How I Led Change

Business transformation is complex and deceptively challenging. Various factions within an organisation will be intent on retaining the status quo, which is why over two-thirds of change programmes are doomed to fail. So how do you go about putting the odds in your favour?

Joe Berwick, Business Development Manager at Criticaleye, argues that, first and foremost, there must be alignment at the top. “Without a unified and cohesive team you won’t be able to deliver a consistent and meaningful change story to your staff, let alone execute the strategy with the precision and foresight it needs.

“Underpinning that is relational competence; the ability to develop deep trusting relationships and engage effectively on difficult and important issues. When this is properly nurtured it can unlock a team’s collective potential and mobilise change across the organisation.”

We spoke to a number of business leaders to find out what they’ve learned from the change programmes they’ve been involved in. Here’s what they had to say:

Rachael Brassey
Business Change Lead, PA Consulting Group

Complex change is like building a huge jigsaw without the picture on the box; while the overall strategy is clear, the view of the end state is largely unknown. Having led many business transformation programmes, I’ve found that assessing the nature of the impact and the organisation’s ability to change helps you determine the best approach.

Analyse the nature of the impact. Change will often bring about a significant shift in behaviour, roles and responsibilities, organisational flow, processes and technology. A combination of any two of these creates conditions for complexity.

In 2007 to 2008, I worked on an international change project that affected thousands of people in 125 countries. I’d created a logical left-brained change plan and didn’t think as much about how to shape the delivery. I learnt to look at things from the perspective of those who had to adapt their ways of working. Let this – and not the programme objectives or the senior leaders’ views – steer how to deploy change.

I also discovered that feeling uncomfortable is good. I ran workshops in which we imagined we’d failed in every element of the project. We each took the role of different leaders and captured the lessons learned, ranging from the technical issues down to how people were feeling. This really helped us to fine tune our approach and make it more resilient.

Peter Horrocks
Vice-Chancellor, Open University and former Director, BBC World Service Group

Some years ago, when I was head of BBC Television News we developed a multimedia platform − so the newsroom you see behind the news readers, the way of working, the technology, the workflows, the culture, were all things I put in place.

The main problems were the people skills and existing culture; people thought of themselves as a TV or a radio person and we needed to make a case to move towards a much more holistic approach. There were a couple of thousands people involved and it took about a year.

Some of my fellow senior colleagues told me that to go in this direction would be to take leave of our senses. Lots of people believed that the audience wanted great radio journalism from us and we had great people in radio, so why confuse things. That argument was held at many different levels.

The key to achieving change was to get the most prominent people – such as the BBC’s former political editor, Nick Robinson and its former economics editor, Robert Peston – enthusiastic about it. That meant appealing to their natural instincts to get their stories in front of as many people as possible. If you can connect the strategic change to specific things in peoples’ lives that they want to improve or feel frustrated with, that can help.

Once people saw that the BBC’s most famous journalists were adopting a multichannel approach the scepticism fell. That was significant to delivering the programme on time and making 25 per cent savings.

Mel Rowlands
Deputy Group General Counsel and Company Secretary, Smiths Group

I’m lucky enough to have worked in a number of organisations during times of fundamental change. My experiences have included break ups and takeovers, working across both private equity and public companies, including those undergoing IPOs.

Over the years I think the biggest lesson I have learned is that you can read all the theory, but success is down to people, not process. In my experience organisations become very emotional places during times of change, successful leaders are those who understand that and are not afraid to deal with it.

I hate the phrase ‘buy-in’ as it suggests a paint-by-numbers approach – tick the ‘team on board’ box and then move ahead regardless. Long lasting change really needs the majority of the organisation sufficiently behind it.

Put yourself in front of people, get them to see your vision and understand why it’s important, answer questions, be patient and listen to suggestions.

It’s important that staff feel part of the change rather than having it done to them. That means not standing on a stage giving town hall speeches, but getting off the stage and running workshops − and certainly not allowing your managers to run things while you are too busy ‘driving things forward’ behind the scenes.

Paul Cardoen
CEO, UK, FBN Bank (First Bank of Nigeria Group) and former Deputy General Manager, Bank of Tokyo-Mitsubishi UFJ (BTMU)

At BTMU, I embarked − rather naively − on a change project trying to convert 2,000 years of traditional Japanese employee culture in a modern, international HR framework. In 2009, the bank needed to accelerate its international expansion and develop corporate banking operations overseas. I was brought in to lead a radical change.

My ambitious HR transformation plan did not disappoint; the President and a senior executive team who had worked overseas knew that BTMU needed to embrace this bold vision of reform or fail to achieve its strategic objectives.

The planning and approval process lasted up to one year during which time nobody challenged any of the reforms, so it came as a surprise that the company’s board of 32 Directors did not give it the green light. Their compromise was to introduce reform − but at a snail’s pace.

We got it wrong by not making a soft assessment of the gap between our ambition and the organisation’s starting point. We also ignored the silent behaviours and Japanese culture that puts importance on harmony and consensus. I didn’t spend sufficient time evaluating the emotional readiness for reform, especially of the Japanese senior leaders.

I learnt that the workforce must be diverse enough to support your views and that cultural assessment is as important as your business case. But my biggest mistake was to focus too much on what worked in my previous life with other banks; no two transformation projects are the same.

Mark Parsons
Chief Customer Officer, UK&I, DHL Supply Chain 

I’ve been through four major organisational restructures in my current role and three in my previous one. I’ve found that the benefits of an organisational redesign don’t come until a year out and even then it’s not predefined as it’s down to the behaviours of people. The changes you make only set up the opportunity for people to deliver, which is why it’s crucial to understand the culture.

At Invensys, we tried to put an ERP system into a business basically run by spreadsheets and that ripped the organisation apart because the culture was anathema to the use of standardised software.

The most successful change programmes I’ve been in are ones that had a very simple and central message that people up and down the organisation understood. Large change programmes with lots of moving parts usually end in compromise.

Pace in its own right can be detrimental to a change programme, you need consistency of speed and for it to match the rate at which employees are willing adapt. We implemented a new organisational structure which got stuck at middle management. This reduced momentum and although changes were taking place, the perception that it was going to fundamentally transform the business was lost.

By Mary-Anne Baldwin, Editor, Corporate

These insights were shared during Criticaleye’s recent Global Conference Call, Leading Complex Change.

