Finding Your Voice as a NED

Comm update_15 JanWhile landing a position as a non-executive director may be difficult enough in itself, more mysterious still can be what to expect around the boardroom table in those early days. The real challenge for first-timers in the role, especially if they’ve had limited interaction with NEDs in their executive career, is in knowing how to influence other directors and when to keep opinions to themselves.

“I couldn’t have been a non-executive director earlier on in my executive career because I probably wasn’t as confident as I needed to be,” says Cath Keers, Non-executive Director at Home Retail Group. “It’s important to gain solid boardroom experience as an executive director to build your confidence before moving to a NED role, because you need to be able to challenge constructively and act independently and impartially. You should also prepare to be a lone voice around the table as, sometimes, even the other NEDs might not agree with you.”

Anthony Fry, Chairman of UK dairy foods processor Dairy Crest Group, comments: “For people who have not spent their careers in boardrooms, my advice would be: learn how to read the room. It’s not just important to be right on an issue – it’s working out how to persuade your colleagues that you are.

“It’s also critical to learn how to challenge executives in a positive but not aggressive manner – many new NEDs make the mistake of confusing the need for critical judgement and comment with negativity which can often create an ‘us and them’ atmosphere.”

Even those with a wealth of boardroom experience must learn to adapt their approach. Michael Benson, Chairman of emerging market investment management firm Ashmore Group, comments: “Having been a pretty hands-on executive director, I had to remind myself what my new role [entailed]. Remember that the role of a NED is essentially to ensure the financial well-being of the company, to be the guardian of all aspects of governance and to approve the top-line strategy and monitor its implementation.”

Use your initiative

The skills required to be successful in the role are changing which means that a lot of work has to be put in if you’re going to make the grade. According to Joelle Warren, Chairman of executive and NED recruitment specialist Warren Partners, companies are looking for “broad experience to be able to assess and comment on a full range of commercial and governance issues… [and] as far as personal qualities, we’re looking for team players with small egos; people with self-confidence and good judgement…

“The Combined Code talks about five aspects of the NED role: constructive challenge; scrutiny of performance; risk assurance; remuneration and succession planning for executive directors; and stakeholder engagement. Look for opportunities to demonstrate these in your executive role – potentially with subsidiaries or joint ventures.”

Ian Durant, Chairman of property investment and development company, Capital and Counties Properties, comments: “The role has changed over the last five years or so. There’s a bit more governance structure and technicalities required, and a greater sense that institutional investors are interested and want to be engaged with what boards do and how they go about their roles… [so] you need a softer way of delivering your challenges in order to become more effective as a NED.”

The onus is on a NED to make sure he or she is up to speed. Carl-Peter Forster, Non-executive Director at engineering concern IMI, who took on his first NED role at Rolls-Royce in 2003, says: “I was very much in listening and learning mode to begin with, although I didn’t feel uncomfortable with this because UK corporate governance is really quite complicated these days. Everybody initially has to learn a lot… so I would recommend asking for formal training sessions in all aspects of corporate governance early on – and it’s very much up to the NED to actively pursue this.”

Don’t rush it

Dedicating plenty of time to the role early on will certainly help you feel more comfortable sitting on the board. Jeremy Williams, Non-executive Chairman of Assembly Studios, an international design and digital services company, says: “My first [NED] role was as chairman for a marketing services business… [and] I devoted a lot of time to this… and as a consequence felt comfortable from the beginning. As part of my contract I made a set of recommendations to the board after the first three months and [was] influential in helping to create a full turnaround and growth plans for the business.

“It takes care, confidence and a fully immersive induction programme, looking at the major challenges, issues and functions of the business. Over six weeks I sat in on key meetings within the business, be they business development, marketing, operations or finance related… had one-to-ones with all of the key managers and held video calls with those in the international offices.”

Ian comments: “Those early months are as much about getting to know the business and feeling comfortable about your own contribution in a board situation… Take your time, observe the behaviour of other NEDs, get to know the business as well as you can and develop credibility with the management – not just the board – by getting out and about in the business and meeting people.”

