Beware the Lazy Thinkers

“The rise and fall of empires is dramatic in the consumer and industrial technology space,” says Andy Griffiths, CEO of the Consumer Appliances Division at Glen Dimplex. “Getting teams together to continuously challenge and reappraise your market, which changes every day in this digital world, is fundamental.”

This continues to be a central challenge for companies across myriad sectors, whether they’re in B2B or B2C. “You have to get away from the running of the business because it can be intellectually lazy. Studying this month’s figures, working out this quarter’s results – that’s not interesting,” continues Andy, who is also former President for the UK and Ireland at Samsung Electronics.

“You need to challenge yourself and your teams to something longer term. You’ve got to do it realistically and for as far as you can see. Normally that’s between two and five years.”

Anita Chandraker, Head of Digital at PA Consulting Group, agrees. She warns: “Beware the lazy thinkers – there are many of them out there. It’s also important to take accountability for tomorrow, because too many people are looking at today. If no one is accountable for innovation, it won’t happen.”

There are very real difficulties for organisations in achieving this, from resetting KPIs to developing a tolerance for failure. “Leaders must put the right framework in place so that individuals and teams can share ideas,” comments Alison Mills, Relationship Manager at Criticaleye. “Setting up cross-functional teams that include a range of individuals with varying skills and experiences could be one way of doing this.”

For Andy there is a simple, yet crucial, point that boards and executive teams need to bear in mind: “The last thing you ever want as a start point is a bunch of clones marching in one single direction going off doing the same things.”

In most cases, a shift in mindset is required. Kevin George, CEO at passenger ferry company Red Funnel Group, reflects on his experiences at British Airways when his team were first tasked with inventing a flat-bed business class seat.

“To come up with a seat that would lie flat and be economically viable just seemed impossible,” he explains. “But it was a question of overcoming that mental barrier and finding a way of doing it.”

When BA created the fully reclining seat in 2001, Kevin said it broke new ground in the airline industry. Now, almost every international airline has adopted them.

From incubation to execution

Those organisations faced with the prospect of having to relearn the art of innovation need a clear understanding of who will be responsible for generating ideas, and who delivers on going to market.

On that point, Anita noted the client challenges highlighted in PA Consulting Group’s ongoing research into innovation. “Certainly the data shows that the biggest challenge companies face is the ability to scale up once they’ve got a good idea,” she said.

There will be serious questions about investment, resource allocation and the risks around how to integrate a new product or service into an organisation.

This is why it’s vital to reflect on the structure, what the levels of accountability and oversight should be, and how this all runs in parallel with ‘business as usual’. David Hollander, CEO at Aqualisa, a UK-based shower manufacturer, comments: “Coming up with new concepts is the easy bit; it’s almost all about execution. That’s where management plays a big part in driving fledgling ideas, presenting visible confidence, allowing time to discuss and evaluate the viability of an idea. Then, it’s about enabling the processes needed to see it through.”

At Aqualisa, David says the company is preparing to launch a new product and different teams are fully involved, working on a collaborative basis: “Our R&D and marketing teams are closely linked. R&D may work to develop a new product in response to a marketing imperative, but equally it can be the other way round. They are led by a Brand and Design Director, who oversees both teams.”

According to Andy, proper thought should be given to creating teams for different stages of the innovation process: “It’s relevant to keep your good thinkers thinking, and have your good doers doing. That, in a consumer market is a more natural segmentation of skills, because you have end users who are continuously demanding, as well as a bunch of competitors agitating your business.

“The innovation team, once they catch their breath post-launch, need to come back to the table two or three months later and start again, using some of the data from how the last project landed.”

That’s the Holy Grail for any business when it comes to innovation – how to keep that cycle going. One great idea and seamless execution won’t guarantee success. Rather, a winning approach lies in the ability to empower those within an organisation to do it time and again.

By Dawn Murden, Editor, Advisory

This Community Update includes insights from a recent Discussion Group: How to Create a Successful Innovation Team

Would you like to share your thoughts on innovation teams? If so, please email dawn@criticaleye.com

Interested in finding out more about cross-functional teams? Then don’t miss our Community Update next week on breaking down organisational silos.

How to Strengthen the Leadership Team

Should the leadership team shift every time an organisation encounters change? It’s a question many CEOs and boards grapple with, because it’s certainly not clear cut. One thing we do know is that every business needs a complementary team of individuals to lead it to success.

Of course, the context will differ for each company and will also constantly evolve. Indeed, over half (53%) of respondents to a Criticaleye survey said that they are either going to replace members of the senior leadership team or overhaul it entirely.

Here, a number of executive and non-executive directors reveal four questions to pose when assessing the leadership team:

1) Do you understand what’s needed?

It would be futile to evaluate the leadership before you know what mix of skills you require to execute the strategy.

Robin Murray Brown, Partner at executive search firm Tyzack Partners, comments: “The most frequent strategic error, in my view, is failing to anticipate future leadership needs. All too often, organisations tend to think about what has worked in the past, or to try to correct current weaknesses rather than working out what leadership qualities are required to deliver their strategy.”

According to Howard Kerr, CEO at UK business standards company BSI, the chief executive and the board must look at strategy, structure and people – in that order – to assess what’s needed.

“If you’re not clear what leadership capability you need to support your strategy, you will fail,” he adds, frankly. “The strategy has to be absolutely pinned down and clear. Not just from a design point of view, but also execution. Who do you need to make it happen?”

