing conversations, utilising voice and text analytics, to truly understand customers’ emotions, frustrations and behaviours, and combining that with more traditional, structured data analytics… You need to ensure all customer engagements consistently reflect and represent the brand.”
In order to fully endorse digital, leaders have to understand the tangible business benefits. Paul comments: “A lack of awareness of the value proposition means you could miss opportunities, so education is important for senior executives to fully embrace digital. You need to understand the benefit to your organisation.”
At the very least, they have to be honest about where gaps in knowledge and expertise may lie. Mike Greene, Chairman of pharmaceutical and consumer healthcare company WinchPharma Group, says: “Boards need a diverse mix of experience, energy and ambition… If they haven’t got someone who’s digitally savvy and digitally confident then their board is missing something, but unfortunately they often recruit in their own image.”
Helen comments: “Digital is so critical to businesses… It’s essential that digital is in its DNA, not a separate operating unit; not an adjunct… It needs to interface seamlessly with the rest of the organisation.”
Large corporates may struggle to embrace a truly digital culture, but senior executives must rise to the challenge. Ultimately, leaders need to ensure they are open-minded and willing to learn, while utilising new technologies and data in order to empower employees to meet changing customer demand.
I hope to see you soon
While organisations are spending significant amounts of money trying to keep cyber criminals at bay, financial investment alone won’t be enough to deter governments, hacktivists or nefarious gangs, nor will it prevent carelessness among employees. Increasingly, it’s apparent that senior executives need to step up and take the lead, and ensure everyone within the organisation knows the part they must play in creating a truly effective defence.
In other words, delegating responsibility to an IT specialist won’t be good enough. Unless boards and executives understand the extent of the risks, it’ll only be a matter of time before security weaknesses are exploited. Criticaleye spoke to a range of leaders and advisors to find out how organisations can beat cyber crime:
1) Scope Out the Risks
If security structures are to be successful, leaders need to identify where the cyber threats to their company originate and what’s being targeted. Malcolm Marshall, Global Head of Information Protection and Business Resilience at KPMG, comments: “You’ve got four key players: foreign governments typically [want] commercially valuable data… or intellectual property that they can pass on to one of their own country’s companies.
“Criminals are after any data that can be converted into financial benefit. Hacktivists [look for] information that suits their ideological beliefs, such as evidence that a particular company is evil or unethical, and the insider [is usually out for]… revenge or financial gain.”
Insulating yourself from every threat is impossible. Sue Kean, Chief Risk Officer at FTSE 100 financial conglomerate Old Mutual, explains: “It’s important to set a meaningful risk appetite. Step one is [prioritising] data and, for all but the most highly restricted items, a zero tolerance approach to cyber risk is just not going to be feasible. We have to accept that there could be occasional breaches.
“If there are breaches, we’ve [then] got to have good enough detection to pick it up and take corrective action quickly.”
Peter Shore, Chairman of Arqiva, a provider of television and radio broadcast infrastructure, says: “You need to prioritise your systems and put a defence around them according to how critical they are…
“In some cases what you try to do is entirely segregate a system from others which are more widespread and, by nature, less secure.”
2) Choose a Leader
Selecting the right person to lead the cyber security agenda is vital. Whether it’s the CRO, CIO, COO or CFO, the specific responsibilities will vary considerably depending on the organisation and how threat levels are perceived. What is clear is that they need to be constantly communicating with the executive committee and be thinking across the organisation, rather than about their own silo.
According to Malcolm, critical decisions can’t be left solely in the hands of the IT function. “Capable though they are, they do not have the full picture. They’ll often [prioritise] things that don’t necessarily need protecting and fail to identify those that a chief executive, COO or market-facing executive will understand to be critical to their collateral success or reputational integrity.”
A similar point is made by John Lewis, Chief Operating Officer at mobile communication provider Airwave Solutions: “Quite often you will get demands from the business to make things easier, which often means bringing in greater security risk. So, having someone who understands the risks in some detail but can then balance the risk-reward decision is important.”
Whoever takes the lead must clearly identify the key action points, communicate them to their executive colleagues and ensure they’re being executed. Gavin Walker, Chief Information Officer at air navigation service provider NATS comments: “My challenge is to make sure that those risks are owned by the business. I can create the right mechanisms, the right policies and the right standards to work to, but we need to be very clear that everyone takes responsibility for implementation.”