Bearing in mind the higher expectations and increased scrutiny now placed on NEDs, it’s a case of taking nothing for granted and going all out to do the hard yards in those early days to make sure you’re properly informed about the business.

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

Why Boards Need to Show Respect

Comm-update-30-01-13-WEB

Trust and confidence in a business takes years to build and can be squandered in seconds. That’s nothing new. What’s changed is that board members need to work harder to maintain trust than they have before. They have to show they respect their customers and stakeholders and are able to communicate with both transparency and authenticity. Silence and aloofness will just leave a business vulnerable to attack.

Sir Michael Lyons, Chairman of The English Cities Fund, a Criticaleye Associate and formerly Chairman of the BBC Trust, comments: “Anyone who understands the value of their brand will also recognise that maintaining public trust is a core business issue. Whether a Plc, a public body or even an individual, your brand determines who buys from you; how much they are willing to pay and their future loyalty… Putting a proper value on maintaining public trust is a job for both the CEO and particularly the board. It’s not a job to leave until difficult times are upon you.”

It’s certainly vital for someone like Jane Furniss, CEO at the Independent Police Complaints Commission. “Public confidence and trust is a real challenge for an organisation like ours,” she says. “One of the things we spend a lot of time on is the different audiences who need to have confidence that we’re doing our job without fear of favour to any one party and are relentlessly focused on the evidence and not on people’s personal interests.

“It’s more acceptable if our work is not liked by some people because of what we’ve found or not found, but what’s not good is if people think the way we’ve done our job isn’t fair or isn’t based on the evidence. It’s not just how we communicate the message but how we help people understand why we’ve come to those conclusions.”

Questions of perception, duty and responsibility have to be weighed up and failures are going to get punished. Michael says: “A company’s behaviour eventually determines the regulatory framework they live within, and nowhere is that clearer at the moment than for the newspapers following the [Leveson Inquiry]. Whether or not there is statutory regulation, they will be facing a tougher regulatory regime in the future as a result of abusing the trust that was given them.”

A catastrophic breakdown of trust, as witnessed in parts of the media sector and financial services industries, will take years to rebuild. Alison Carnwath, Chairman of commercial property company Land Securities Group and a Criticaleye Associate, says: “Banks are not trusted as they have treated customers and shareholders badly. They have sold unsuitable products and cost taxpayers money. No business wants to end up where they have been. Watch how they rebuild trust and ensure you never have to be in that place.”

So it is incumbent on CEOs to keep standards high. For Jane, this is especially important given the very human tragedies that often lead to IPCC investigations. “We’re currently doing a serious review with an independent panel of experts on how we investigate cases where people have died in custody,” she explains. “Because of the sensitivity of this issue and in response to the criticism that we and the police have received, we decided to launch this study. We’re consulting academics, politicians, lawyers, campaigners and, crucially, families of those who’ve suffered, and are seeking their views to help us understand what’s gone well and not so well and how we can improve the system, and we’ll publish that report.

“If you aren’t convinced that you are getting things right or if people believe you’re not getting things right, it’s really important to be transparent and not hide away. You need to engage with people and be non-defensive, even if you are being criticised from every corner.”

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Sum total

The CEO cannot work in isolation when it comes to fostering trust. The tone at the top, as set by the executive team, must be consistent and authentic, but the non-executive directors also have a massive role to play here.

Alison says: “NEDs are witnessing at close hand in board meetings how a CEO behaves and talks about staff, shareholders and customers and his attitude to certain issues, and if they feel he is being neglectful or intolerant of certain people or issues then they have to try and steer him in the right direction.

“If you’re an experienced NED and you’re used to being in different business environments, you can see those companies that are prepared to modernise and those that are not prepared to embrace it and the new, more open society that we live in… You really can feel the culture of an organisation.”