2) Is the CEO driving it with the right support?

Effectively assessing the senior executive team calls for a number of constituents. It must be led by the chief executive, while the support of the chairman, board and HR director will be critical.

Anne Stevens, Criticaleye Board Mentor and former Vice President for People & Organisation for Rio Tinto Copper, says the most challenging aspect of strengthening the team can be persuading the CEO of its importance. “You have to coach and support them to take an objective look at their team, their attributes and where to develop them. The HR director has a key role to play in making sure the CEO is comfortable with the approach and prepared to take action where required.”

For David Parry-Jones, Vice President and General Manager for Northern Europe at software company VMware, the HRD and chairman should both act as agitators, pushing the issue to the forefront of the CEO’s mind.

He explains: “CEOs can sometimes get wrapped up in quarterly reporting or annual cycles of the business and lose sight of stuff that may help them in two or three years’ time. The chairman’s role is to look over the horizon to see what’s coming.”

The chairman’s role is also fundamental in assessing the CEO. Alison Carnwath, Chairman at Land Securities, says: “A non-exec chairman of a Plc should require that leadership capability assessment and development be brought to the board regularly for discussion, but only the chair will really assess the CEO.”

3) Can the leadership team be developed?

If the path or direction of the business changes, the leadership team must be reviewed; it may then become apparent that there are gaps. The question is whether you change the team, develop them, or apply a combination of the two.

But ambitious leaders need to feel they can progress. “There needs to be more focus on development,” argues Jamie Wilson, Managing Director at Criticaleye. “Just because someone has reached the higher echelons of their career doesn’t mean they should stop learning.”

On that point Kevin Barrett, Operations Director at Howden Joinery Group, notes: “The CEO should demonstrate their own personal skills and outline what’s missing around the table. They should then ask: Do we buy those skills in, or does someone want to put their hand up and develop them?”

It’s down to the CEO to lead by example. “I sit down once a quarter with a coach for half a day and talk about my leadership strengths and weaknesses. I’m very reflective and get a lot of feedback from people,” Howard says. “That makes it harder for people to push back on their own development.”

Unfortunately, some leaders may feel they are beyond that. Anne notes: “I found a clear link to those who were keen to learn about their own strengths and development and strong employee engagement. The more resistant leaders, typically, were the ones who needed the most development.”

Reticence may lead to difficult exit decisions. Chris West, Vice President for Commercial Operations at Asda, comments: “It’s better to address things quickly than hope they will get better over time. Focus on what’s probable versus possible.”

4) Are you over-promising on succession?

Every company should be preparing internal talent for future roles, as well as providing continuous development. However, you should think twice before committing anyone to a specific role too early, such as the CEO role.

“That’s a mistake organisations make, they lock themselves in and feel they can’t go back,” Anne continues. “Inevitably, if the business does take a different direction or adopts a new strategy, you end up having to manage a very difficult conversation and the subsequent fall out.”

According to Kevin, there’s a fine line between leadership development and succession; they need to be in balance. It might be more effective to develop someone, rather than bringing in the next person. “You can get sucked into succession planning, so much so that you do it at the expense of leadership development,” he says.

One suggestion for avoiding this pitfall is to focus on a much broader set of leadership skills, rather than being driven by roles. “If you’re specifically developing someone for an ‘as is’ type of role there is a high chance of failure,” Howard says. “You should be preparing people for the ‘to be’ state.”

That’s why the whole leadership team – plus another 100 employees – at BSI have been through a leadership challenge programme. It’s based on methodology developed by the CEO, HR and an external facilitator. It studies an individual’s strengths and weaknesses related to three elements: strategic thinking, relationship building and operational execution.

“My philosophy for leadership development is to build, rotate and change,” Howard says. “You’ve got an organisation stuffed full of really smart, ambitious people who want to learn and develop, give them opportunities, don’t let them atrophy.”

 

This article was inspired by Criticaleye’s recent Executive Breakfast Briefing: How to Strengthen the Leadership Team

By Dawn Murden, Editor, Advisory

Would you like to share your thoughts on developing leadership teams? If so, please email dawn@criticaleye.com

Don’t miss our Community Update next week on innovation.

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How I Changed My Leadership Style

Guiding people and situations is not a one-size fits all game; leadership styles must evolve to suit the environment and people around them. As such, a good leader will be responsive, adaptive and open to feedback, all of which takes excellent emotional intelligence.

“Leading a team largely comes down to engagement. Get people inspired enough and they’ll follow you on whatever journey you wish to take them,” explains Tom Beedham, Director of Programme Management at Criticaleye.

“Of course, complexity comes when leading teams of different personalities, cultures or geographies – but it’s your job as a leader to read the room. Regular feedback on your leadership style can help with this.”

Here, we ask business leaders how, and why, they’ve adapted their leadership styles over the years:

Caroline Rainbird
Director, Regulatory Affairs
Royal Bank of Scotland

I reflect a lot on the styles I come across in other individuals, and try to incorporate those I have an affinity with into what I do. For example, I’ve been influenced by leaders who have listened to me and adapted their approach.

I try to have a very open, inclusive and affiliative style. I want to make it clear to people that while I have views and opinions, I don’t know everything and want to hear their ideas.

When I took on my current role, I was not a subject matter expert and had a lot to get through. I needed to engage with the experts around me but they didn’t work at the pace I wanted. I realised I had to slow down in order to go faster and modify my approach in an engaging way.