3) Engage the Board
According to Heather Savory, Independent Chair of the Open Data User Group, which advises the UK Government on the value of the data it collects, boards are being short-sighted if they fail to treat cyber security as a priority.
“Too many organisations have strong governance around financial risk – primarily because they are required to report their financial status publicly – but pay little attention to IT risks until disaster strikes,” she says.
Brian Stevenson, Criticaleye Board Mentor and Non-executive Director of the Agricultural Bank at China (UK), comments: “There has to be line of sight from the main board to wherever your key risks are located. It’s about having the ability to probe an organisation and to satisfy yourself that its defences are adequate.”
As with all fast-moving, specialist areas, organisations have a duty to ensure their non-executives are kept up-to-date. “We might get external speakers in to take the board through the wider national threats – that’s something I would certainly recommend,” says John.
For Peter, this is where the skills and experience of an IT executive can come in particularly handy. “Our board members can ask for a session with our CIO or chief IT guy if they feel it’s necessary to get up to speed and fulfil their obligations as a director.”
4) Educate Your Stakeholders
Employees are potentially a company’s biggest vulnerability when it comes to cyber security. However, for organisations that devote sufficient resource to informing them about the risks, staff can become a powerful asset.
“We’re having to raise the level of education that we provide to our staff,” says Alan Towndrow, Group Information Systems Director at international asset advisor, M&G Investments. “We’re making sure our employees are aware of phishing emails and the social engineering that takes place. This is just as true in their private lives as it is at work.”
Leaders need to communicate the security strategy and explain exactly why it’s central to a business’ success. John explains: “People get frustrated by the security measures because, naturally, they make things more difficult. Giving some exposure as to why… we have those processes in place helps make it real for them.”
As is often the case, actions speak louder than words. Gavin says: “The executives at NATS lead by example because they understand how big the risk is. If cyber crime isn’t being taken seriously by them, it’s unlikely it’ll stick with the rest of the organisation.”
According to Ruchir Rodrigues, Managing Director of Digital for Barclays’ Personal and Corporate Banking Group, UK and Europe, this education should extend beyond an organisation’s employees. “An area of concern for us is that fraudsters use different methods to get information from the customer themselves.
“We need to reach a point where certain behaviours and practices are ingrained in customers’ brains… so [if, for example, someone phones you] whoever is claiming to be on the call, do not give them any passwords [or sensitive bank details]. It’s that kind of awareness you have to drive.”
Collaborating with your competitors may be necessary for this because it’s a job too big for any single business to tackle alone. Ruchir continues: “Banks are coming together to agree certain principles or frameworks that we will all have in place… This has to be industry wide.”
5) Continually Reassess Your Position
Investment in cyber security should no longer be seen as a one-off, technical fix. Leaders have to regularly invest time and money into assessing the threats, their systems and cultural practices, or they’ll quickly find themselves at risk.
The proliferation of internet enabled devices and mobile working, as well as an increasing reliance on cloud technology, is raising a number of questions. Alan comments: “There’s a growing awareness that the infrastructure that businesses use can expose them to vulnerabilities, so work needs to be done to respond and to develop strategies that allow you to come up with higher levels of security.”
Gavin says: “This isn’t something you just pick up, put a bit of effort into and then put down again. It’s here forever and it’s just going to get worse or more complicated. So, it’s a journey… that all organisations are going to have to live with for a long time.”
Increasingly, companies rely on the integrity of their digital capability to maintain the way they operate and their reputation. That’s why time invested in understanding the macro issues and how your company is responding is never wasted.
As Malcolm says: “Security is not something [that should] get in the way of doing business but is something that enables you to do it more safely. Hopefully that means something to [you and] your customers.”
I hope to see you soon
All eyes are on you as a first-time CEO. No matter how experienced you think you are, there will be aspects of the role that take you by surprise. It’s why many new CEOs take the opportunity to assess the business, looking to build an accurate picture of performance by meeting different stakeholders. Once you’ve got to grips with the various realities, the pressure will be on to act decisively.
“On my first day, I was very conscious that when I walked into the office everybody was looking at me thinking, ‘Well, who is this guy?’” comments Howard Kerr, Chief Executive of standards and training provider BSI Group. “They were saying, ‘We’ve seen the company announcement and we’ve seen his CV, yet, from what we can tell, he’s got no obvious credentials for this job.’”