Would you like to share your experiences of leading change? If so, please email maryanne@criticaleye.com.

Read up on how to tackle the four steps in change management, and learn how emotional communication can help you lead change.

Also, don’t miss next week’s Update on whether a chairman should mentor their CEO.

Follow Criticaleye on LinkedIn 

Leadership in a Digital World

Comm update_21MayAs technology continues to transform business models, a new breed of corporate leader is emerging who is digitally-savvy and assiduously curious. Rather than fearing change and obsessively trying to retain control, the most accomplished CEOs accept that for an organisation to compete globally and attract and retain the best talent, they must be highly collaborative, operationally focused and ruthlessly strategic.

These are just some of the outtakes from our Divisional CEO Retreat, held in association with Accenture. Over the course of 24-hours, our Members discussed the leadership skills and experience now required if global organisations are to thrive in the digital age.

“We’ve reached a tipping point with digital, but it’s not as frightening a proposition as we might think,” said Oliver Benzecry, Managing Director for the UK & Ireland at Accenture. “Large organisations are now institutionalising ‘digital’ into their business model and, increasingly, they are becoming the disrupter not the disrupted.”

Bal Samra, Commercial Director at the BBC, who is responsible for a budget in excess of £1 billion and over 1,000 staff, commented: “Digital disruption is inevitable so business leaders need to recognise it, collaborate and foster a culture of learning within the organisation so that more is understood with every new project.”

Speed is absolutely essential. Ruchir Rodrigues, UK Managing Director for Digital Banking (retail and business banking) at Barclays, said: “The pace of change in digital is dramatically accelerating, forcing companies to provide better products, services and customer experience… Remember, if you are not there for your customers they now have the choice to go elsewhere.”

Simon Johnson, Group Managing Director for UK & International at publisher HarperCollins, said: “Innovative digital leaders are those who are completely obsessed with inventing things and with customer experience… They also need to create the right culture internally, encouraging the people within the business to think more like a start-up.

“This might mean starting-up a skunkworks for innovation, for example… or setting up new business units in direct competition with legacy ones.”

Embracing change

According to Mark Spelman, Global Head of Strategy at Accenture, “New business models are coming to the fore that will require a new style of collaborative leadership. The first quality required of today’s leaders is therefore to explain context and synthesise complexity.”

Bal said: “Creating a disruptive business proposition isn’t easy because it means breaking all the rules and often challenging existing business models… In large organisations, big and disruptive digital projects will benefit from the support of the CEO but you’ll also need to build a coalition from within.

“That means creating champions below the board level and across boundaries within the business… because they’ll be the people interested in the product rather than who’s in charge.”

Likewise, the ‘digital natives’ in an organisation have to be fully cognisant of what the business wants to achieve in the short, medium and long term. Ruth Cairnie, Non-executive Director at both food manufacturer ABF and engineering concern Keller Group, commented: “The obligation is on the digital experts to remove the mystique and complexity for the board by communicating clearly and simply what really matters for the business.”

Donald Brydon, Chairman of software provider Sage, said: “In a large company like ours where there are 50,000 small decisions being made daily, the CEO needs to both understand these, yet also hold to a very clear and simple strategy based on rigorous analysis.”

It was widely agreed that Divisional CEOs must create an infrastructure which supports and enables connections for customers, employees, partners and communities. Ruchir said: “The biggest risk for companies is to do nothing with digital. If you’re not constantly testing, learning and evolving, you will be left behind.”

In one sense, the challenges facing Divisional CEOs in today’s digital world do require new skills and an entrepreneurial mentality. But it is also just a new manifestation of change – albeit highly disruptive – which good leaders will absorb, understand and navigate like any other.

“Rather than being in fear of digital disruption, you should be full of optimism and ready to embrace it,” said Donald.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

3 Reasons Why Change Fails

Comm update_5MarchChange management programmes fail to deliver due to a lack of clarity and conviction within the leadership team. The original ideas put forward to improve performance become lost in the miasma of short-term agendas, petty politics and stonewalling. Small wonder then that ‘change fatigue’ is a big issue for businesses as it’s easy for employees to become disillusioned when they think they’ve heard it all before.

Criticaleye spoke to a variety of business leaders to find out the three crucial areas where leaders fall down in their approach to launching a change programme.

1) No context

“The first mistake that’s so often made is not having a clear understanding of the reason for change and failing to set out some very clear goals of what you want to achieve by making a change,” says Richard Oosterom, Executive Vice-President of Group Strategy & Business Development at communications provider Colt Technology Services.

Marcus Hayes, Joint Managing Director at consultancy The Storytellers, comments: “What often happens is that the senior management, in developing the strategy for the change, spend a lot of time looking at the big picture… then they move towards the ‘how’.

“As that gets disseminated down through the organisation, the danger is the ‘why’ and ‘what’ get lost and the energy gets focused on the ‘how’. In my experience, if you give people the ability to see the context, to have an opportunity to explore why the change is taking place, not only does it provide the motivation for the ‘how’ but it also allows them to approach the change with the right mindset.”

2) Lack of engagement

Not everyone will see change as an opportunity. There will be winners and losers as roles are altered and jobs may be lost, so the pressure is on during a change programme to identify your advocates.

Thibaud de Saint-Quentin, Executive Vice President & Managing Director for EMEA at gaming concern Activision Blizzard, who came into the role in 2009 following a management reshuffle and large scale business restructuring, says: “We created a change agent network, identifying the key ambassadors for our strategy to help us drive changes throughout all levels of the organisation.”

According to Samantha Barber, Non-executive Director at electricity company Iberdrola, “your leadership team needs to identify those who are best able to be conductors for that change… those who can be pioneers in that area and encourage others. [Likewise] some people will need additional support to make that transitional move, while others will need to move on”.

Neil Wilson, CEO of recruitment consultant Stanton House, says: “Sometimes the communication isn’t as effective across the organisation as it probably needs to be. You need the line management to be absolutely engaged in what’s going on… If they’re not quite onside and they feel as though they’ve got other priorities, then of course, that’s when it all starts going wrong.”

3) Too much, too soon

The pace of change will need to be judged carefully. For Ian Stuart, Chairman of Aspen Pumps, the formula for success when he was President of the Latin American division for Black & Decker was to trial changes step by step.