As a leader, it’s really important to role model behaviour but also to show that you’re adapting and learning yourself. I choose people in the organisation who I trust to get feedback on how my leadership style lands, because if it’s not working I need to know and to modify it where I can.

Across the bank, we’re rolling out a new and consistent approach to leadership. One great part of this is continuous observational feedback and coaching, under which I locate the skills I can work on to improve my leadership style. I then work on that skill until it becomes authentic and sustainable. It’s being rolled out from the top, throughout the organisation.

Alastair Lyons
Chairman
Admiral Group

Early on in my career, when I was a CFO, I asked my then Chair of Audit whether I was capable of stepping up to the role of CEO. He told me yes, but only if l learnt how to leave the office without checking if the windows were open. I was known for my detailed approach and had to learn to let go.

My leadership style as a chairman has also developed over the 16 years I’ve held the role across different businesses. I now have a much greater focus on the strategic, rather than operational,elements. I’ve also developed my ability to communicate both internally and externally, and understand the importance of really knowing the mindset of all stakeholders, including what is not said as much as what is.

In my view, a good chairman needs to be a chameleon and able to adapt their leadership style to fit the particular situation. I enjoy deciphering how to work with people, understanding the person, what their strengths are, what their fears are, and how they like to interact so that I can properly engage with them.

Those I’ve found hardest to work with have very set ideas on how to get things done and resistance to input, mixed with a strong belief in their own importance. That kind of person I find difficult to relate to.

Gary Kildare
Chief HR Officer, Europe
IBM

If there are aspects of your personality that you don’t like, you can certainly make adjustments to them. However, it’s important that you’re natural; don’t spend time trying to be something you’re not.

I think the same is true in leadership – being a leader can be tough enough without trying to fake it. Also a message often has more impact when delivered in a natural style.

There are many examples of people having to behave in a particular way because circumstances or situations demand it, but it’s not something they can do long term. Ultimately your true mettle will show through and it’s often at points of high pressure.

What you should focus attention on is changing your unproductive or negative habits, such as micro-managing, inspecting, checking and reviewing. Over time this will change your behaviour.

We all need feedback but it must be constructive, just being told what you do wrong won’t help. You must also decide how much stock you take in others’ opinions, while being open to change. I’d hate to be like an actor on opening night who celebrates the good reviews but completely ignores the bad.

Margaret Rumpf
General Manager, Hong Kong & Macau, Emerging Markets & Asia Pacific
GlaxoSmithKline

Everyone has comparable expertise by the time they are in a senior executive role, but what distinguishes someone above the rest is their ability to communicate, inspire and engage different people across the organisation. That means being able to adapt ones leadership style to suit the relevant audience.

I think it is incredibly important to know – and adapt to − who you are influencing, their perspective and the reason why they would buy into your message. It sounds really simple, but I see too many people trying to drive their own agenda and then asking why people haven’t followed in their direction. This takes time and effort.

I ensure the key message is clear and consistent no matter who I speak to, but how I frame the idea will be different depending on the audience. I also look at my circle of influence to ensure I cover everyone, not just those above me.

By Mary-Anne Baldwin, Editor, Corporate

Would you like to share your thoughts on changing leadership styles? If so, please email maryanne@criticaleye.com

Don’t miss our next Community Update, which will deliver highlights from Criticaleye’s Non-executive Retreat 2016, held in association with Santander.

Follow Criticaleye on LinkedIn

A Bird’s-Eye View on Innovation

Managing risk and allowing innovation to flourish are two sides of the same coin. Today’s board directors must understand the value of both and create an environment that rewards them appropriately.

Sir Howard Davies, Chairman of the Royal Bank of Scotland, explains that while directors clearly should not be relied on for new product ideas, they have a key role in setting the right tone. “The board should be able to create an environment in which innovation is valued, supported and where people feel self-confident enough to take appropriate risks,” he says.

It’s a point shared by Andrew Minton, Managing Director at Criticaleye. He reasons: “It’s becoming increasingly clear that if a business wants to develop an innovative culture, the board has to create an environment within which people can experiment.

“As a result of increased transparency, non-executive directors must be cognisant of their role in setting the right culture and attitudes. If NEDs don’t appear to value innovation and fresh thinking, the rest of the business will follow suit.”

For Rita Clifton, Non-executive Director at ASOS and Nationwide, this goes beyond simply saying the right things. The modern boardroom must have vibrant, curious individuals who symbolise the behavioural standards and values that they expect from the wider organisation.

She says: “When I started sitting on boards 15 years ago, I would hear many chairmen, chief executives and directors talking about how the business needed to be more innovative; that it needed to move faster. I would look around the table and think: ‘Guys, you’re the problem, you don’t look as though you want to be innovative’.

“In my view, the board directors need to symbolise the best of your organisation. The standards and expectations they set are so important; people pick up cues from what the board appears preoccupied with. Regardless of what you say about culture, if your staff know that your main driver is profit you’re going to encourage fearful and short-term behaviour.”

Complaining about compliance

The challenge for boards is to find the time for strategic thinking when the immediate focus needs to be on regulatory compliance, corporate governance and effective risk management.

Sir Howard, who has sat on FTSE 100 boards for over 25 years, has seen a shift in the board’s approach to governance. He believes that time, which would otherwise be spent looking forward and assessing growth opportunities, is being eaten-up by “the pressure to demonstrate a robust control framework”.