Mike Turner, Chairman of engineering concern GKN and former Group CEO of BAE Systems, comments: “What was new to me and surprised me the most was the rigour of the external communications with the shareholders. I thought you just went along with your finance director and that the focus would be on your earnings.
“Frankly, they’re not that interested in the past, they want to know about the future: where’s the growth coming from, do you have a clear strategy and, above all, are you delivering that strategy successfully?”
Often an adjustment period is needed to deal with the greater visibility and profile. Tony Cocker, Chief Executive of energy concern E.ON UK, says: “I’d been working for the company in Germany and it was completely out of the public spotlight. So, when I came back to the UK I was intellectually but not emotionally prepared for the pressure of dealing with the… perception of mistrust of energy companies from the media, some politicians, consumer organisations and many customers.”
Sarah Boyd, CEO of retail chain Guardian Health & Beauty, Singapore, which is owned by Asian retail group Dairy Farm, comments: “I was surprised by the sheer number of decisions that I was faced with. But it was more about the fact that the majority of those decisions were being made based on gut feel, rather than using good quality data and analytics.
“I was absolutely terrified because people were asking me to make decisions on things for which I had no frame of reference, and I found that incredibly uncomfortable for a while.”
So, what should be on the agenda for those who are new to the role in those first 100 days? The most common pieces of advice fall into three areas:
- Spend time assessing the business internally in order to separate fact from fiction;
- Meet external stakeholders, such as customers, suppliers, analysts and advisors, to get an idea of how the company is perceived;
- Once the period of assessment is over, be decisive.
A good starting point will be to sit down with the chairman. Lord Stuart Rose, Chairman of online grocer Ocado Group and former CEO and Chairman at retailer M&S, says: “The relationship between a CEO and Chairman is absolutely built on trust and mutual understanding. For example, when discussing my recovery plan for Marks & Spencer with the Chairman, he just said, ‘Right, well I’m backing you’. “It was about giving me time and keeping the board and the shareholders off my back, while I focused on getting the job done. Every chief executive must crave a hugely supportive chairman and every chief executive who is any good deserves one, until he proves [otherwise].”
Greg Morgan, Director at search firm Warren Partners, comments: “I think, crucially, you need to agree with the Chair on what your objectives for the first 100 days are going to be. [You then need to] establish, again, in consultation with the Chair and the board, what your strategic and operational priorities are… and work to define them so that everyone is [in agreement].”
What they say
Don’t underestimate the value of talking to people in the business during these early days. Sarah comments: “For a retail CEO, certainly, it’s about working in-store for a period of time and spending as much time as you can with the people on the ground who are actually delivering the results for you. After all, you can’t start adding value at a more senior level until you really understand what’s happening.
“If I’d come into this business and said, ‘Tell me how our stores are run,’ and I just sat in my office… I would have been so far from the truth of what actually happens in-store.”
Tony says: “You absolutely need to take the time… to meet and listen to colleagues at all levels, as well as customers, very early on. You’ve got to prioritise listening so you get a much better feel for the organisation in your first 30 days.”
Understanding external stakeholders is increasingly a key part of the CEO’s role. Greg comments: “Going the extra mile in terms of your due diligence is probably the distinguishing feature of people that do it well. The incoming CEO must talk to advisors to the business, people that are no longer with the company and, of course, customers, investors and analysts.”
Howard says that he did “an awful lot of travelling around” to make a concerted effort to speak with those on the frontline and to deal with customers: “In my case, because I was coming into a business and a new industry, I didn’t come with any preconceptions, so I came in being genuinely curious.”
It’s about absorbing as much information as possible and carefully choosing how to relay the messages you think will have the biggest impact. “You’ve got to prioritise listening to colleagues but then also listen to customers and other external stakeholders,” says Tony. “I remember the first newspaper I sat down with was The Sun [the UK’s most popular tabloid], which was a deliberate decision because many more of our customers read The Sun than the Financial Times.”
Lights, camera, action
Once a CEO has developed their own view on strategy, it’s time to ring the changes. Mike says: “Get your direct reports, your team right, and have your head of communications in attendance at your executive committee [meetings]. He or she has to know what’s going on in the business and [likewise] you can make sure the key messages are getting out to all employees, especially around the company strategy. It’s a real failure when employees say, ‘I don’t know what the company strategy is’.”