“Global organisations should manage the risk by implementing changes in one place and [refine accordingly] before rolling it out,” he says. “I had about ten different companies around Latin America reporting to me and we wanted to bring in a new enterprise system…

“We took it to Argentina first and they messed it all up because they tried to change everything and make the system fit the way they operated; then we went to Colombia and learned a lot from that experience… [and] by the third one we were ready to roll it out globally.”

It’s often a case of less is more, says Samantha: “Remember, you’re not trying to change too much. Sometimes you need to go for the two or three big wins [that impact] cultural change and, if you can secure those, then other things will follow.”

This is a lesson that was learned the hard way at Colt Technology Services, where its change programme, now in year four, was intended to improve customer service, drive growth and increase efficiency. Richard explains: “We have done another strategic review in the last 12 months because we have not achieved the goals that we set out at the start of the change programme. We had too many programmes and we have been trying to do too much…

“You need to allow yourself to really focus on the things where you can make the biggest difference… and just stop doing the rest.”

***

The overall performance of an organisation is the best metric to use when determining whether a change programme has been a success. That said, change is not something that suddenly stops – the leadership team should always be looking at ways to disrupt the status quo and improve the business in order to drive success.

In that sense, it’s a never-ending process.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

Mastering the Generation Game

Comm update_28 JanTapping into the changing needs and desires of five generations of consumers is only part of the challenge facing today’s business leaders. Just as taxing is the question of how to manage a multigenerational workforce. How exactly do you ensure that your incentives, ways of working and corporate ethos are going to appeal to both your younger and older employees?

Mark Purdy, Managing Director (Economic Research) and Chief Economist at Accenture, comments: “There’s a clear need for a multigenerational organisation. We’ve recognised that there’s a major trend around ageing and increasingly organisations are thinking about this, but maybe what we haven’t recognised is that we have a lot of millennials in the workforce too, and increasingly the successful organisations are going to be defined by their ability to bridge the gap between the ages and capitalise on the inherent strengths of both young and old.”

It’s a leadership and talent management issue. Naomi Wells, Head of Future Planning and Sustainable Development at Waitrose, part of the John Lewis Partnership, says: “We want to be able to offer a benefits package which appeals to people at the end of their career and the beginning of their career. Having choices is really important, whether that’s buying an extra week’s holiday, investing more in your pension or taking childcare vouchers, and a benefits package that covers the full spectrum of your workforce will also help you to attract talent, both young and old.”

Few of those in leadership roles will have experienced this before, especially as it is intricately linked with how technology is changing the workplace. Vanda Murray, Board Mentor and Non-executive Director at construction and support services company Carillion, says: “Businesses need to invest in IT to enable flexible working, which may be from home or any remote location, as it is now expected that we are all ‘connected’ wherever we are.

“There are huge benefits to businesses that embrace more flexible working patterns and practices. It helps recruitment and retention – in particular those workers with family commitments – be it younger children or elderly parents. Young mothers often find they cannot balance work and home life without this flexibility for example.”

Experience matters

According to research by Accenture, the fact that people are staying in employment for longer should be seen as a good thing for the economy as increasing time in the workforce by one year per person in the UK would boost the level of real GDP by one per cent. Mark says: “The fact that we’re going to have more people in their mid-sixties who still have valid skills, plenty to contribute and who also have time, is a tremendous opportunity for organisations that can harness it in the right way.”

In many cases, it’s about thinking how the older generation’s experience can be used in more imaginative ways. At Tullow Oil, for example, older workers who aren’t yet ready to retire are proving to be extremely useful when applying their experience overseas. Gordon Headley, Chief HR Officer at Tullow, explains: “In Ghana, Uganda and Kenya where our main operations are, there is an expectation from local governments that we train local workers,” he says. “By having older workers available to go and work overseas we can send seasoned and highly experienced oil-field professionals to train local workers… which [makes our older workers feel valued and] gains us great favour with those governments.”

Tim Smart, Chief Executive of the Kings College Hospital NHS Foundation Trust, has seen a similar benefit of shared knowledge: “We are doing quite a lot of work with health care systems providers in the Middle East. They really value and respect age and experience so we are able to offer people opportunities beyond their normal retirement age, working in our more commercial developments which are principally overseas.”

It’s a case of applying some imagination and creative thinking to the world of work. Anne Jaeger, Chief Risk and Compliance Officer at insurance firm RSA Scandinavia, says: “We have been able to attract people who would otherwise have retired to some senior schemes by finding ways to suit their needs, such as where they only work three days a week or part time.”

Great expectations

The under 30s generation, or so-called ‘millennials’, also want different things from an employer. “Our younger workers aren’t driven just by money,” claims Don Elgie, CEO of PR and communications concern Creston. “They’re also interested in being able to advance themselves through learning… [that’s why] we have various graduate [and] innovation schemes where we encourage people from across the group to, for example, pitch for a hypothetical client or submit an innovative idea. Actually, we’ve found they’re motivated by a whole host of non-financial incentives.”

Mark comments: “We find that a lot of the people we recruit [at Accenture] are incredibly interested in, for example, our Corporate Citizenship programme, Skills to Succeed, or the work we do for the World Economic Forum. There’s this sense that they’re interested not just in the business itself, but in its place in the wider world and the contribution that it can make to society.”

Unlocking the power of a multigenerational workforce involves encouraging the exchange of knowledge and experience between the young and old in an organisation. Jane Furniss, NED at the National Crime Agency and former CEO of the Independent Police Complaints Commission, comments: “Certainly, at the IPCC, use of social media, technology, understanding of networks and ways of operating among young people and understanding of the world, meant that many of the people that [we recruited] and the police officers who operated with us, found that shared learning was really valuable…

“The experience of one and the knowledge and understanding of the other really improved how we did our business. And it was better for the public, making sure our services were changing to the public demands.”

Rudi Kindts, Non-executive Director for technical recruiter Matchtech and former HR Director for British American Tobacco, says: “The nature of what constitutes work is changing and I see some organisations that really haven’t thought it through or are still arguing against the benefits of flexible working… [while others] are making their sales force as flexible as possible, providing them with the technology so they can be on the road, working from home or wherever.”

Increasingly, successful organisations are going to be defined by their ability to harness productivity across the workforce, combining the wisdom of age with the exuberance of youth.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

3 Ways to Engage Your Employees

Comm update Faces - 24 september

In many respects, discussing employee engagement can be to state the blindingly obvious. After all, CEOs shouldn’t really have to be told that they need to talk to their staff and be able to listen. Perhaps this continues to be such a hot topic because too many leaders allowed themselves to become estranged from their employees and now it’s a case of getting back to basics.