What can you do to redress the balance? Sir Howard answers: “You can make better use of the risk committee, which should take a lot of the heavy-lifting off the main board. However, be careful that you don’t create two classes of director, one who is focused on risk and the other who can ignore it”.

“The key thing is that the board isn’t dragged too far into the detail and can afford to pull itself into more strategic thinking. You could also ensure that there are board and off site meetings in which risk and control are banned topics and you focused on innovation.”

For Guy Elliott, Deputy Chairman at SABMiller and Non-executive Director at Royal Dutch Shell, boards need to embed their obligations into strategic discussions.

“Often compliance and risk are segmented as a special discussion on the board. Board members may think they tick that off every six months, and if the audit committee has said that the processes are fine, they feel they’ve done their job,” he says.

“You have to go further than that. What you should be doing with risk, a lot of the time, is integrating it with strategy and futurology. For example, one might think about what’s going to happen to consumer habits; what rate of growth you’ll see in emerging markets compared to a developed one. Integral to that is exploring how you are going to chase an upside risk or mitigate a downside one.”

All-pervasive technology

The nature of innovation in the digital age means that directors require a much deeper understanding of technology. Natarajan Chandrasekaran, CEO and Managing Director of Tata Consultancy Services, says: “All of us, in every industry, are going through a transformation; the biggest [challenge] is that before technology was supporting business, now it’s leading it.

“It’s no longer the case that once the business model is decided, you deliver the technology to support it. Now, it’s absolutely essential that you appreciate the power of technology so that you’re able to define the future of the business.”

This sentiment is echoed by Stine Bosse, Member of the Supervisory Board of Allianz and Chairman of BankNordik. “I would argue that you can’t talk about anything in the future without considering technology. Last year, it took up about 30 per cent of board time. That included educating the board – we have to go into the machine room and understand the technology, then we can think about its impact strategically,” she comments.

“At Allianz, we have just had a full day looking at where disruption is likely to come from – a full day for the board is a lot of time. We were thinking about driverless cars and the implications for insurance.”

Even with this level of education, Stine believes that the composition of the board room will change. “The average age will fall because boards will need to have age diversity. Intuitive knowledge of technology [needs to] enter the board room. Of course, [everyone] has to be able to satisfy the regulators’ requirements, but let’s not be too frightened about that; you can educate yourself to that end.”

Ultimately, it’s a case of developing a board that has the confidence to invest in change and encourage the business to move forward. Guy says: “We have to have more discussion about technology and disruption in the boardroom. That doesn’t necessarily mean that a CIO needs to sit on the board, but they need to be there, talking the language of the board. It is important that what they say actually means something to everyone around the table. It’s difficult to make that linguistic transformation, but it can be done.”

Of course, the other side is that to ignore market disruption is a dereliction of duty. Rita notes: “Risk management can be seen as putting a brake on proceedings and trying to stop things from happening. With the speed at which most markets change these days, a key risk is not to innovate. If we’re not careful, the board will be seen as trying to stop things from happening.”

These comments were made during a panel discussion at Tata Consultancy Services’ European Summit in Berlin.

By Joshua Tearney, Account Manager, Advisory Practice

Do you have a story about innovation? Please share your perspectives by emailing: dawn@criticaleye.com

Don’t miss next week’s Community Update on how to change your leadership style.

The Evolution of the CFO

Chief Financial Officers (CFOs) have a big job on their hands. Increased regulation, competition and access to real-time data mean they are expected to be proactive strategic partners. Criticaleye spoke to a number of CFOs about how they are using financial insight to drive the business forward.

“The role of the CFO has changed significantly and they have become much more influential when it comes to business strategy and planning,” says Andrew Minton, Managing Director at Criticaleye. “Digital technology is enabling the CFO to transform their function from being expense and accounting focused, to one centred on predictive analytics and collaboration with other functions.”

In Criticaleye’s Eye to Eye video series, in association with Accenture, we asked a number of CFOs from large corporates how digital technology is transforming the finance function and how they see their role evolving. Here’s what they had to say:

Stephen Daintith
Group Finance Director
DMGT

Our technology development spend was around £15 million over the five years to 2010, in contrast over the next five years we will have capitalised and spent in excess of £300 million. There has been an enormous acceleration to keep up with competition, develop our products and to innovate stronger and harder than ever before.

That puts challenges and responsibilities on the CFO to ensure we’re always spending the money wisely, getting involved in the debate, understanding what it is we’re building and what the payback looks like, as with any sort of investment appraisal.

There’s another topic that’s come up – which is brand new for me and will be for many CFOs – and that’s the notion of measuring your technology debt. This is the understanding of your IT systems across an organisation and the cost of replacing or upgrading them. It isn’t recorded on your balance sheet, but is a contingent liability.

What’s also interesting is how we’re evaluating acquisitions. The technology assets they bring to DMGT is high up there on the list of reasons why we would acquire; it’s not just about the products or revenue streams. Technology is affecting us and it’s a case of CFOs having to learn fast.

One CTO gave me some good advice and said: ‘Ask more simple questions: ask why, how and what? And don’t accept our answers.’

Technology is a space where jargon can be used, so ask the common sense questions and flesh out real issues.

Patrick Lewis
Group Finance Director
John Lewis Partnership

I would pick three different lenses where I get the most value from technological improvement. The first [is about] our customers and making sure that we’re investing in the right place based on our digital understanding… That helps me with capital allocation and getting the best returns, so that we can provide the greatest service.

