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.

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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. 

A Shake-Up in the Boardroom

Familiarity in the boardroom doesn’t always breed contempt, but it can encourage complacency and assumptions that alienate directors from a business and its wider market. A good chairman, in conjunction with the CEO, will be fully aware of this and won’t be afraid to shake things up.

In the UK, the Corporate Governance Code states that listed companies are required to carry out annual board reviews. When executed in the right way, they can provide a catalyst for change and an injection of new ideas.

Ian Durant, Chairman at London property company Capital & Counties Properties (Capco) and bakery chain Greggs, has been through five board reviews at three different organisations.

“If the chairman wants to get something done then the board review can act as a tool to make it happen, or if board members want the chairman to behave differently it can assist the delivery of that message,” he explains.

Adding to this assessment, Judith Nicol, Director of Leadership Services at executive search firm Warren Partners, says: “Board reviews provide that time to think. Being made to stop and reflect opens up possibilities for the business.”

According to Judith, reviews generally have the most impact when “you have a new chair, new directors or a new set of challenges that the board is facing”.

Glen Moreno, Chairman of international publishing and education company Pearson and FTSE 250 bank Virgin Money, explains how he carried out his first review at Pearson after he had been there a year: “I led the effectiveness review with the support of the board… We decided that to add value we should focus on four key areas that would make a difference to the company: governance, strategy, business performance and people. We built our entire board cycle and agendas around those four themes.”

The code also states that FTSE 350 board reviews should be externally facilitated every three years. For Glen, specialist external advisors can help address softer issues, like board chemistry. “People need to be able to open up and say someone speaks too much, the chairman is too dominant or not dominant enough; a good external advisor can help facilitate that,” he comments.

“Like most things in life, board reviews are what you make of them. They can either be expensive, time consuming and useless, or they can be creative and valuable. It’s the chairman’s job to ensure the latter.”

Making the most of it 

Boards are often criticised for box-ticking their way through evaluations, carrying them out purely as an act of compliance.

Glen says: “Practitioners ignore the code’s unique flexibility and attempt to apply it rigidly. The phenomenon we all refer to as box-ticking is spreading like wild fire… whether the review is internal, external or externally assisted.

“Boards are there to create enduring businesses that benefit customers, employees, shareholders and other societal stakeholders… We need to reconcile good practice with the realities of business life.”

Some board directors cite a lack of time as the reason for taking a prescribed approach to evaluations. Ian vehemently disagrees and says it’s down to attitude: “Some boards view the way they do things as satisfactory and don’t think anything needs to change.

“Board evaluations need to be viewed as a useful forum and a democratic process for improvement. Circulate the report after the review and give members time to go through it. The board may dismiss some points, but you have to discuss them and decide what should be actioned and why. Then, it’s up to the chairman to make sure they are pursued.”

For Charlie Wagstaff, Managing Director of Executive Membership at Criticaleye, it’s important to note that even the most competent individuals can learn how to improve, both from an individual and collective perspective.

“Bringing together successful people does not guarantee a successful board – the two are not necessarily aligned,” he says. “Constant evaluation is a necessity, as it can all too easily drift off course.”

While the success of a board evaluation rests heavily on the shoulders of the chairman, the chief executive must fully participate because it’s the CEO and executive team that will ensure change is felt across the company.

As Rob Margetts, Chairman at Britain’s mapping agency Ordnance Survey, says: “All reviews start and finish with the chairman; it’s their job to make it work and to get the most out of them.

“No one can argue over the virtue of improvement; you need a chairman who is both humble and self-confident so they can drive that. And if you show a real commitment to enhancement and effectiveness at the board level, it should echo throughout the organisation.”

These comments were taken from a recent Criticaleye Discussion Group, Board Effectiveness Review – Why Bother?, held in association with executive search firm Warren Partners.

By Dawn Murden, Editor, Advisory

Do you have a view on this subject? If you have an opinion you’d like to share, please email Dawn at: dawn@criticaleye.com

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Getting Fit for the Board

Plaudits garnered during an executive career are no guarantee of a breezy transition into a non-executive director role. This can come as a surprise to both an aspiring NED and one growing their portfolio. Often, they realise that competition is fierce and the criteria for candidates is only getting tougher.

Tom Taylor, Chairman of the Consumer Council for Water in Wales and former Chief Executive of the Agriculture and Horticulture Development Board, recalls that he applied for a NED role that had attracted 138 applicants: “It’s a tough world, so start early is my advice. Companies are not waiting for you to be a NED. Life’s not like that.”