Howard comments: “[In my case] the executive team was, to a large extent, not really fit for purpose, so I had to replace the HRD, the legal director and the FD. I also had to move a couple of regional directors around, so there was quite a lot of change required…
“Basically, I didn’t have enough evangelists on my team to support me on the messages I wanted to convey and to help me execute the strategy.”
When speaking to former CEOs, a familiar refrain is that, in retrospect, decisions could have been made at a greater pace. Lord Rose says: “When I look back and assess the mistakes I’ve made, it’s always about not acting quickly enough. Whether that’s not firing somebody or not pushing a plan through forcefully enough, there’s always the question: could I have gone faster?”
Put simply, the spotlight will be on a new CEO to show real leadership. “You’ve really got to energise yourself, but triply energise the team who are working for you, because if you don’t [motivate] the team, you don’t get the job done,” adds Lord Rose.
I hope to see you soon
Every stage of international expansion requires careful analysis. From evaluating market opportunities to deciding on whether to make an acquisition, form a joint venture (JV) or grow organically, a leadership team must do its homework and be prepared to adapt to the commercial realities of each country. Get it right and the rewards are such that business models can be transformed.
The first step is to give serious thought as to whether a country is a good fit. Paul Walsh, Chairman of FTSE 100 catering and support service Compass Group and former CEO of global drinks giant Diageo, says: “[It’s] about looking at the GDP projections, the populous and the ladder of aspirations. You look at the social acceptability of what you’re selling, the political environment [and question whether] this is a market whereby a non-local company can do well… All of these things have to be analysed, then [you] make your priorities accordingly.”
Bill Caplan, Chairman of crane hire company Weldex International and former Regional Director for Europe, the Middle East and Emerging Europe at temporary power firm Aggreko, says: “You generally look at the macro-economic activity in the country, fine tune it to what’s happening in the sectors that you’re strong in and then, within those sectors, decide on your addressable market.”
Boards should be wary of being taken in by a market’s size and fast-growing GDP. Bart Cornelissen, Head of Emerging Markets within the Global Joint Venture Practice at KPMG, comments: “There is another dimension to this and that’s the whole question of what the ease of entry is like and what the competitive landscape is really about? It’s easy to focus entirely on the potential but you can forget to ask: ‘How are we going to make this work? What’s the right business model, e.g. a joint venture or local partnership, and how do we ensure we have the necessary capabilities?’”
Once a market has been chosen, the next challenge is the small matter of deciding on an entry strategy. While some leaders have a formula which they claim can be rolled out, the consensus is that the decision will be based on the speed at which you plan to expand, the experience of your senior leadership team and the risks and regulatory structure of any given market.
“So much depends on the sector, the geography and the business model,” says Charlie Johnstone, Origination Partner at private equity firm ECI. “A good example is [our portfolio company] Fourth, whose software is excellent at helping the hospitality sector understand and control their costs… When we invested they were doing some work in North America but were definitely underweight there.
“As we didn’t need [to introduce] a new product to sell into the US, a sales-led office opening strategy seemed sensible. However… given the small, monthly payment nature of the contracts, it would have taken a long time to scale. So, we helped Fourth identify and buy a software business in Connecticut which was in the same sector… [and] this gave the company immediate scale in the US, a sales force and signature clients.”
Tea Colaianni, Group HR Director at Merlin Entertainments, explains how an acquisition in Istanbul has given the theme and leisure group a platform from which to grow: “We’ve always wanted to be in Turkey… [so] the location was very attractive and it gave us an opportunity to establish a relationship with a number of people: landlords, city officials and so forth. We’re [now] in discussion to open possibly another two attractions in the same location.”
Alternatively, JV may be the best option as this allows organisations to share not only the risks and capital investment, but capabilities as well. David Moore, Chief Portfolio Officer at private equity firm NorthEdge, comments: “JVs allow you to leverage a locally-based business’s infrastructure, whether that’s people, manufacturing capability, logistics, know-how of operating in the territory, customers, routes to market or an established supply chain.”
Andy Dunkley, CEO of clothing company Lee Cooper Brands, which was acquired by global fashion group Iconix in 2013, comments: “We’ve got a JV partner in Southeast Asia, Li & Fung… We add to the portfolio of products that they can sell and [the hope is] they’ll grow our business and provide a supply chain, which we as a company will never do. So they help us on that missing jigsaw piece, as it were.”