From an employee perspective, over the last five years we’ve managed to drive interaction with our partners… in a way that reduces the amount of time they have to spend on administration. This, in turn, increases the amount of time they provide adding value to the business [thus] enabling them to earn more. That’s very important, as a co-owned business my goals are slightly different from the CFO of a standard Plc.

Last but not least, the digital understanding right across our P&L helps us drive productivity. So, [to take an] example… the process by which we interact with our suppliers to pay them… used to be a very manual process, with different [procedures] right across the business. We have [now] put in [place] a number of systems that have standardised that, [allowing] us to manage the process all the way through our [supply] chain.

Simon Dingemans
CFO
GlaxoSmithKline

Enhanced digital capabilities across the company are transforming the way in which finance can engage with the business. In a traditional model of finance systems and finance IT, it would have been about controls and governance; it clearly still needs to be about those things, but you now include a much more comprehensive, capable analytics platform.

This allows you to engage with the business in a much more real-time environment. I think that is really the challenge: how do you think about the speed at which you need to make those decisions? You can invest exponential amounts in trying to accelerate that speed and, at some point, the trade-off and the value in that is questionable.

How you use data is also increasingly important. Many CFOs have invested in new systems and more standardisation, and GSK would be no exception. What you want to do is allow the whole business – not just the finance people – to see that data, understand it, interpret it quickly and in a practical way.

Stephen Jones
Former CFO
Santander UK

There’s a huge opportunity for the CFO to be able to drive their immediate business requirements in a manner that is better integrated across the firm.

Many of the requirements for a CFO… relates to ensuring that data is available in a manner that addresses accounting, capital, liquidity and other regulatory reporting requirements. [However], if you think beyond those narrow requirements it’s the same data that is driving credit risk, market risk, operational risk and could be driving customer relationship management.

I think the role of the CFO in relation to data overlaps very strongly, particularly with the roles of the Chief Risk Officer (CRO), Chief Technology Officer (CTO) and, to an extent, the Chief Marketing Officer.

Being digitally savvy and able to think about data in a manner [that] is based around golden, bullet-proof sources, [as well as] creating digital architecture which is being updated all the time with the latest requirements, are incredibly important skills.

CFOs need to become better at commissioning and executing data-related projects. The standoff I often see between the CFO and the CTO is [when] the CTO says: ‘You asked me to do this so I did it.’ Probably what the CFO asked [was] the wrong thing because they didn’t understand [the wider outcome]; they weren’t thinking beyond their own narrow scope. [CFOs need to be] lateral [and] understand the potential of technology.

Julie Brown
CFO
Smith & Nephew

There has been a big change in the role of the CFO. Previously, say ten years ago, the CFO would be a traditional accountant; they would know reporting, accounting standards and what you may call the finance specialisms, [such as] tax and treasury, extremely well.

The CFO of today is much more focused on business strategy and performance… The profile of [those] being sought after for CFO positions are now business orientated and commercial. When you think about the future… with macro-economic issues and [the fact that it’s harder to grow] in established markets, there’s an increased focus on cost, efficiency and resource allocation.

The CFO is ideally suited [to partner with the CEO in order to grow the company] because of their lens on the business and the numbers.[They can help an organisation to look] at the levers by which performance can be improved; I think that’s going to continue to become more important.

Getting top-line growth… requires someone that understands the business, looks at the granularity of the numbers and the return on investment in different parts of the business. [They need to] help the CEO channel investment towards the areas that are [ultimately] going to generate the greatest return.

By Dawn Murden, Editor, Advisory

Do you think the role of the CFO is changing? Please do send your thoughts to: dawn@criticaleye.com

Watch the latest Eye to Eye: The CFO as Architect of Business Value video series

Or why not read more from Accenture on how digital is killing the finance function as we know it.

Also, don’t miss next week’s Community Update on productivity.

Follow Criticaleye on LinkedIn 

Can a Chairman Mentor the CEO?

A chairman should be able to provide support and guidance to a CEO when necessary. That said, a big question mark hangs over how open the two can be about business challenges given that the chairman’s ultimate responsibility lies with shareholders.

It’s a notoriously complex relationship, so Criticaleye spoke to a range of executive and non-executive directors about the ability of a chairman to mentor a CEO. They came up with four key points to bear in mind:

1) CEOs Don’t Do Vulnerable 

Understandably, a CEO may think twice before admitting to a chairman they’re struggling to resolve an issue in the business and need help.

Sir Ian Gibson, Criticaleye Board Mentor and Chairman of Norbrook, a global provider of veterinary pharmaceuticals, explains: “Often, people don’t want to show weakness to those they work with and therefore it’s the natural reaction of the CEO to question what signals they would send by raising a certain point.”

For mentoring in its truest sense to be effective, there has to be openness. While that’s not impossible between a CEO and chairman, it will take time to establish the necessary level of trust.

2) The Chairman Does the Hiring and Firing 

The chairman is expected to find a new leader if company performance levels are below par. Naturally, the CEO knows this and it’s a defining element of their relationship.

Tom Beedham, Director of Programme Management at Criticaleye, says: “True and effective mentoring can only be delivered by someone who has been at the coalface of leadership and understands the real life, day-to-day challenges faced by executives.

“A chairman may have this experience but they cannot truly be an independent mentor to the CEO as their ultimate role is to hire and fire them; their primary responsibility is to ensure the obligations to investors and stakeholders are both understood and met.”