A shift is occurring in the market for non-execs, as Andrew Tallents, Director at Warren Partners, notes: “It’s starting to change. A number of boards we’re speaking to now are saying: ‘I want a contemporary non-exec director.’ Particularly with digital experience.”

As such, planning needs to begin while still in an executive role. Ruth Cairnie, Criticaleye Board Mentor and NED at Keller Group, ABF and Rolls-Royce, says that in the early stages of seeking a NED position, she took the opportunity to ask numerous contacts for feedback on her CV.

She realised that charting her progression through a set of impressive roles was not enough. “I can write a beautifully crafted list of what I’m good at, but the trick is in telling the story − helping people understand how your experience is relevant and what you can really bring to the table,” she explains.

Bill Payne started to think about how to make the move into a NED role when he turned 50 and was General Manager of Customer Experiences and Industries at IBM. “I made an effort to build my network and my personal brand,” he recalls.

“I wrote articles and became interested in lots of different things, including academia, so I did teaching. I also became involved in venture capital, investing in [companies] and doing pro-bono work for VC-backed businesses.”

Bill, who is now a Non-executive Director at the AIM-listed technology and intellectual property services company Tekcapital, insists there has to be a degree of experimentation and discomfort when first transitioning to a NED role. “You need to create the time and space to do things that are different to your normal daily life,” he says.

Balancing act

Some companies are open to the idea of an executive taking a NED role, but this must be carefully scoped out and there has to be buy-in from the top. Ruth, who was Executive Vice President of Strategy & Planning at Royal Dutch Shell when she landed her role at Keller, says that “it was important to know exactly how the final decision would be made”.

She was grateful to have had a line manager with board experience, which meant he understood the responsibility and supported her. “I could say: ‘I’m sorry I can’t do this internal meeting, it clashes with a board meeting,’ and there was never any push-back or further discussion. If you have a line manager who doesn’t understand the commitment, it could be very tricky,” she warns.

Andrew notes that it’s also essential to understand the board dynamics when applying for NED vacancies as an executive. “You need to convince the board that you’re actually going to be a non-executive as opposed to an executive, which you obviously are in your day job. And that you’ve got the time to commit,” he says.

It’s all too easy to take that first offer of a NED role as soon as it’s made. Charlie Wagstaff, Managing Director of Executive Membership at Criticaleye, says: “Particularly if you’re a first-time NED, it’s flattering when you get the call that says: ‘Come and join this board.’ But do your due diligence and work out if it’s actually the right thing for you.

“Boards work brilliantly when you’ve got the appropriate level of challenge and support. You’ve got to make sure that you can work with the board’s chemistry and tone, in particular that of the chairman, especially if you’re simultaneously keeping an executive role going.”

Don’t be afraid to ask questions about company performance, risk management and the culture within the boardroom. Of course, there’ll be conversations with the chairman and other directors, but also speak to advisors to get the fullest picture possible.

It takes patience and planning to make the transition to the boardroom. Relying on past glories just won’t cut it anymore.

Do you have a view on this subject? If you have an opinion you’d like to share, please email Mary-Anne at: maryanneb@criticaleye.net

Jane Furniss Criticaleye Board Mentor and NED on the board of the National Crime Agency will discuss how she took a portfolio NED career at Criticaleye’s next Aspiring NED dinner.
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Model Behaviour

Media-friendly entrepreneurs or Silicon Valley tech gurus typically spring to mind when discussing role models in business, yet it’s often an entirely different breed who really inspire or rouse ambition in others. The best role models are emblematic of what’s good about an organisation and show that with the right skills and values, people from all backgrounds can rise to success.

Michelle Scrimgeour, who is currently Chief Risk Officer at M&G Investments, recalls how, in the early stages of her career, the asset management company she worked for had a number of high-profile, successful women − including the CEO. “It was important at that point in my career to see that,” she says.

“If you’re in a minority, at all levels in the firm, it’s good for there to be role models… If you’re a woman and you’re looking across an organisation and you just don’t see women at the senior or middle tier and rising ranks, I think it’s probably quite soul destroying.”

Phillippa Crookes, Relationship Manager at Criticaleye, agrees: “Role models are incredibly important in helping you define who you want to be in business, and inspiring you to achieve those goals throughout your career.