Some of those businesses which haven’t taken this seriously, which see it as a distraction or some form of political correctness, are the ones which have ended up in trouble. Gary Kildare, Chief HR Officer at IBM’s Global Technology Services in New York, says: “It is more prominent today because of the significant economic, financial and social issues around the world which are negatively impacting citizens and employees.

“Businesses are very focused on maintaining, building or regaining trust. They are endeavouring to be more open; introducing or publishing codes of practice and conduct; aligning business strategies with leadership behaviour; getting more interested in client satisfaction studies and measurements; investing in corporate citizenship and appointing ‘chief trust officers’.

“It’s too late to think about what you should do when you are the headline in the news. It’s all much more than publishing annual reports, marketing, the AGM or having a website – business in general is becoming much more transparent.”

There’s no use trying to avoid this or think it doesn’t apply to you as a leader, although maintaining such openness can be arduous. Bruce Cox, Managing Director of Rio Tinto Diamonds, which is set to be sold by Rio Tinto, argues that trust is easier to achieve if there is ‘two-way communication’. Even though the exact future direction of the business he runs may not be clear, Bruce sticks to his view that it’s essential to keep talking with people and to be as transparent as possible.

“There’s a huge amount of change and uncertainty, so it’s more important that we do everything possible to maintain the relationship with our [employees] to keep that communication up,” he says. “If you’re not continually interfacing with various stakeholders they will begin to believe their own concerns are true rather than being rational about those concerns… [it’s important] there’s more human contact or more social interaction through… meetings where the stakeholders have an equal opportunity to talk and to contribute, rather than the manager or director communicating down.”

As ever, the organisations which have leaders who appreciate this will be better placed to succeed and make it through challenging periods of change. Peter Cheese, Chief Executive of The Chartered Institute of Personnel and Development (CIPD), says: “We need to be able to demonstrate to the wider public what is going on and how businesses are responding. We’re looking for more open, transparent leadership and moving on from old models of the past which were more about top-down control and management.”

Gary agrees: “Leaders should be concerned if the business feels too comfortable, routine or complacent. The role that they play is to ensure that there is robust professional challenge and no-one and no subject should be out of bounds to scrutiny on a regular basis.”

CEOs: How to Manage a Crisis

Today’s intense public scrutiny seems to unearth business calamities on a weekly basis, whether they’re leadership gaffes, tales of wrongdoing or a disastrous technical failure. When such a crisis hits and the media demands immediate answers, it’s up to the chief executive to get the details clear, control any panic and secure the long term reputation of the business.

Andrew Heath, President of Energy at engine-maker Rolls-Royce says: “Our approach is to stick to the facts: acknowledge them and work swiftly internally, to understand what we need to do before we tell people [outside the business]. The media doesn’t necessarily like it, but both [they and] our business circles do recognise that… we don’t speculate and only put out what we know when it is factual.”

Once the details and the extent of the risks to the business are ascertained, the clear up can begin. Leslie Van de Walle, a Criticaleye Associate and Chairman of both construction supplier SIG Plc and recruitment consultancy Robert Walters, says: “Be vigilant: you need to monitor the… feedback from your audience. Be ready to react relatively quickly, with a low profile and with the facts, hoping that it will calm down the bad press before the spotlight moves on to something else. [The key] is giving an appropriate response to the events, without under or overstating it.”

It’s a case of defining your priorities and the interests of key stakeholders first and foremost. Kevin Murray, Chairman of PR consultants Good Relations Group, says: “Trust is a strategic asset and if you destroy a relationship with a customer or a supplier it is far more damaging to your business than some bad media headlines. Ask whose relationship with you is being damaged [by the crisis] and what you need to say and do to fix it. It is about developing the right strategic response, rather than the right media response.”

Enough businesses have undergone high profile catastrophes to make it clear that successfully handling the external perception of a crisis hinges on the quality of internal management and with the aforementioned focus on a business’s relationships, values and reputation.

In mining, for example, the ongoing stability of a venture is threatened when companies don’t keep local communities onside. Bruce Cox, Managing Director of Rio Tinto Diamonds, says: “It is not just the global brand reputation that is critical, but the perceived or real community concerns. They can result in lasting local reputational damage that is hard to recover from. The solution there comes from facing issues head-on, through sincere and genuine engagement with community leaders.”