Ian Harley, Board Mentor at Criticaleye and former Deputy Chairman and Senior Independent Director at British Energy, comments: “By and large the chair can’t be the CEO’s mentor – especially if they selected the CEO.

“It’s tricky to be seen coaching and helping someone you have picked because you believe they have what is required for the job.”

Cheryl Black, Non-executive Director at insurance agency Unum, notes: “The chairman has a role to help the chief executive succeed but they are not a sponsor. It’s very clear that the chairman is there to help the business succeed first.”

3) A Powerful Combination 

Of course, as trust builds between both parties, it should encourage greater openness. Anthony Fletcher, CEO of snack company Graze, says: “To not have the chair mentor or coach the CEO in some way would seem like you’re missing a trick to me,” he says.

“They understand the perspective of everyone around the board table; some of those perspectives may have been given in private – they don’t have to be betrayed – but that information will help [the CEO] do their job well.”

A similar point is made by Richard Laing, Criticaleye Board Mentor and Chairman of 3i Infrastructure:  “The chair can help the CEO deal with the many complex issues he or she will face, especially around the human aspects, such as the CEO’s colleagues, career progression, the way they are handling the job and so on.”

As Sir Ian puts it, “it’s about relationships”. He explains: “Process tracks what is happening, whereas relationships define whether it happens easily, seamlessly, or if there is a standoff. If it becomes fraught it will take longer to execute the strategy and that just isn’t helpful.”

4) An Independent View

It is all too easy for a CEO to find themselves isolated, especially if they are in the role for the first time. “Being a CEO is an extremely lonely life, you’re always having to keep things to yourself, you’re always guarding your views; whether you like it or not, you need to continually evaluate your people and whether they are working as a team,” Sir Ian comments.

“Eighty per cent of that you can and should share with your chairman, but there will be things that mean you’ll want to talk in a way that you can’t do with somebody in the business. If the conversation involves you questioning your own judgement as a CEO, you don’t want to share that with your chairman.”

That’s when speaking with someone who is genuinely objective and independent can be invaluable. “Early on in my career, when I stopped being a CEO and became a NED and chairman, I was relatively unimpressed by the idea of CEOs needing external mentorship,” recalls Sir Ian. “That’s touching 20 years for me now, and over that time I’ve become more convinced that it is of benefit.”

Do you think the chairman can mentor the CEO? Please do send your thoughts to: dawn@criticaleye.com  

Don’t miss next week’s Community Update in which business leaders will discuss the role of the CFO. 

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.

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Listening to Tomorrow’s Leaders

The founders of Snapchat and Airbnb were aged 21 and 26 respectively when they launched their companies. This shows when it comes to disrupting a market − or creating entirely new ones − age is merely a number. What are corporates doing to capture the ideas of their outstanding young talent?

“We thought you could only get value from people after they’d been in the business for five to ten years, but we’re breaking down those perceptions,” says Dominic Samengo-Turner, CEO of Jardine Lloyd Thompson (JLT) Asia, a subsidiary of the JLT Group.

Reflecting on the way the company changed its approach to career development 12 months ago, Dominic continues: “We take our quality graduates after a year and put them with senior executives as an executive assistant. Their thinking and observations then start to influence the business in a more informal way.”

The success of this now means the company is taking it to another level. “We [then] put that generation in junior management positions of influence. We’re creating new management roles that didn’t exist before so that they can add value to the business,” he says.

This is hugely valuable to JLT which, as a legacy business, has a number of employees whose length of service spans two to three decades. Dominic explains: “We don’t need [millennials] to have deep, technical competence – the older generations have that. We need to help facilitate the operational running of the business. We feel we’ll move much faster than originally thought.”
Seeking new perspectives 

Different voices, views and generations need to be heard at board level; this is something John Brisco, Senior Vice President, Chief Information Office and Chief Operations Officer at Manulife Asia, welcomes.

“Many boards today have a very traditional make-up of constituents who quite rightly have thorough industry and career experience. However, the pace of change driven by data and digital innovation… means there may be a requirement for the make-up of a modern board to have a new mix,” he says.

“There may have to be a wider dispersion of board constituents, that may involve millennials but it could also involve 35 to 40 year olds, who I would say aren’t represented on boards that well. I would ask: ‘How can boards expand their thinking, what type of skillsets do they need and how can they make sure that age isn’t a barrier?’”

In light of this, John is currently exploring the advantages of an advisory board – made up of a range of individuals from millennials to entrepreneurs – to support Manulife’s Asia-based leadership team.

“It will independently challenge us on our ideas. Some will come from an entrepreneurial mindset, others from a consumer background or technology mindset. That will create a healthy tension,” he says.

Connecting with the customer

The notion of millennials on the board may be a step too far for some, especially in the context of a regulated environment.

Romana Abdin, CEO at diversified healthcare company Simplyhealth, says: “The role of a director in the boardroom is to challenge, critique and support; I don’t think many millennials would possess the experience and gravitas to make that kind of contribution unless they are supported through coaching and mentoring. It is our responsibility to develop the outstanding leaders of the future.”

Yet Romana agrees that the onus is on the board to seek a fresh perspective. “Our board spent a day being customers by visiting different retailers and bringing those experiences back into our organisation,” she comments. “It’s about understanding the aspirations and behaviours of all generations, including millennials… It is only by understanding customers and their lives that we can be valued and valuable.”