That means interacting with people and getting everyone to believe in the business. After all, a fully engaged and motivated workforce will be a powerful agent for any organisation seeking to change, grow and deliver success. Criticaleye finds out how leaders from a range of organisations are making it happen.

1. Test the Water

The first step is to ask employees for feedback. Most organisations still find the annual employee engagement survey an important barometer here.

Maria da Cunha, Director of People, Legal and Government Affairs at British Airways, says: “While you shouldn’t get too hung up on measurement, I do think it’s useful to have some way of checking how you’re doing. In a large organisation like ours, which has many sub cultures, it’s quite important to get some sense of whether you can prove you are going in the right direction.”

Just keep it simple and understand what you want to try and achieve. Tea Colaianni, Global HR Director at Merlin Entertainments Group, comments: “In our employee engagement survey we ask just one key question: ‘Why do you enjoy working here?’… while it turns out that 95 per cent of our employees enjoy working for Merlin, we try to spend a lot of time working out why there are 5 per cent who aren’t engaged, and the goal is to try and turn them around and make them ambassadors for the brand.”

2. Be Visible

Obviously, CEOs need to get out and talk to staff. “I do a lot of floor walking,” says Martin Balaam, CEO at IT services concern Jigsaw24. “It’s important to be out there and visible, not just having forums and presentations… but to make sure you take time out to chat and reflect on things with your staff. You can often tell what the mood of the office is just by walking through it.”

It’s harder to get around when you’ve a globally dispersed workforce, but there’s still no substitute for face time. Jane Griffiths, Company Group Chairman for EMEA at Janssen, the pharmaceutical division of global healthcare organisation Johnson & Johnson, comments: “Two weeks ago I was in Russia and Poland; next month I will travel with my leadership team to Istanbul… it’s important to go and listen to what the situation is like in different markets and meet with people in different offices face to face. You’re trying to dig deeper into the organisation all the time to see who’s there and who needs more input into their development.”

The other key thing is for middle managers to be engaged and behaving like ambassadors of the decisions made at board level. Colin Hatfield, Senior Partner and Founder of Visible Leaders, a consultancy that specialises in leadership communication, says: “There’s often this great intent at the top of the organisation but it falls down in that layer below, at the local leadership level. Frankly, that is where engagement really happens because the point of this is to get teams engaged…

“If those leading teams within an organisation are not engaging people, then it’s not going to happen. So the emphasis needs to be on helping that layer of leadership do the right things to drive engagement forward.”

It’s a point taken up by Paul Isaac, who until recently led HR for the industrial business of DHL Supply Chain in the UK: “[Engagement] is about the visibility of more senior managers, actually visiting sites, talking to individuals, getting to understand first-hand how those individuals are engaged with the business and the site where they operate.”

3. Walk the Talk

To get any sort of lasting engagement, employees will want to see that you’re serious about taking their views on board. That means being honest, says Ella Bennett, Human Resources Director for the UK and Ireland division of global IT systems and services provider Fujitsu: “It won’t all be good news and openly recognising that helps build leadership credibility. We use…online discussions where people can raise issues in real-time, suggest solutions and get immediate responses from senior players in the business… We make sure the executive team is always accessible.”

Maria comments: “Feedback can get lost in the corporate machine, so people might feel nobody’s listening or that they aren’t contributing, when actually they may be making a very important contribution. So having a feedback loop with clear, two-way communication is the most important thing that can be done and often one of the hardest to get right in a large organisation.”

Such was the case for Nick Allen, former VP of Strategy and Portfolio at oil and gas giant Shell, who was tasked with the challenge of understanding how the organisation could better retain female middle managers. “It required listening to why they were leaving and being willing to take on board the things you may not have thought about, or that may be more difficult to execute than you would like,” he recalls. “I ran virtual focus groups using… video conferencing with six female managers and it was genuine dialogue, so I ended up getting them to chair and facilitate the discussions… [because] you really want to get to the point where the solutions come from them.”

***

What engagement really boils down to is good old-fashioned communication. That means listening to employees, acknowledging their views and making them feel that they’re opinions count for something.

The mistake is to think that employee engagement can be created in bitesize programmes or one-off team building initiatives. As Colin says, “Organisations with a truly engaged workforce simply see it as part of everyone’s day job.”

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeuk

The People Side of Global M&A

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Integrating a newly acquired business is difficult at the best of times but fusing a foreign entity adds cultural complexity which needs to be addressed. People are the most important part of any M&A transaction and, in order to retain acquired talent after the ink on the deal has gone dry, it’s vital that senior managers move quickly to make them feel an essential part of the ongoing strategy.

Setting the tone of the integration in the first three or so months will be crucial. “Make sure you sit down with your newly acquired colleagues and give them absolute clarity about why you bought their business,” says Martin Sutherland, Managing Director of BAE Systems Detica, a division of the FTSE 100 aerospace company focusing on information and data security.

“You should share the management plan with them so that they own the acquisition case as much as you do… In those first 100 days you need to make clear why the acquisition was done, what the new mission statement is and what the expectations are of the acquired management. You then have to work with them to assess the best way of achieving that plan using all of their current approaches and processes.”

Communication doesn’t necessarily need to be dictated by head office as managers on the ground should be well briefed enough to handle questions from employees, customers and suppliers. “The most common mistake is to leave the foreign entity to its own devices. Culture, practice and loyalty are not absorbed by osmosis and true integration will require a lot of hands-on involvement in both directions,” says Richard Harvey, Chairman of consumer products company PZ Cussons, and a former Group CEO of insurance concern Aviva.

“If possible, I would appoint an existing and trusted corporate executive to be the new local CEO in the country in question. If not, then at least one or more employees to be transferred in at director-level. The more exchange of executives both in working roles, and through management training courses and so on, the better.”

Personal touch

The acquirer must make sure they’re giving plenty of time to focus on the softer side of the deal. Richard Prosser, Chairman of car rental distribution provider CarTrawler, comments: “Many make the mistake of hauling people into head office, but if you really want to understand the nuances of the acquired business, get under the skin of it and relate to the people, you have to visit that country often and not just reside in the boardroom.