The company line

When a crisis breaks, it’s the CEO who has to exercise judgement on what the impact of a crisis is on the business and decide on the appropriate course of action, rather than relying solely on the opinion of advisors and comms teams (although they certainly have their place). Likewise, it’s the leader who needs to ensure, and thereby feel confident, that the values of the organisation are understood by each and every employee right through to those in the supply chain.

Easier said than done, perhaps, but weak links in organisations are causing catastrophic consequences. Patricia O’Hayer, Vice President of Global Employee Engagement at Unilever says: “Today at any point in time anyone can mobilise a maelstrom of activity which challenges a company’s reputation, so never discount a threat as insignificant or not credible… But it’s not all doom and gloom, a company’s reputation is an asset that can be managed and bolstered each and every day.

“Invest in your employees as the first line of defence, they are the best advocates for your company… and hold your suppliers accountable to use your products, speak well of your company and adhere to your standards, [as they] too have a vested interest.”

It’s about drilling home what’s at stake to the whole business, adds Martin Sutton, Head of Corporate Assurance at National Lottery owner Camelot Group: “On the very rare occasions that a player has a problem with our lottery systems, we know that, no matter how small or temporary the problem may be, news of it will spread like wildfire on Facebook and Twitter… [but] most crises start small and like a storm approaching don’t necessarily in themselves warn you of what’s about to come.

“It’s a fine judgement and the first indications often won’t lead an inexperienced manager to think this is indeed a crisis… [so] we put all of the senior executives through a training process, which I found incredibly useful because you know what to expect in those first 24 hours that define the overall response.”

Let’s not forget that with all of this, good non-executive directors have a role to play in protecting the reputation of the business. Leslie explains: “I think it goes back to the board… If you have an experienced board that is capable of taking an appropriate assessment of the situation, the company’s leadership is likely to be helped in taking the right decisions… It’s difficult once the press get involved but it is the role of the board to take a balanced view and a balanced response.

“In a crisis, it is a question of being prepared, it is a question of being transparent and honest, and it is a question of having people who are mature and experienced. [They] know that as a CEO you will have a crisis during your tenure.”

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon.

Matthew

CEO & Chairman: The Perfect Chemistry

Trust between the CEO and chairman is essential if a business is to achieve its goals. Without that basic element, communication soon breaks down and rifts appear in the boardroom. No one expects a match made in heaven, but a weak and ineffective relationship will quite easily lead to a business losing its focus.

Debbie Hewitt, Non-Executive Chairman of clothing retailer Moss Bros Group, says: “There needs to be mutual respect and trust so that there is sufficient and relevant challenge from the chair, who knows when to push and when to support. [There should be] complementary skills and experience, a clear division of duties and open and frequent communication.”

This can easily go awry where ambitions are at play and motives may not be all they seem. Ian McCaig, CEO of energy saving specialist First Utility, recalls seeing a situation – in a different company – where the chairman had conversations with another executive board member and agreed things without discussing them with the CEO. “It completely fractured the trust in that relationship and from that moment on the effectiveness of that relationship evaporated,” he says.

The nightmare scenario unfolds when a chairman wants the CEO’s position and vice versa. Mark Hunter, CEO of claims and risk management business Airclaims Holdings, says: “The minute the chairman becomes too hands-on you begin to question the trust and then also begin to wonder whether you, as the CEO, are perhaps not delivering to the chairman’s liking.”

It’s an issue that can be as relevant for a private-equity backed company as a publicly listed one. Lady Barbara Judge, Chairman of the Pension Protection Fund, says: “It can be the case that problems arise where the chief executive and the chairman both want to do the same job. In today’s corporate world there are two jobs there, not one, and they need to have an agreement and understanding of who does which role.”