Not every country presents a series of choices when it comes to selecting your entry strategy. Paul says: “In Vietnam, for example, a lot of the entities that you’re looking at are actually state owned and the government will only allow you to take a partial stake.”
Starting from scratch
The other tactic to use when entering a new market is to opt for organic growth. It is generally a far slower route to take, but it does have its advantages. Giles Daubeney, COO at international recruitment consultancy Robert Walters, comments: “In our industry [the issue with] acquisitions is if I buy a company… and all the consultants decide to leave, which can happen if they’re unhappy with the new compensation package, you’re left with nothing.”
Giles goes on to explain that expansion has to be client led. “I was having a meeting with [a major client] and he said: ‘Listen, what are you guys doing in Japan? We’ve just entered that market and we think it’s a huge opportunity.’ We then went and did a bit of research and decided to open an office in Tokyo… We’ve been in Japan 15 years now and we’ve got just short of 200 people, two offices and it’s purely organically grown.”
For Mark Silver, CEO of European property management specialists VPS, if you’re going to grow organically, the management team needs to really understand the market. “If I was going into, say, Scandinavia, I’d look for an acquisition because… it’s a really new area for us. But if I was going to go into Portugal, where we’re not currently located, I might choose to do that via organic growth because we have a business in Spain, so it’s just down the road.”
Whatever route you choose it will require genuine focus from your senior leadership team. “If you are going to invest or build you are committing yourself and you can’t get cold feet part way through, so you must have done your homework,” comments Paul. “I think the leadership, wherever they may be based in the parent company, has to invest time in visiting the market, understanding the people and creating strong relationships.”
Without that first-hand attention to detail, you may not appreciate the need to make changes to strategy. Bill says: “[Don’t] be afraid to revisit your… business plan and change it as you go along… [because] no matter how much due diligence you do… once you’re in, more is revealed and, as a result of that, you end up having to be responsive to things that you didn’t necessarily anticipate.”
It’s universally agreed that it’s wise to hire people that know the market from the inside. Paul explains: “You have to get people with local knowledge. Where businesses fail, in my opinion, is where they think they can just have either ex-pats or people visiting from London; you’ve got to have people who are senior and know the market, and you have to establish a very firm bond of trust.”
International expansion is difficult to get right but, as long as the markets are carefully selected and the entry strategy is aligned with an organisation’s capability, the rewards will be very much worth the effort.
I hope to see you soon.
Leaders that spend some of their valuable time on networking never look back. They’re willing to meet a mix of people, are keen to share their own experiences while also taking advice that could inform their own thinking on how to tackle business dilemmas. Fundamentally, they understand that a diverse network, where there is mutual respect, can only be a good thing.
Sir Ian Gibson, Chairman of supermarket chain Morrisons, says: “Networking is useful because it opens people’s minds and stops them becoming too internalised. It’s also good for appreciating what you’ve got, because every company [and]… management team will have challenges and issues to overcome and, seeing the way it works for others, provides an external reference which can be useful to validate ideas and ways of working.”
It forms an important part of leadership development for directors who are curious, always on the lookout for fresh insights. “The real purpose of networking has become clearer in recent years,” says Dominic Emery, Vice President of Long-Term Planning for BP. “Certainly my experience of it, in terms of understanding how other companies do strategy, which is primarily what I’m involved in, I’ve found extremely useful… [and] I’ve learnt an enormous amount from real practitioners about what works and what doesn’t.”
Paul Withers, Senior Independent Director at engineering concern Keller Group, comments: “What it does is give you other people’s perspectives. So, like I did, if you spend a lot of time in one company, there’s a danger that you get a particular perspective on how things are, how things might be and how things should be.
“But if you see different companies run in different ways, in different styles and you meet a mix of people who have their own particular approaches, you’re more flexible in terms of how you see possible solutions or ways through situations and that is good to have.”
Code of Conduct
If you’re to extract the full benefits from networking, there’s some basic etiquette to follow. Jeremy Williams, Chairman of design agency Assembly Studios, says: “For me, people selling their services at a networking event, particularly at the outset or in an insistent way, is a big mistake. My approach to networking is to look for opportunities to help others, be that by making connections, further introductions or recommendations.
“If you focus on the needs of other people rather than yourself, then you will add great value for them at networking events. I feel this approach is much more likely to develop into mutually beneficial, two-way relationships in the future.”