“For example, an Italian business that I bought was previously owned by the Catholic Church, which was quite a transition to being a UK-owned plc, and one of the most important things I did every year for ten years was to go to their annual staff party. It was set in a rustic restaurant in Parma and there were 60 people in the company, which meant that I could personally thank everyone for doing a great job.”

Cultural issues shouldn’t be underestimated. Howard Kerr, CEO at standards and training provider BSI and a former MD of World Gas Thailand and Chief Executive of Calor Group, says: “The biggest problem is when you have people in head office who just don’t understand [a different] way of doing business. When we bought businesses in Thailand and Taiwan, I was the guy in Asia, and I spent as much time arguing with my people in HQ as I did speaking with the target company in Asia, because they just didn’t appreciate the cultural sensitivities and didn’t have the personal experience of having done it themselves…

“In Asia, it’s about getting the trust and confidence of the individual and it takes time to make sure people really understand what you’re saying. Sometimes you’ve actually got to protect them from your head office to make sure you don’t lose the deal.”

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Beyond the facade

Trust will only truly be created once the realities of the deal come to light. Not everything will have been covered in the due diligence and acquirers need to probe for any discrepancies.

Keith Butler-Wheelhouse, Non-executive Director at specialist plastics products manufacturer Plastics Capital, and a former Group CEO of multinational technology concern Smiths Group, explains: “Most businesses are sold professionally these days; there’s a prospectus and the numbers and market data are polished, and it omits anything that’s not great… As the buyer, you should be looking for the things in the business that, if you were buying it [without the help of advisors], you would consider to be the major risks. You need to test those questions with the management once they’re over the wall and ask them what they consider to be the biggest risks in the forecast over the next 12 months.

“The skill is in mitigating some of those risks and driving the path between the very optimistic way that something is always sold and the realism of what might go wrong. Then, during the integration, there won’t be any surprises. But unless you ask the right questions, you won’t get under the skin of it quickly or get the honesty you need from the management.”

The purpose of the deal has to be clearly defined on both sides if the two separate businesses are to be combined successfully. Aleen Gulvanessian, Partner at law firm Eversheds, says: “Our experience shows that acquisitions can succeed or fail as a consequence of good or bad integration planning. This should run alongside the acquisition contractual process with integration teams set up to ‘hit the ground running’ on deal completion.”

David Turner, CEO of French outsourced contact centre specialist Webhelp TSC, which acquired UK-based HEROtsc in February, comments: “It’s at board level where the deal is done and, to get our people onboard fast, the first thing we did was to bring the two management teams together at the senior level. We had a vision and knew at a high level what integration should look like but we didn’t have the detailed plan before going into the deal as we wanted the two teams to design and build the content.

“We’ve just had our first steering group meeting of that integration plan, which included myself and one of the owners of Webhelp, and appointed one person from each of the businesses to manage the project for us and lead a series of work streams to deliver the content behind it. Because of that, we’ve got two sets of management teams feeling as though they own the programme and that there is a process where their views get heard.”

Yetunde Hoffman, who recently stepped down as Global HR Director at Imperial Tobacco, where she was responsible for HR integration following the FTSE 100 tobacco firm’s acquisition of the Spanish-French joint-venture, Altadis, comments: “Town hall events and cultural integration workshops will help management understand the values of the acquired organisation and the values of the people that come with it. Having opportunities to share opinions about the integration is absolutely crucial because it impacts engagement and the ability of people to work effectively together.”

A similar point is made by Alison Esse, Co-founder and Director at change management consultancy The Storytellers: “What’s important is that you create a shared vision and then you start to shape your organisation, its rewards and processes around that vision, and look at the cultural side of the business as soon as possible.”

Plenty of transactions that looked great on paper have been ruined due to poorly thought out integration plans. Howard says: “An awful lot can go wrong in the first 100 days and if you lose the hearts and minds of the people who are joining you then, in my experience, it’s very difficult to get it back.”

Beating Short-Termism in the Boardroom

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In the sporting world, plenty of fresh-faced coaches end up fired after the failure to get results renders their long-term plans irrelevant. For businesses, the pressures may be different but there is an increasing sense that boards are too focused on the short term as opposed to having the strength of character to make decisions and investments for the future.

Boards must be committed to working on strategy even though they may currently have a limited ability to implement it,” says Norman Bell, Group Development Director at building material supplier Travis Perkins. “The biggest danger is in taking decisions that address the short-term perspectives with which a business tends to be viewed these days, as opposed to positioning it to be fit for the growth that we all expect to be coming at some point a little way down the line…

Making investments that pay back in a year, for example, is much harder for publicly-quoted businesses, because if you post profits that are lower than expected then your valuation is severely impacted. Therefore, somewhat inappropriately, you’re always conscious of looking at quick wins.”

This raises questions around internal and external communication, directors’ pay, shareholder incentives, the value of innovation and just how to approach strategy when many industries and the global economy continue to be in state of flux. Forcing a boardroom discussion about where the business is heading in five or ten years’ time and how to get there could easily expose weaknesses on the board.

All the more reason then to bring executive and non-executive directors together to tackle strategy head on. Vanda Murray, Non-executive Director at construction and support services company Carillion and also Chairman of alternative energy concern VPhase, comments: “Sometimes you have to take decisions that won’t pay back immediately, and if you run the company simply for the next three to six months then you can’t possibly be creating long-term value for shareholders. Everyone wants results but you can’t always deliver results today if you’re investing for the future, so boards need to be strong enough to make longer-term decisions and explain to investors why they’re taking them.”

It’s a point taken up by Roger McDowell, Chairman of clean-tech concern Alkane Energy: “A board needs to be very strong on communication as well as delivery. While we criticise capital markets for being too focused on quarterly reporting I have found that, providing you can articulate a really good growth strategy, the more forward-thinking shareholders will be patient and will understand it… but it does have to be convincing.

Thinking fast and slow

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In some ways, it doesn’t matter if a company is quoted or backed by private investors as poor performance will lead to executives being axed. “The average tenure of chief executives isn’t long and if a company gets into difficulty and the management team cannot sort it out quickly then people will be fired,” says Vanda.

Bryan Marcus, Regional Director of the South America Region for Volkswagen Financial Services, says: “What you don’t want to have is your long-term strategy becoming a strait jacket and that you’re so rigid and focused that you don’t recognise the practicalities and the pragmatic issues of the here and now.