“For me, seeing successful women in senior leadership roles is vital in motivating career ambitions.”

That said, the ability to raise aspirations goes beyond ethnicity and gender. Liz Bingham OBE, Managing Partner of Talent for UK & Ireland at professional services firm EY, explains how the first Partner to manage her nurtured both her confidence and ambition.

“Technically, he was very able, had great client relationships and was very effective at leading and inspiring teams. In particular, he was a role model for me because he came from a very ordinary working class background, as had I,” Liz says.

“That is quite unusual in professional services − he’d left school at 16, whereas I left school at 18. That meant neither of us went to university. He worked his way up through an environment that is quite tough for people from that background, without coming from either a public school or, certainly, having a university background. He was incredibly inspirational in terms of showing what could be achieved.”

For Stephen Chu, philanthropist and former CEO of the Hong Kong-based Hui Xian Real Estate Investment Trust, finding a role model is down to a mix of “happenstance and chemistry”. He met his, Dr. Li Ka-Shing, founder and Chairman of Cheung Kong Holdings, while working at the company. It’s a similar story of effort over education.

“He started out his career as a plastic flower salesman with very little formal education and through hard work, determination and business savvy became the richest man in Asia with an estimated net worth of $34 billion.”

Real values

The responsibilities of leaders are multiplying. Not only should they inspire individuals, they also have a duty to reflect societal values and the company ethos.

Paul McNamara, Group Chief Executive of financial services concern IFG Group, comments: “Everyone is a role model and should see themselves as such − they can be a good role model or a bad one depending on whether their behaviours live up to the desired values of a business, team, or even society.”

To this end, it’s crucial that leaders instil good standards and ideals. Stephen says: “It is paramount that role models and leaders reflect the core values of the company, and society as well. Often these people are the ‘face’ of the company and they are responsible for its image.”

Adam Chamberlain, Sales Director at Mercedes-Benz Cars, confirms that role models can be found at all levels: “One of the things you try to do is identify best practice in a different context. In my past job, I had a peer who was particularly good at certain aspects of their position, so I think you can [learn] various things from different people.”

It is up to the CEO and senior executive team to set the right example, which means demonstrating behaviours that don’t simply emphasise targets and profits but promote a wider understanding of how business should be done.

“The reality is, the more senior you get, the more you are a role model − whether you like it or not,” says Michelle. For this reason, leaders should stay mindful that not only are they being watched, they are possibly being mirrored.

From a CEO’s perspective, role models ought to support succession planning by finding and enabling those with potential. So, it is important that companies have a diverse mix of people who are able to coach, mentor and inspire others, regardless of background.

Michelle adds: “Part of the leadership role is to nurture the pipeline and help develop the people who are going to be the future of the company, who are going to come up with fresh ideas and innovations − who are going to work together to solve problems.”

It’s something that should be ongoing. As Stephen puts it: “The best role models are constantly trying to improve the performance of the company and their colleagues.”

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That First Board Meeting as CEO

Knowing how to manage a board can be a tricky proposition for a new CEO. There may be a sneaking sense that the board is something of a distraction from running the business. This shouldn’t be the case and it’s up to the CEO, in conjunction with the chairman, to get the interaction right so everyone understands how these meetings can be productive.

Gareth Davis, Chairman of Wolseley, William Hill and DS Smith, remembers his first board meeting when he was appointed CEO of Imperial Tobacco Group: “We were re-floating out from a conglomerate as an independent, straight into the FTSE 100… there was a huge agenda… and it was a bit daunting.

“It was my first board appointment, so you’re a little bit unsure of the role of non-execs. Most of them were very experienced board practitioners… but the reality is, it’s much less difficult than you think; what you forget is everyone wants you to succeed.”

If coming in as an external appointment, the CEO will need to explain what they expect from the board. Ian Tyler, Chairman of Bovis Homes and Al Noor Hospital Group, and former CEO of Balfour Beatty, comments: “I’ve just gone through a process where an incoming CEO was taking over in one of my companies. That’s more about making your presence felt on the first encounter.”

This was the case for Ian Bowles, CEO of Allocate Software: “I used that first board meeting to set my stall out clearly and draw a line as to what was board responsibility, what was exec responsibility, where the lines had blurred and how we would handle that… We agreed our respective roles: the chairman runs the board; the CEO runs the company.”