According to Charlie Wagstaff, Managing Director at Criticaleye: “Boards, executives and HR functions need to think about how to blend talent of all ages.” Indeed, the belief that all the best concepts come from the top of the organisation is outdated.

“Leaders need to ensure a company’s employees reflect the diverse customer base it’s targeting and welcome the fact that ideas can come from anywhere within the business,” Charlie notes. “Each organisation will have its unique set of challenges, but diversity of thought is hugely important.”

There’s no doubt that there are some supremely talented millennials out there. Evan Spiegel, CEO of mobile app Snapchat – estimated at a net worth of $2.1 billion – is just one of them. He knocked it out of the park early in his career but there are others waiting to make their impact.

Most millennials can’t be expected to lead a complex legacy business today, but they are the leaders of tomorrow. By giving them a voice, you can harness perspectives that better represent your customer base, allow you to innovate and and look to the future.

How are you bringing up the best talent in your business? If you have thoughts to share on this topic, please email dawn@criticaleye.com

This was inspired by Charlie Wagstaff’s blog on millennials – read it here

Don’t miss next week’s Community Update on how to successfully lead complex change.  

How to Support a First Time CEO

Stepping into the CEO role for the first time is a daunting task. You’ll face immense pressure to tackle widespread responsibility at a relentless pace. No CEO can do it alone and a first-timer in particular will need support in making that transition.

“The top job requires so many skills and leadership capabilities that just acquiring them − let alone using them − can seem overwhelming. Once you’re in the role, don’t expect that you can do everything yourself; a strong leadership team should be there to support you and give you time to reflect and decompress,” says Matthew Blagg, CEO of Criticaleye.

We ask leaders for their experience of being, or supporting, a first time CEO. Here’s what they had to say…

Get the Support of the Board

Ron Marsh, Criticaleye Board Mentor and Chairman at Polypipe

For a first time CEO probably the biggest challenge is having the confidence to drive through change in an organisation that they’re not entirely familiar with.

The chairman is there to support them in that, but also to challenge them and respond to their individual needs. He should be supportive without taking responsibility away from the chief executive. It’s more difficult for a NED to directly support the CEO as they don’t have routine interaction with them, but they should provide the sounding board for the chair and CEO to reach a solid conclusion that they can then back.

One of the things a chairman should look for in a new CEO is whether they are overworked – the hours they put in and the sheer effort needed for the job is immense; it can be too much for some.

The main concern is whether the chief executive is feeling lonely and isolated. That often happens when significant changes occur within the top team and at that point the chair should provide a little more help.

Look for Strategic Insight

Catriona Marshall, CEO at Hobbycraft

I joined Hobbycraft in 2011 as a first time CEO. I was heading into a major change programme in a very competitive market with high expectations from my private equity owners. I knew I would need the support of a good board.

The chairman’s role is very important – they maintain a healthy relationship with investors and the board. They should be supportive but also independent. You want them to point out the pitfalls and give you honest advice but also help you on how to get to where you want to be.

From a functional perspective, the CFO should be able to take on things like IT, the supply chain and property but I love to have a buddy on the strategy; someone who can understand the implications of a strategic question.

Getting a CFO who is technically good and commercially savvy is hard, but getting one who can also build a team is the real trick.

Find a Top CFO 

Ian Harley, Criticaleye Board Mentor and former Finance Director and Group CEO at Abbey National

The relationship between a CEO and CFO is the most important in any corporate entity because of the level of contact between them.

They should be complementary – with different strengths and talents – but it’s also very important that they are in locked step; they must move together on the big issues.

I spent five years as CFO to a very charismatic CEO, an ideas factory who sometimes spoke before he thought. When doing investor roadshows with him I’d need to catch those loose balls. My role was to be pragmatic. I also focused on the numbers because he wasn’t technical in terms of accounting.

When I was promoted to CEO I was lucky to be able to pick my own CFO. It was someone I knew from inside the organisation and had worked with for years. If you inherit an incumbent that’s potentially quite tricky – especially if they were a candidate for the top job, which is almost always the case.

Any CEO will have disagreements with the CFO but you must try to have them in private because stakeholders in the business will see the chinks between you and will worry about it, if not try to exploit it.

Create a Team with Complementary Skills 
Greg Morgan, Director at executive search firm Warren Partners

The energy and dynamism of the first time CEO can be a huge asset to any business, especially when well-supported and given the autonomy they crave.

When preparing for a first time CEO role the candidate should be open and honest about their relative blind spots – everyone has them. These could range from having a limited experience of operations, not having done M&A or being a novice in engaging with shareholders or the City. Individuals should involve themselves in situations that enable them to mitigate some of those blind spots.

Businesses that are committed to developing their people will encourage their ‘brightest and best’ to operate outside of their comfort zones and to seize every opportunity to broaden their skillset.

As a first time CEO, it’s no less important to flag where you’re going to need support – the business will not be expecting you to be the finished article; they will respect your honesty and candour and it will get them thinking about the make-up of the team you will need around you.

Potential implications for the business range from hiring or retaining a ‘heavyweight’ CFO to support the new CEO, or asking the chair to remain in the post a while longer.

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4 Tips on Improving Performance

Improving business performance takes strong leadership and immense effort, but neither will have impact if the company’s customers, staff and other stakeholders don’t believe in its future. A good leader will be able to create buy-in from everyone involved and use it to drive change.