A well-balanced board will understand how to manage both the operational and strategic priorities. “Short-termism is a disease,” insists Richard Oosterom, Executive Vice-President of Group Strategy & Business Development at communications provider Colt Technology Services. “It is the cause of decisions that hurt the company in the longer term and it often confuses the workforce and destroys investment.”

Bryan says: “If you don’t have some kind of investment in forward thinking and are prepared to potentially lose that money, the organisation inevitably will be damaged. The company that made buggy whips and carriages probably had a long-term strategy but they didn’t foresee that the automotive industry was about to take off. You must have that long-term perspective and the capacity to adjust your business model as circumstances change.

Board strategy

If the executive team are becoming too tied up in trying to hit quarterly targets and are losing sight of wider issues for the business, which does happen and is understandable, then the non-executive directors will need to step in.

Ian Harley, Criticaleye Associate and Senior Independent Director at John Menzies, a media distribution company which has also developed an aviation division, explains: “The really good boards, in my experience, are the ones which take a longer-term view of the business’s future. Yearly board evaluations are often a useful way of assessing how the board is working as a unit and whether it could perform more effectively.

“If a conventional board evaluation suggests that there’s a potential strategic gap, and the board doesn’t feel comfortable that it is driving strategy the way it should be, there may also be a place for a specific third-party evaluation.”

There is a view that companies in the UK, compared to those in Germany and the US, have become particularly bad at looking at the bigger picture. The UK’s Corporate Governance Code does specifically recommend board evaluations are conducted at least once every three years, although it’s debatable whether companies are using this as an opportunity to drive forward thinking.

It’s a complex issue and the answers are not easily found. In order to make businesses more ambitious and bold, perhaps there is an argument for quarterly reporting not being compulsory for plcs, while a suggestion that changes to shareholder rights post a takeover could help to make M&A more strategic immediately sets off alarm bells. The latter point also suggests that shareholders are to blame for faults that may well lie in the boardroom itself.

There are many directors who have been in the plc and private equity camps who insist that the latter is much better at promoting a longer-term approach. Again, there is certainly some truth to that but there are also numerous instances of private equity-backers being outrageously risk averse and lacking in ambition.

It comes back to the mix of people on the board. Is the chairman right? Do the NEDs have the insights and commitment? Are the executives up to the task and, fundamentally, do they have the support to achieve success?

Those are the questions that need to be asked.

Vanda says: “Getting a balance means having good financial management, running the numbers and understanding the rate of return and the investment criteria… [and] you should set yourself a model to balance those things that you’re going to deliver for short-term benefit with the strategic things that are absolutely must-do for the business in the longer term.

No-one can afford to be complacent.

These days, the margin for error is just too small.

Middle Management: Blessing or Curse?

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Can middle management be trusted when they smile and nod as you espouse your latest grand plan? There has to be supreme confidence that your managers will tell you honestly what they think and then relay the right messages with passion to their respective teams. Otherwise, extensive damage will be inflicted if they say one thing, do another and feign enthusiasm for your ideas.

If that is the case, they need to be weeded out fast. Jon Moulton, Chairman of turnaround investor Better Capital, says: “If it’s an excellent business and it’s got lousy management it could still be generating reasonable results, but if it is anything less than excellent and it’s producing poor results you can be pretty confident that management is your first place to look for blame.”

Here are five pointers to help you sift the wheat from the chaff in your business:

1) Are they company advocates?

“It’s clearly very important that your middle managers are ambassadors of the business,” says Geraint Anderson, CEO of TT Electronics. “They are the ones in front of customers and talking to lots of the employees on a daily basis. If they don’t believe in the business and really walk the talk, then you’ve got a major issue on your hands.”

Richard Oosterom, Executive Vice President of Group Strategy & Business Development at business communications provider, Colt Technology Services, comments: “[It means] having frequent interaction with [managers] as well as their teams, watching whether they are focused on short as well as long-term goals and serve the company’s interest and not just their own or their team’s.”

2) Attitude and ability

The pressure to figure out where the real talent lies often comes to a head in a turnaround situation. For Ian Toal, CEO of dairy company Adams Foods, who has cut some £5 million of costs out of the business since joining in July 2011, it has been a case of being harsh but fair. “I did a lot of profiling with the individuals in terms of skill-sets, which also gives you a flavour of the people who want to be on the journey with you,” he claims.

“If you’re not the finished article and you want to be on the journey, I’m one of those people that will work to get that person where they need to be… But the people who simply don’t want to be on the journey shouldn’t be, and I’ve removed them very quickly. It took me a year, but 90 per cent of our underperformers have now gone.”

Naturally, experience makes you better at identifying strengths and weaknesses. Chris Merry, CEO of accountancy firm RSM Tenon, comments: “I’m looking for proof of a professional track record. Are they engaged with the client and do they have the technical knowledge they need to do their job and are they competent at managing people and driving teams? But there are softer skills required too, which are much harder to measure. Clearly, you are looking at their ability to make an impact quite far into the future for them to be really successful.”

According to Jim Waller, formerly Group Commercial Director at Carphone Warehouse and Commercial Director for Foods at Marks & Spencer, the questions around an individual’s attitude are absolutely fundamental: “You’ve got to look much more at the character of the person, how they treat staff and customers and how they talk to people. Is it purely transactional or do they want to understand a bit more about the person?”

3) Consistent message

“I’ve seen too many companies where they let people slide by in terms of not meeting performance targets or they’re not keeping to some of the company values, and if they continue to be kept in the firm it produces incredible cynicism around them,” says Nandani Lynton, Criticaleye Thought Leader and Adjunct Professor of Management at CEIBS, Shanghai. “If a company won’t stick to what it says it is looking for, it can quickly ruin the morale of everybody else.”

Sarah Murphy, Group HR Director at international food business AB Mauri, says: “Have regular dialogue about personal performance, not just delivery against goals – ‘how’ someone does their job is as important as ‘what’ [they do] when trying to achieve a sustainable organisation.”

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4) Can they delegate?

Creating a well-rounded, committed team is a skill in itself. Ken MacRae, CEO of real estate concern Northacre, comments: “While I want to see them hitting their targets and producing high quality work, it is important to see growth and development within the team also. The middle managers have a direct impact on this.”