For those appointed as CEO from within the organisation, there may be less of a need to make a mark. Ian Tyler says: “I was already on the board – I had been the CFO and then COO. In reality it was just moving into a different seat.

“The issues that I was dealing with were a big chunk of the CEO’s overall responsibility. The only difference is that all eyes look to you as the CEO… But I had gone through a long succession process.”

Knowledge is power 

Once expectations and responsibilities have been established, the focus should be on how to get the best out of discussions. “A CEO has to understand why [they] need the board and non-executive directors, and why corporate governance is useful,” says Theresa Wallis, Chairman of medical technology concern LiDCO Group.

“Some people, when they first go on the board of a company… think: ‘Why do we need non-execs? What do they do?’ You need to explain the obligations of the non-execs; how they can contribute and be useful.”

Gareth says: “A CEO has to tell it as it is, warts and all. Be very open, remembering you’re among people who want to help… If there’s bad news, get it out of the way.

“Don’t underestimate the ability of NEDs to absorb and contribute… It’s usually when boards come into their own – when bad news is shared and collective intellect is applied.”

It’s important that the CEO exercises leadership in the boardroom and gets as much value from the discussions as possible. Ian Tyler comments: “I appreciate the chairman formally leads the board, but the chief executive has to be taking the board where he or she wants to go… that’s when you get a healthy dynamic where there is respect both ways, but the chief executive is clearly the prime mover in the discussion.”

Anthony Fletcher, CEO of online snack retailer Graze, says: “You prepare this enormous board pack, you prep all these people to come in and present. Then, you need to capitalise on all this information and the views people have brought around the table with their different experiences.”

When the CEO and board dynamic is healthy, the chief exec accepts challenge and listens to what is being discussed. “That’s when it works, the diversity, the debate – management brings something forward and it’s ultimately improved,” adds Anthony.

Charlie Wagstaff, Managing Director of Executive Membership for Criticaleye, says: “The CEO should be able to use the chairman and NEDs as a sounding board, drawing on their collective experience to provide guidance when necessary.”

“They are there to hold management to account, but also to support and guide you. Getting them up to speed sooner, rather than later, can only be a good thing.”

Cracks appear in the relationship between the chief exec and non-execs when the information provided is poor or selective. “There are recent examples with governance accidents where executives were not terribly welcoming to non-execs,” says Gareth. “They are directors of the company, they should have complete access and [the CEO] should facilitate that.”

James Crosby, Criticaleye Board Mentor and former Senior Independent Director of Compass Group, comments: “The chief executive has to take the initiative in putting proposals and ideas to the non-executives as early as possible… You can’t just dump a whole pile of fait accompli on them – if that’s how you treat them, you won’t have the right relationship of collaboration and challenge.”

Ultimately, the manner in which the CEO and chairman work together will set the tone for everyone else. As Ian Bowles of Allocate Software says: “If those two aren’t collaborative, then the board is going to be dysfunctional from the get go.”

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Becoming Chairman of the Board

A solid track record of excellence in an executive role, traditionally that of CEO or CFO, has been mandatory for anyone looking to become a non-executive chairman. While that still holds true in many cases, the qualities required to run a board are arguably growing in complexity, and this means that gaining NED experience before seeking to make the transition has become more important than ever.

Andrew Allner, Non-executive Chairman of transport concern Go-Ahead Group and landscaping manufacturer Marshalls, says: “It’s good for a senior executive to have at least one NED role while still in their executive function. That will really help, especially if they chair a committee, because they’ll see a board from a different perspective, learn how to influence as a non-executive and work with the executive team…

“It would be pretty tough to take on a chairman role without getting non-executive experience first, certainly for a bigger company.”

Debbie Hewitt, Non-executive Chairman of menswear retailer Moss Bros, glazing and lock specialist Evander Group and privately owned fashion retailer White Stuff, says: “It’s unusual for a board to take a risk with a first-time chairman. You’re more likely to get an opportunity from somebody who can strongly recommend you. If they have seen that you possess chairman-like qualities, they are much more likely to have influence in getting you appointed.”

When a position does become available, it’s a case of conducting thorough due diligence. Theresa Wallis, Non-executive Chairman of medical technology concern LiDCO, says: “You have to speak to the board and the directors. In my case, I spoke to the Chief Executive, the finance and sales directors, the outgoing Chairman, and I also actually spoke to a couple of the doctors who use the products.”