Neil Wilson, CEO of recruitment concern Stanton House, agrees: “When you’re networking, you have to go into it with a feeling of trying to help people, whichever way that might be, because then it could be reciprocal. But if you just go in and think: ‘What can I get from this personally?’ and don’t give anything back, that’s when I think it can go wrong. It’s a case of striking the right balance.”
A transactional attitude will be damaging, both for the person trying to sell and the organisation they represent. Liz Bingham, UK&I Managing Partner for Talent at professional services firm EY, says: “You can’t expect an immediate outcome, like another meeting, a piece of work, a job opportunity, whatever it may be. The problem with that approach is that the whole thing becomes more tactical than relational.”
According to Liz, it’s a misunderstood skill. “One of the challenges is that people view networking as standing around with a glass of something fizzy in your hand chatting, whereas the true value really does need to be better understood,” she says.
Quality, rather than quantity, is frequently cited as vital when building a network. Mike Greene, Chairman of online education company Bolt Learning, says: “I would rather meet one person a year who was hugely beneficial than a thousand of no value.”
In its purest form, knowledge, learning and diversity of thinking are what high-value networking can provide. “It works in a rather diffuse way,” explains Dominic. “You’re never quite sure what you can potentially offer until you get into the conversation. So you may have a superficial view that you’ll be able to exchange ideas about how strategy gets created in your company, but until you get to the conversation it’s not obvious where the giving and taking will be.
“So, I think if you go in there with some sense of what the purpose of the conversation is and then allow it to evolve, often it will result in a lot of common ground emerging very quickly.”
Not everyone is a networking natural but that shouldn’t be an excuse to shy away from it. With a little planning and effort, the benefits, both personal and professional, will soon become apparent.
I hope to see you soon.
Facebook has an average of 829 million daily active users. Every minute more than 120 professionals sign up to LinkedIn and 5,700 tweets are sent per second. There’s no doubt social media is a powerful communication tool for individuals and businesses, so building an online presence and engaging should be high on the agenda when it comes to being an effective leader in this digital era.
Richard Branson is a great example of a leader who engages across multiple channels. The Virgin Group founder currently has over 4.37 million Twitter followers, is active on Facebook and Google+, and publishes thought leadership on LinkedIn. While many executives struggle with deciding how to create a personal and corporate profile through social media, Branson effortlessly blends the two.
Of course, such a profile and persona are rare in business. For many executives, social media presents a conundrum. How much of your own personality do you want to reveal and what are the consequences of getting the balance wrong between professional and personal? Criticaleye spoke to a range of Members who are frequent users of social media about how to get it right and why it’s essential for leaders to dive in and explore the benefits.
1) Set Goals
Before you take the plunge on any social network, it’s important to have an idea of what you’d like to achieve, whether that’s networking, publishing thought leadership or exploring customer attitudes.
Andrew McCallum, Director of Corporate Affairs and Business Support at Dana Petroleum, comments: “Don’t just do it because everyone else is – have a real, strong business rationale for doing it… set clear boundaries and directions of what you’re trying to do and how you’re going to measure success.”
While there is a risk of over-thinking the pros and cons of social media, you do need to consider your own profile and that of the company you represent. “Executives can jump on these bandwagons without asking themselves, ‘What am I really trying to achieve?’” says Paul Brennan, Chairman at cloud storage provider OnApp.
2) Understand the Channels
If you’re going to engage with social media, it’s useful to understand the context of different channels. Sarah Bentley, Managing Director for Accenture Digital UK and Ireland, says: “Facebook still seems to be in the realm of the personal. I think that there are employers who still check that, but… it’s legitimate for that to be a personal aspect of you.”
LinkedIn, with 313 million users, is viewed as the best channel for business connections. Richard Gillies, Group Sustainability Director at Kingfisher, comments that his LinkedIn “has got lots of people on it so it’s become a Rolodex” of useful business contacts.
Sarah says: “[LinkedIn] is also a good recruitment marketing tool… I can see what personal networks look like, but also if there’s a particular client or person in the marketplace that we want to have communication with.”
Twitter, the microblogging site with 271 million users, is generally regarded as the most dynamic. Peter Horrocks, Director of BBC World Service Group, says: “The main tool I use is Twitter… it’s very versatile. It allows people to have multiple interest groups. Twitter is the primary source of recirculation and the distribution of news so it’s particularly appropriate for me.”