How quickly the team matures will often be defined by how willing a manager is to delegate responsibility. Jim says: “Good managers will canvass the opinions of the team around them, thereby allowing individuals to feel that they are making a positive contribution to whatever project they’re working on.

“I remember my boss once said to me: ‘You’ve got a team of doers; what you need are innovators, so you’ve got people who can create value.’ Those that give their teams a to-do-list every week are never going to encourage others to make decisions and therefore be creative. You have to give people enough latitude to make decisions and provide them with the opportunity to make mistakes and learn from them.”

5) Embracing change

“The ability to be able to keep reinventing themselves and keep evolving is absolutely critical,” says Adrian Gunn, CEO of recruitment agency, Matchtech. “In order to retain the respect of the team around them, they’ve got to keep one step ahead, just as I welcome my management team to challenge me and keep me one step ahead of them.

“It requires a continual evolution of your skills to show that you can keep adding value to that management chain. Those that don’t will be caught out and will lose the respect of the team, which may mean they have to exit the business.”

Rod Webster, CEO of mining concern Weatherly International, says: “Circumstances change so quickly that, for me, rigidity in thinking is the biggest problem in managers. In the mining business, for example, we’re constantly subject to political and social forces, changes in commodity prices and work practices and the threat of industrial issues, so the people you employ have to be flexible… but it is pretty hard to get.”

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Your middle management can be the biggest source of drive and passion within your business, or an inhibiting force which must be removed. There are various ways and means to bring the blockers and dissenters to light and each director will have their own techniques for spotting them.

Jon, for one, has a pretty straightforward approach. “The presumption from my experience is that anybody who has had more than two divorces is a bad manager,” he declares.

Time to Get Creative about Talent

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Companies need to be bold about how they tackle talent. In order to identify the weak links, high performers and future stars, there has to be more joined-up thinking between HR, the executive team and beyond. There is a strong argument for organisations to have flatter structures which allow for better integration, alignment and a greater understanding of the diverse range of skills needed to drive success.

Finding the right people is continuing to prove difficult in competitive and fast-changing markets. “While it sounds simple, often businesses get themselves into situations where they have to react very quickly because they haven’t properly planned for those emerging yet necessary skills, which requires some good insight and analytics,” says Peter Cheese, Chief Executive of The Chartered Institute of Personnel and Development (CIPD).

Gareth Jones, Group HR Director at institutional and retail fund manager M&G Investments, comments: “The challenge is in recognising that you don’t always know what the future looks like that you are preparing people for. Therefore, adaptability is one of the key things we’ll look for in people, which we also look to nurture through our leadership and talent programmes and the mentoring process…

“The whole aspect of people management has become far more critical. If you talk to our senior fund managers they will tell you that a key part of their role is to develop talent, so the ownership has shifted away from something that HR initially took a lead on, to being embedded within the way the business thinks about what it needs to succeed.”

Companies need to be smarter about how resources are deployed. Catherine West, Head of Global Reward and Organisation Design at World Duty Free, says: “A simpler solution is required that enables line management to practically take ownership of talent management as well as HR… [while] also finding a way to influence managers to be open about relinquishing their own high performers to somewhere else for the greater good of the company.”

A more open and organic approach is needed. Ursula Morgenstern, CEO of IT provider Atos UK, comments: “While we make sure we focus on hiring tomorrow’s talent through our graduate programme, we complement that by bringing in specialists or working with our partner suppliers, because you cannot always get the right talent internally. Working with experts in this way helps us while we are re-skilling our own organisation, because there will be talent available in those niche suppliers, small development houses and consultancies which we can hire in for projects and our internal staff can learn from them.”

Dominic Emery, Chief Development Officer at BP Alternative Energy, says: “We need to be in a position to react to changes in the market. Within our corporate venturing area, for example, the main change we are progressing is to move away from pure cleantech technology venturing, given current IPO and general market performance. We are now securing capable people into our team who know more about venture capital and corporate venturing in the core BP businesses: oil and gas.”

“By having people with transferable financial and commercial capabilities, such individuals are able to move within the team as our investment strategy changes to support one technology over another.”

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Forward thinking

Planning for the future can be problematic when you’re unsure what’s going to happen next week in your industry, but it’s imperative that the skills required for a business to be successful in the years ahead are thought-out.

Ian Wright, Corporate Relations Director at Diageo, says: “You want the right talent for the future, rather than the talent that’s necessarily got you to where you are. This is a particularly tough challenge for smaller companies because the need to modulate and change has to be balanced against the disruption of making that change, and the potential lost experience of those that move aside in order to create those opportunities…

“There’s also the very real fear of getting it wrong. That’s why you can’t do this on instinct and you must have a really cold-eyed assessment of what you think you will need over a three to five-year time horizon.”

Ursula says that the company is obsessive about examining what skills will be needed as technology evolves over the next five, ten or 20 years as it helps to make informed decisions about how to map out where to specialise and what is likely to become obsolete. “That’s something we constantly monitor in our organisation,” she says. “While it’s never an easy thing to achieve, the art of talent management is to do it continuously.”

Without question, there has to be some hard analysis. David Turner, CEO of Webhelp TSC, an outsourced contact centre company, says: “We plot our management talent on a version of the Boston Matrix, which looks on one scale at performance and on another scale at potential… we’re looking for those that fall into the top boxes as forming our talent pool, which makes up about 15 per cent of our people.

“But we’re always looking at the bottom quintile of our business too, which makes up about 20 per cent, and the norm is that about a quarter of the people in that quintile just never make it. You have to be honest with those people and admit that, while you can coach and mentor them, you’ve probably not got the right behaviours in that bottom quintile to be able to move them on.”

Gary Kildare, Chief HR Officer at IBM’s Global Technology Services in New York, says: “Growing talent has to be deliberate, considered and planned. It doesn’t work if it’s random or ad hoc. Retraining and re-skilling of current resources also has a role to play and, if done well, in time and in the right way, an investment in retraining can help engagement and keep recruitment costs in check.”

When it comes to identifying the high performers within the organisation, there has to be involvement from the top. Lucy Dimes, UK CEO of telecoms concern Alcatel-Lucent, comments: “Companies can often be quite mechanistic about talent identification and management. I’ve found it’s as much about making sure you’re spotting the right people and personally engaging with them to enhance their emotional engagement.

“In my experience, having come through a talent pool myself, it’s rarely about money and more about feeling that the company has plans for you and that your ambitions are more likely to be realised by staying than going.”