It’s a case of minimising surprises for both parties and doing everything you can to make sure your skills complement the business and its strategy. “A chairman will be taking a company through a particular stage and that will vary, so you need to understand whether you have the right experience and attributes for that journey,” she adds.

 
Philip Aiken, Non-executive Chairman of infrastructure services business Balfour Beatty and engineering software provider AVEVA, says: “A non-executive chairman has to think about what they bring to the table. Boards have to address strategy, corporate governance and succession, so you have to consider the general issues that the company faces and what you can personally contribute.

“It’s good to take a NED role while still an executive in order to understand what the responsibilities entail and broaden your experience away from your day job. It’s hard enough making the move to being a good NED but it’s a big stretch to suddenly being a non-executive chairman.”

Road to success  

To be effective, a chairman might not necessarily possess deep sector knowledge but they will absolutely need to have experience of how a business works, what good governance and corporate reporting look like, and how to influence others.

Egos should also be kept in check. “A chairman needs to be able to provide ‘air cover’ to let the chief exec get on with what they’re doing but they must also be prepared to take tough decisions, cutting through complex issues,” comments Joëlle Warren, Executive Chairman of executive and non-executive search firm Warren Partners.

“A hugely important responsibility for a chairman is to appoint a CEO and then to really back him or her. They have to be able to act as a mentor, providing support, but also be prepared to challenge and, ultimately, be prepared to sack them if they’re not performing.”

The magic ingredient for a chairman is to understand where mistakes are often made and what slows a business down. “They’re not just there to chair meetings and be a figurehead,” continues Joëlle. “It’s a case of being much more attuned to what’s going on, so they’ll know if management are tackling the big issues.”

It’s a point that Andrew echoes: “My objective, as Chairman, is to look at how to draw the best from the people round the table who have a lot of skill and experience between them. You need to create an environment where people feel comfortable about raising questions and issues they believe are important. It requires real transparency and honesty.”

If there are risks to the business, they need to be identified and addressed. However, a good chairman will frame the dialogue so that everyone can reflect on the bigger picture too. “There can be an awful lot of focus on the short term, but one of the jobs of the board is to extend the horizon so that we’re thinking about strategy for the medium to long term as well,” says Andrew.

Underpinning all of this will be the relationship between the CEO and chairman. When the two aren’t functioning correctly, it can have a hugely damaging effect on the entire organisation. Debbie says: “The chairman is accountable for making sure that the company has the right CEO and that they are performing.

“Any chief executive, whether they’re highly experienced or new to the role, needs support, encouragement, a sounding board and a mentoring-type relationship. It’s fundamentally about trust – does he or she respect your judgement when they ask for advice? They need to feel that you have a helpful and constructive perspective and value the contribution you can make.”

Philip of Balfour Beatty stresses how essential it is to create a healthy dynamic: “I’ve had long discussions with CEOs before taking on a position so we clearly understand our roles… It’s very important, as a chairman, to know when to be firm and when to be supportive.

“There are times, I think, when the chairman has to be the leader and in other instances they will need to be the counsel.”

Andrew Minton, Executive Director of Criticaleye, says: “To think of the chairman’s responsibility as being solely focused on governance is to misunderstand the role fundamentally. The real value lies in providing support and challenge for the CEO, and ensuring the board prioritises what’s right for the long-term interests of the business and its stakeholders.”

For anyone considering the move, they should never think of the position as simply being a facilitator or box-ticker. As Philip says: “I was once taught years ago that it’s very important that the CEO runs the company and the chairman runs the board.

“If there is conflict between the desires of management and the board, the chairman needs to be the one who tries to arbitrate, mediate and, in the end, he’s probably got to bite the bullet and make the final decision.”

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeUK

The Plc vs Private Equity Chairman

ImagePlenty of chairmen sit in both the Plc and private equity camps. It takes an experienced individual to do it well, someone who is equally at ease in the public spotlight, with its corporate governance requirements, analysts and media coverage, as they are accomplished enough to deal with the different shareholder dynamics in PE, where a chair is often expected to delve much deeper into the nitty-gritty of a business.

Alan Thomson, Chairman of recruitment firm Hays Plc and the recently floated pipe manufacturer Polypipe, says: “With all the reporting that we have to do around audits and remuneration in particular, as well as creating a nominations committee, [being a chair in a Plc] is a lot more complex. For example, [with Polypipe] we now have a board of seven people rather than four.”