Beyond these sites the use of others like Google+, Pinterest and Instagram seems to depend on industry sector and personal preference. Andrew McCallum says: “There is also some geographical distinction, in China for example Qzone or Sina have got millions of users.”
3) Know Your Corporate Policy
If you’re a company founder or employed by a start-up you’re likely to have more freedom in the way you communicate on social media, whereas corporate leaders will have stricter guidelines to adhere to. Andrew McCallum says: “I think [knowing] the policy around it, really understanding the boundaries is key… be very specific about what’s out of scope or off limits.”
Domestic and international politics are areas best avoided (unless you’re Richard Branson), as are heated exchanges with customers. Laura Haynes, Chairman of brand consultancy Appetite, says: “You are dealing with your own and your company’s reputation every time you tweet or comment on LinkedIn and Facebook, therefore it’s incredibly important that you understand the impact and implications of your communications.”
Andrew Powell, Chief Operating Officer at careers education provider The Training Room, makes a similar point. “Even though you can retract or delete a tweet, you can get caught out if you let your passion overspill… If you’re really passionate about something, think before you tweet,” he says.
It’s important to remember this especially if you or your company comes under fire. Peter comments: “You have to be prepared to take a certain amount of flack. But don’t ever rise to the bait, don’t get angry. If someone is behaving inappropriately, it’s okay to block them.”
As with any communication, it’s a case of applying common sense. Andrew Powell says: “There’s a bit of guidance around policy and dos and don’ts from the marketing team that you need to be aware of, but you need the ability to express yourself. Provided you don’t bring the company into disrepute – experiment.”
4) Learn and Explore
One way of ensuring you’re up to speed is to learn from those already versed in the technology. Sarah comments: “I look at what my children do, who range from one to 16… Internally we’ve got a reverse mentoring programme where we’ve got this great analyst who joined us as a graduate… and he’s setting up a whole programme for our execs, me included, to help coach and train us.”
Andrew Powell also found it useful to learn from employees on the frontline referencing an example from his previous role as COO at Colt Technology Services. “Every country I visited, my first three meetings of the day would be 45-minute sessions, back-to-back with people from the floor of the business, talking about technology, social media, what’s going on and just listening and learning,” he says.
According to Peter leaders should be capable of working it out for themselves: “The whole world is going on Twitter. You don’t need to do a complicated course to learn how to use [social media], just sign up, have a look at it and work it out for yourself… If a leader can’t get into something like Twitter and start to work out how it might be a useful tool for them, they haven’t got the curiosity or technological skills which make them a leader in the digital age…
“Dip your toe in the water. You can start using it and consuming it well before you start to post yourself. Get comfortable with the culture of the people you’re following and see what the conventions are, the language they use… the style.”
5) Be Authentic
Navigating the line between personal and corporate may be difficult to master, but once you’ve found your voice it’ll soon become intuitive.
For Sarah sharing a little bit of personal information is good: “I do think that consumers, employees or potential clients would be very suspicious of somebody that was 100 per cent corporate and not having an element of the personal in there. So the odd comment about watching rugby or what you’re having for dinner is fine… there needs to be that element of humanity.”
Andrew Powell agrees: “[Twitter] created a whole different dialogue, where people felt a lot more comfortable in an executive’s presence and therefore the conversation and information was a lot richer for me…
“[Employees] knew what football club I supported; they knew what my kids were up to on a weekend… Suddenly you were talking to a human being rather than a level in an operation.”
Others take a completely different stance, like Paul who draws a clear line between the public profile he maintains professionally and his personal life. “I would never… start talking about my children or that I did a triathlon over the weekend, because I really don’t think it’s pertinent to the opinion piece I might be giving on cloud technology.”
It’s understandable for executives to be reticent about using social media. Why run the risk of being trolled, falling foul of regulators or upsetting customers? Besides, what does it say about the workload of a CEO if they’re spending their time tweeting when they should be focused on running the business?
While there is some credence to these objections, they can be used as a smokescreen for fear and lack of curiosity. The reality is that with minimal preparation and a basic appreciation of the rules of engagement, the negatives can quickly be surmounted. Given the emphasis on communication as a core leadership skill, it’s somewhat negligent of executives to not make time for social media and see it as another means of building closer relationships with various stakeholders.
As Peter puts it: “People can be a bit nervous about it but get over that and try it out. You’ll be surprised at how much it improves your effectiveness as a leader.”
I hope to see you soon.