When looking to bolster the performance of a company or division, Matthew Tait, Business Restructuring Partner at BDO, emphasises the value of communicating a clear strategy to all involved.

“One risk to recognise about businesses in distress is management’s tendency to lock the doors to the bunker. Despite the evidence, they can believe that no one sees what’s going wrong. Nothing could be further from the truth. Staff, customers, competitors, will know what is happening,” he says.

“A good turnaround plan needs to be agreed by the stakeholders as opposed to being imposed on them. You must understand what you need from each stakeholder – it could be time, funding, or a change in work practices. You also need to understand what the turnaround offers them; if it doesn’t give anything to key stakeholders then the turnaround won’t work.”

Change can be worrying for anyone, but the greatest fear comes from not being informed about where it will lead. As Joe Berwick, Business Development Manager at Criticaleye, highlights: “A clearly communicated strategy is the cornerstone of any successful change programme, and it is the leader’s responsibility to ensure it’s well-received by all stakeholders.”

We spoke to a range of business leaders, each of which have been through a restructuring, to find out how they managed their stakeholders. Here’s what they had to say:

  1. Reassure Your Customers 

When Vanda Murray, Criticaleye Board Mentor and Non-executive Director at Bunzl, led the turnaround of conservatory provider, Ultraframe, where she was UK MD and Group Marketing Director, she knew all key stakeholders had to be involved. “You must engage with them on a meaningful level about what they need, what their issues are and how you will work together,” she says. “The core of the turnaround story should always be the same and it should be based on reality, but you will clearly want different messages for different stakeholder groups.”

One move Vanda made early on in Ultraframe’s turnaround was to reassure customers that the company was reacting positively to market changes.

“The competitor had copied the product and halved the price, the product wasn’t quite as good but it was good enough. Our customers were leaving us in droves; it was a critical situation and action needed to be taken very quickly,”Vanda explains.

“I spent a week on the road speaking with all of the top customers to really understand what was happening. I spoke to most of the senior people in the company and then modelled how it could survive. We made it very clear what we hoped the timeline would be and we told them about our milestones to show we were on track. That was really important for them.”

  1. Build the Right Executive Team

When Andrew Richards took over as Managing Director of Britvic’s newly acquired Irish operations, recession had just hit the country. “We saw a procession of poor numbers, poor productivity and a poor marketplace performance across almost the entire spectrum. The business was failing,” he explains.

Andrew realised that he needed a team fit to take the business through Ireland’s recession; that meant very honest conversations with his executives, culminating in five of the seven leaving the business.

“In my first 90 days, one of my goals was to assess the nature of the loadbearing team,” says Andrew. “When I arrived, the Britvic Group Chief Executive had confidence in the Britvic Ireland executive team we’d inherited, but as we spent time pressure-testing the plan it became apparent that a lot of people weren’t capable of making the journey.

“The first person to exit the executive team, which was within three or four months, was the HRD. He was very well intending but not capable of managing a progressive HR agenda, and he recognised that.”

This process needs to be maintained throughout the change programme – while it’s common to make initial changes to the executive team, continued assessment will ensure the team still carries the skills it needs as the business evolves. “Those who initially feel they’re engaged and involved can begin to lose the energy to continue,” Andrew explains.

  1. Restore Staff Morale 

Low morale will take its toll on any business in decline; it can blight productivity, stain your company culture and lead your best staff towards the door. While emotions are bound to run high, there are ways to improve things – the most important of which are openness and clarity.

“People know when you are being straightforward with them. I talked to the staff in small groups of their own teams, so they felt comfortable enough to ask questions. I was as honest as I could be with them about the changes that would happen,” explains Vanda.

The greatest fear for many employees will be redundancy, so it is important to ensure it is handled properly. “We allowed people to leave with dignity and their heads held high, as much for them as the people left behind,” says Vanda.

It’s also important to understand how cultures vary across regional and international operations. Bryan Marcus, now Chairman of JBR Capital, recalled his experiences while being CEO of Volkswagen’s Latin American financial services division, VWFS.

Tasked with the turnaround of loss-making businesses, Bryan says: “I was a Brit leading a turnaround of German-owned banks in Brazil and Mexico, so the cultural, regulatory and operational challenges were numerous. From my experience, the critical success factors were openness with shareholders, consistency with local stakeholders and to ‘walk the talk’ with the local management teams.

  1. Communicate With the Board

Having led the turnaround of an international division, Bryan is familiar with the complexities of dealing with a distant board, as he explains: “Having worked in a local corporate, one of the challenges I faced was being part of a global corporation with global standards. You need to manage the pressure from headquarters and meet shareholder expectations while creating the time and space for the transformation to take root locally,” he explained.

Andrew faced similar issues at Britvic Ireland and found face-to-face communication was the remedy. “Some of my group executives and board colleagues had less sympathy or understanding of the situation I was in,” he explained.

“One of the ways I tried to work through that was to get the Chairman and a couple of non-execs over to explain what we were grappling with, that’s how I tried to manage my stakeholders back at the group level. Once I’d got them on the ground to see the situation first hand, they started to understand the challenges better.”

Whether you meet your stakeholders in person or build a rapport from afar, it’s imperative that you earn their confidence. As Matthew explains: “You need to have a trusted starting point otherwise people will hear the same messages reiterated but never believe it.”

And as much as you may want it, widespread improvements won’t happen without the belief of others.

Read more on managing your staff through a turnaround and rebuilding a business.

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