It is a testing environment and there’s no sign of the complexity diminishing. Debbie Hewitt, Chairman of clothing retailer Moss Bros Plc, comments: “Remuneration and incentives is a much more emotive subject when chairing a Plc, particularly given the new rules of institutions voting on the remuneration policy.”

While it would be wrong to say the risks are overplayed – the liabilities for any Plc director are onerous –, it shouldn’t be forgotten that there is a definite upside. John Kelly, Senior Independent Non-executive Director at betting firm Ladbrokes Plc and someone who has also had a number of PE chairmanships, says:  “In a public company, while it’s a very difficult place to be, if the chairman wants a bit of a profile and to be seen to be supporting the executive managers and strategy, he can create a difference for that company which has real visibility.

“So, in a Plc, you have the likes of Schroders, Fidelity, AXA, and so on, opining on whether you are a decent chairman or not. You’ve also got the press who are more aware of you than they ever were when you were in private equity; then there are the analysts who are… publically saying how well the board is functioning in a variety of ways… If you want to establish your credentials as a chairman, a public company chairmanship can be a very satisfying role.”

Horses for courses

None of this is to suggest that chairing a PE-backed business is an easy gig. John Allbrook, Executive Chairman of IT financiers Syscap and former CEO of AIM-listed GoIndustry, says: “The chairman of [a Plc] is going to have to spend considerable amount of time on corporate governance and making sure all of those boxes are ticked, which will mean they have less time to spend on strategy and execution.

“By contrast, in the private equity environment you’ll need to spend more time in the business, understanding the growth strategy and focusing on value creation.”

Charlie Johnstone, Origination Partner at private equity firm ECI, comments: “The type of person who is attracted to a chairman’s role in private equity is a different animal. They are more interested in getting under the skin of the business and less interested in the prestige of profile that goes with being chairman of a large Plc.

“You need to be more ‘hands-on’ but you are still a non-exec… so while you might spend more time with the executive team, it’s often done in a coaching capacity.”

The interaction with shareholders, as you might expect, is significantly different. Debbie comments: “Managing multiple shareholders in a very public way adds a complexity to the role which PE companies don’t require. The agenda for the chair in a PE business is typically simpler to manage, and usually means they can more easily focus on the business and delivering performance, as opposed to the time spent managing a more complex shareholder structure.”

John Kelly says: “In PE you’re dealing directly with your shareholders, all of whom are executives and have a significant financial interest which creates a very different relationship between the executive management team and the sponsors.”

He goes on to point out that the relationship between the management and PE firm is crucial as the business moves towards an exit, adding “the chairman must be prepared to withdraw when it’s appropriate while keeping oversight on how that relationship is developing, how sustainable it is and how logical it is and whether it’s working in the best interests of the investment”.

Paul Brennan, Chairman of cloud storage provider OnApp, comments: “You need to have a very clear insight into how the PE world works… [and] how remuneration works for the people involved, because PE houses are clearly there to make a return on investment for their equity holders.”

Many chairmen are happy to crossover from a Plc to PE board and vice versa. Success depends on them being fully aware of what is needed for each particular business and its shareholders. Perhaps perversely, they also need to be wired in such a way that they can enjoy the unique challenges each presents.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

CEOs & Chairmen: The Missing Piece

Comm update Faces - 18 septemberMad as it may seem, a CEO once felt the need to hire a private investigator to follow the company chairman’s every move, such was the breakdown in their relationship. It shows how the dynamic between CEO and Chairman, like any relationship, can go catastrophically wrong and why every effort has to be made to ensure that both parties are in agreement about what’s best for the business.

Without trust, there is going to be trouble. Julia Robertson, Group CEO of outsourced HR services provider Impellam, says: “[The chairman] was on the board before I arrived, so I’ll talk to him openly about whatever legacy issues I’ve found and what I think we should do about them, and I’ll ask him if there’s anything I haven’t considered. What makes the difference is if you communicate openly and transparently, whether the news is good, bad or ugly.”

It makes sense for a CEO to manage expectations by defining the terms of the relationship. Rob Margetts, Chairman of mapping agency Ordnance Survey and former Chairman of insurance giant Legal & General, recalls: “When I first became Chairman of Legal & General, then CEO David Prosser sat me down and said: ‘Now this is how we’re going to do it; you are going to commit in your diary two hours a week for us alone. I’m going to come prepared with all my items which I’d like to let you know about that are going on and I want you to do the same. Then we’re going to reach agreement on what’s the best way forward.’”