It’s why retention plans and development programmes help to keep people if their ambitions aren’t going to be realised as quickly as they would like. “People need to feel it’s worth the commitment,” adds Lucy. “You do this on a personal level by talking with them, sponsoring them and through active mentoring.”

Moving target

Businesses are struggling to get their talent strategies right because to do so is complex and the answers are constantly changing. For smaller companies, it can require an enormous gamble and for larger ones there will invariably be years of cankerous legacy issues to clear away.

And yet, the question of effective talent management is going to haunt businesses until they are more creative and innovative when engaging and developing their employees (this includes succession planning for the top team).

“As chief executive, you need to decide whether you see people development as a cost or an investment. I have always felt it is an investment… but you must also have a culture that commits investment toward growing and managing talent,” comments David.

Peter says: “If we can’t recruit oven-ready employees then we’ve got to do a much better job of building the skills we need inside the organisation and this is a critical area of strategic focus for businesses in the future.”

Making the Switch from CEO to Chairman

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There are CEOs who make the move to chairman without missing a beat. They understand how to support the executive team and won’t interfere with their decisions unless the long-term interests of the business and its stakeholders are threatened. Others, it’s fair to say, aren’t quite so enlightened.

That’s why it’s often advisable to gain non-executive director experience first, especially if you’re thinking about stepping into the public company arena. Leslie Van de Walle, Criticaleye Associate and Chairman of building material company SIG Plc and recruitment concern Robert Walters Plc, says: “Before becoming chairman you need to learn a bit more about chairing board committees and understand that one of the roles of chairman is to foster a consensus. People don’t always come from the same angle or share the same view and chairing a committee is a good way to start learning that skill.”

Geoff Brady, Non-executive Chairman of Harvey Jones Kitchens, recalls that he only took on his first chairman role after four years in NED positions: “I decided my first NED roles should be a mixture, so I got one in a family-run business, one in a Plc and one in a private-equity backed business because they are very different animals.

“It’s important to understand not only the difference between being an exec and non-exec, but also between being a non-exec and a chairman in each of those arenas as the chemistry needed for success is different. Clearly, if you are in a listed company you are a little more of a policeman and a little less of a strategist and sounding board, whereas in a PE-backed business you are at the other end of the spectrum.”

There are a number of companies where the CEO moves into the role of chairman or takes on the title of ‘executive chairman’, which can prove problematic. Douglas Quinn, Chairman of care home developer Castleoak and former CEO of Voyage, which operates in the care sector, says: “Before becoming chairman of Castleoak I had stayed on the Voyage board as a non-exec having been the chief executive, which was quite difficult. I did it to provide a bit of continuity and a period of transition, so I took on the chair of the governance committee. To be a NED of a business where you’ve been a CEO is difficult, but being a chairman of a business of which you’ve been a CEO is nigh on impossible…

“The chair should allow the CEO to shine, so if you’ve been the CEO previously you’re still seen as the person in the spotlight… you’ll know all the details of what the CEO does so it must be very difficult to tread the line between challenging without sounding a bit defensive.”

Personal ambitions have to be kept in check. Clive Sharpe, Chairman of Quorn Foods and former CEO of Golden Wonder, makes a similar point: “I have seen chairmen wanting to be CEOs and it is important that you don’t think you can do a better job. If I ever felt like that, I’d need to review the CEO’s performance, address any deficiencies or change them.”

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Chairing the new normal

So once the move has been made, what can you expect? Lady Barbara Judge, Chairman of the Pension Protection Fund, comments: “Chairmen have to be strategists and very good with people. There are times when problems can occur between the executives and the only one who can effectively sort things out is the chairman. That is the situation I have seen a number of times and in which I have been personally involved.

“In order to have the stature and knowledge to do the job effectively, the chairman needs to really understand the business and should spend much more time on it than any other non-executive. The chairman has a real opportunity to add value with respect to strategy and people management.”

The executive team must be driving the execution of strategy, but the qualities a chairman brings to a business, particularly if it’s family owned or backed by PE, will go beyond the efficient and timely running of board meetings.

“Chairmen are increasingly becoming involved in understanding the day-to-day of the business,” says Clive. “Quorn, for instance, has a lot of overseas business and I visit partners in different countries, whether that’s distributors, joint venture partners or even customers.”

The profile and expectations placed on the chairman are rising too. Leslie says: “In today’s world, when there’s a problem, people will not just go after the CEO for answers but the chairman too, so the chairman has a duty to be able to influence and be aware of what is being decided.”

Douglas comments: “The level of involvement is higher, particularly in difficult times. That’s why it’s important to understand the nuts and bolts of the business. It’s no longer enough to just go along to the board meeting and read the newspapers.

“In the care sector, for example, it looks likely that the government’s proposals on corporate and personal liability of boards and directors are going to be pushed through… so that sense of responsibility is going to be accentuated more than before, and a good chairman is going to have to know what’s going on in the business.”

Businesses need strong and genuinely knowledgeable, experienced chairmen. Geoff says: “Chairmen do need to be a little more hands-on in tough times… As soon as you have a problem, a NED will spend more of their time looking after the shareholders’ interest, changing personnel on the board and getting more involved in strategy and spending time in the business. You have to keep a little bit of distance from the CEO and not get too close because you never know when you’re going to tap the CEO on the shoulder and say, ‘Look, this just isn’t working out.’”

The skill is in knowing when to step in and when to remain at arms’ length as too much of either can create serious problems. Alan Giles, Chairman of clothing retailer Fat Face, says: “Your principal duty as chairman is to manage the board, ensuring that the right strategy and management is in place, that there is a focus on performance and management of risk, and that the organisation has sound values.

“To do that you must be able to constructively challenge, support and mentor the management but it’s your responsibility to hold the CEO to account, which ultimately might result in firing them, stepping in if necessary and hiring a replacement. Your primary duty is to shareholders, so you must understand their views and represent their interests in the boardroom.”

That harsh reality is and always should be there but, on the upside, when the relationship functions properly it provides fantastic momentum and energy for a business. Douglas says: “If you’ve got a good chairman and a good chief executive, and the two are working together well and each understands how the other operates, it can be a very powerful and important thing. Having been a chief executive, I valued the role my chairman played and I am trying to replicate that and make sure I add value as a chairman.”