Powerful Combination

There are any number of reasons for a breakdown between the CEO and chairman, but without question the biggest is when the lines become blurred about who has responsibility for the business. Jamie Pike, Chairman of plastics manufacturer RPC Group, says: “You cannot have two chief executives trying to run an organisation, so the chairman must be hands-off. If he feels the need to be hands-on it probably means a new CEO is required.”

Julia comments: “If [my chairman] got involved in any of the areas of my remit and didn’t keep me informed as to why he was getting involved, that would cause me a problem. So it’s about clarity, accountability and respect.”

Self-control and discipline are required to keep more heated debates behind closed doors. Brian Stevenson, Criticaleye Board Mentor and NED at Agricultural Bank of China, and formerly Chairman of Global Transaction Services at RBS, comments: “If you’ve got a chairman and chief executive that are clearly not getting along together, or have disagreements about strategy, or anything that’s visible to people, then that sets the tone for your whole organisation.”

Don Elgie, CEO of insight and communications agency Creston, comments: “The course that the company takes and the support that the CEO needs from the Chairman are vital for the future health of the company, and not to have that could seriously damage or delay the progress that a company makes.”

Provided the boundaries have been set and expectations managed, a CEO can benefit enormously from a good chairman’s input and insights. Christian Nellemann, CEO and founder of PE-backed XLN Telecom, says: “As our business has grown and gone through a number of different stages, I’ve had to change my leadership style and way of operating and engaging with direct reports and employees in general. It has certainly been incredibly helpful to be able to discuss issues with somebody that has already been there and done it… my chairman is very much my mentor.”

It shouldn’t be forgotten that if a chairman feels investors aren’t being served well, then they can issue marching orders to the CEO. This can’t be a ‘matey’ relationship so again it comes back to having the right balance.

Sam Ferguson, CEO of EDM, an information management provider, says: “The job of my chairman is totally different to mine. He doesn’t manage the strategy; he doesn’t manage acquisitions. His only job is actually to manage the board.”

According to EDM’s Chairman, Iain Ferguson, “there’s positive tension, of course”, and he believes that’s healthy when doing big things like making major acquisitions and changing the way a company operates. “But because we’re very aligned and transparent and because there’s a tight and effective leadership operation in the business, it works very well,” he adds.

Words like ‘harmony’ and ‘chemistry’ may be over egging it slightly, but ultimately if the working relationship is right then the company will be in a strong position. As Glen Moreno, Chairman of education and publishing concern Pearson, says: “Everybody assumes it but [the CEO-chair relationship] is the key to everything… You need a basis of trust and confidence and to be talking all the time.”

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeuk

The Role of the Chairman in an IPO

Community Update Faces - 25 june 2013Why companies leave the appointment of a chairman until the last minute of an IPO is a mystery. It’s the key hire for a business, greatly enhancing the prospect of success as the chairman is tasked with building an effective board, coaching the senior management team and calling on years of experience to ensure the story a company sells to the market is both compelling and real.

“A company has to figure out what it wants in a chair,” says Stephen Davis, Criticaleye Thought Leader and Associate Director and Senior Fellow of Harvard Law School Programs on Corporate Governance and Institutional Investors. “The decision should be a part of the ordinary process of planning an IPO but frankly it’s usually an afterthought or comes late in the process.”

As IPO activity picks up, it’ll be interesting to see if the new issues have learned from the mistakes of their predecessors. John Allan, Chairman of Dixons Retail and global card processing company WorldPay, says: “It could easily take a year for a chairman or chairman designate – as he doesn’t necessarily need to be identified in the role of chairman straight away – to build a public company board. If it’s going to be compliant, it should be headed towards a majority of independent non-executive directors whereas a typical private company often doesn’t have any.”

There is plenty for an incoming chair to put in place, assess and, where necessary, fix. David Vaughan, UK&I Head of IPOs at Big Four firm Ernst & Young, says that “the task for the chairman is to set the tone at the top and to say what you want the organisation to be, establishing good governance and making sure the business has the right corporate reputation in its community”.

Chip Goodyear, Non-executive Director of oil and gas concern Anadarko, says: “The chairman will need to have a collegiate personality and be somebody who can work well with a board. My view is you do want a board who will be able to challenge management but you want it to be done in a constructive way; somebody who can bring that together is very valuable. You also want somebody who is not trying to be CEO and is comfortable in the role of chairman.”

There will be sectors where industry know-how is desirable, such as defence, financial services and oil and gas, but essentially it’s the knowledge and gravitas garnered from a stellar executive career, followed by being a seasoned Plc NED, that count the most. Jamie Pike, Non-executive Chairman of plastics manufacturer RPC Group, comments: “In general, I would say chairmen are fairly interchangeable but there are special industries where a lack of knowledge could frankly prove pretty risky. You would certainly want the chairman to have Plc experience, such as dealing with the institutional investors.”

Debbie Hewitt, Non-executive Chairman of Moss Bros, comments: “As well as complementing the executive team, the experience of the chair probably needs to reflect the timing of the IPO. The closer the IPO the more important his/her industry knowledge is. If it is some way off, an experienced chairman will have the time and capability to get to know a sector. No matter what the timing, the City and institutional investor experience are vital.”

It’s categorically not a role for the uninitiated NED, even if they are a big name. “You need an excellent board and the chairman has to make sure the governance is absolutely right,” says Dame Helen Alexander, Non-executive Chairman of media company UBM. “The last thing an IPO needs to focus on is the make-up of the board or the quality of governance. The selling process should be about the business – potential shareholders shouldn’t need to ask about compliance.”

Built to last

The chairman will have to decide if the management team, particularly the CEO and CFO, are fit to take a company public. Mike Turner, Non-executive Chairman at engineering concern GKN, says: “In the first three months, you should be comfortable with whether the CEO and CFO are up to leading the business but equally important is to get a sense of whether they can convince the City.

“They will have to spend a lot of time going round the City, which is something you don’t do in a private company, and they will need to be convincing about the strategy of the business and its future.”

If they do have what it takes, the chairman ought to prep them for investor roadshows and what to expect once public. Chip says: “For the chairman, there is always an element of coaching of the senior leadership team. But with regard to the public side, particularly if the chairman has had that experience, being a counsel to the management team would certainly be an important thing.”

Remuneration will have to be examined via the hire of an excellent Remco Chair together with the recruitment of an Audit Committee Chair, along with succession planning and an assessment of the quality of the people in the organisation. “It is very important that the chairman goes round the senior management team, especially at the executive committee level, to see what it’s like and that there is good bench strength,” says Mike. “You need to know what talent is available below the level of the CEO and CFO.”

The quality of the advisors has to be watched too. According to Helen, if a chairman comes in and they’re not happy with those already appointed, he/she should have the power of veto to bring in ones who are of the right calibre.

This is where reputation and prior knowledge make a difference. “A chairman has to understand the capital markets and listed vehicles and it certainly helps to have strong contacts and a network of tried and trusted advisors,” says Debbie.

It means treading a fine line as a non-executive. “It’s helpful if the chairman does know how to communicate and deal with advisors, brokers and investment banks, especially if it’s a company where the CEO doesn’t have much experience… Again, it’s important that they’re not seen to be able to try and lead the company,” says Chip.

Behind the scenes, the pricing of the business will be sense-checked too. A canny chairman will figure out who might profit by shorting on the IPO, making it difficult for game players to mess around with the stock but at the same time making sure the investor mix will generate enough liquidity.

Jamie says: “Liquidity in markets is very important. Therefore, if you’re buying and selling, you need people who will be selling the day after they’ve bought shares on flotation. I had this drummed into me during an IPO some years ago as it’s easy to get on your high horse but the market does need liquidity and that means buyers and sellers…

“What people often fail to understand is that when you float a business you are selling it and bringing new owners in; some of them may be short term while others may be longer but they do have rights. You cannot mess the market around and these owners must be taken into account, meaning their needs and objectives are factored in to how you run the business.”

It will vary on a case-by-case basis, but the chairman of an IPO will have to get their hands dirty if the Prospectus is to be signed with confidence. Stephen says: “The chair coming into a new public company has to exercise different skills than one joining an on-going public company, since for the latter you don’t have to re-invent everything.”

Many chairmen swear by the recruitment of a company secretary as a safe pair of hands to deal with governance and risk management. The run-up to an IPO is frenzied, intense and reputations that have been established over the years can be decimated in a flash if it goes belly up.

That’s why you spend time finding the right chairman and bring them in early.

I hope to see you soon.

Matthew

https://twitter.com/criticaleyeuk