Call me

Politics aside, the demarcation of roles remains simple enough. “The chief executive should run the business and the chairman should run the board,” says Barbara. “It is important that they agree on strategy but the chief executive has the main job of proposing it. The chairman and the board act in an advisory capacity.”

Ian Bowles, CEO of Allocate Software, agrees: “The chairperson should be a coach and mentor to the CEO, but it is the CEO who runs the business; the chair runs the board and only one of the roles can make the final decision on strategy and direction and that should be the CEO.”

The relationship has to be robust enough to withstand candidly exchanged views. Ian continues: “From my perspective there needs to be mutual respect and an agreed common set of goals. However, the CEO is not there to be a ‘yes man’ to the chair: the two must challenge each other in terms of thinking and ideas.”
Tension isn’t necessarily a bad thing in a business as ideas need to be worked through and questioned. “It’s the job of the CEO to come up with the strategy and the job of the chair and board to probe, check and balance it,” states Brendan Hynes, CEO of soft drinks business Nichols plc. “For me a healthy dynamic must involve open, honest communication about both the successes but also the challenges and the problems the CEO has to deal with.”

That’s why it’s important for the pair to meet informally too, away from the boardroom. Mark says: “If the chairman and CEO are only meeting in terms of the monthly board meeting, I think it sort of demonstrates too much of a distance between people. You need the type of relationship whereby the CEO can pick up the phone to the chairman and say: ‘Can we have a chat?’”

That said, the last thing any business needs is a chairman who is too friendly with the CEO. Alan Giles, Chairman of the PE-backed clothes retailer Fat Face, says: “You don’t have to be best mates and indeed it is unhealthy to be too close but, inevitably, much of the contact is by phone and like any other relationship conducted at a distance that leaves scope for misunderstanding and mistrust to creep in. Good personal chemistry helps minimise the danger of losing touch, as does seizing every opportunity for face-to-face contact.”

Equally, there can be problems if the relationship goes the other way. Ishbel Macpherson, Non-Executive Chairman of support services firm Speedy Hire, comments:  “Sometimes there are concerns with companies where the chairman is going native and just agreeing with whatever the chief executive says. The chairman has got to be there to challenge and ultimately be the person who fires the chief executive if he’s not doing his job correctly.”

Public & private life

In private-equity backed companies, it’s easier for a chairman – invariably appointed by the PE firm – to step on the toes of the management team. David Harding, Chairman of eco-friendly detergents maker Aquados, says: “Managing expectations is a key role for the chairman, helping both private equity owners and executives understand what is possible and agreeing a plan and performance metrics with both parties.”

It’s a conversation that needs to be had at the very start of the relationship. Alan adds: “For most of the time, everyone’s interests are fully aligned, but tensions can come into the relationship between shareholders and management as an exit arises, or when performance problems set in. An independent chairman has to take care not to become too closely aligned with either group, and has a vital role to play in helping mutual understanding, resolving conflict and reconciling differences.”

The governance and compliance requirements of public companies may change the duties of the chairman, but the essential components of a good working relationship are universal. David says: “The CEO has to ‘own’ and believe in the strategy, so she or he must lead the process. But if the chairman has the right relationship they can influence the direction substantially without undermining that ownership. Preparing the CEO for board-level challenge involves [the chairman] asking all the difficult questions and this process enables the CEO to make sensible adjustments without losing ownership or face.”

Those CEOs who have the best relationships with their chairman are able to talk about strategy before a brave new vision is officially announced. Ishbel says: “Smart CEOs never bounce a new strategy on the board. They have discussions about direction and thinking and see if there is buy-in or not; they listen to challenges and comments so that by the time you get to a strategy session broadly everybody is there already and you’re just putting the details around it.”

Again, that can only happen if the two parties are focused and committed on trying to achieve the same outcome. “For me the basic thing is trust,” says Ian McCaig. “It is essential because the chairman has to be a sounding board for the CEO and must be able to discuss things that he/she might be concerned about, or questions the CEO has where there might be sensitivities about discussing them with the team.”

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

How to Change Your Business

Shifting consumer trends, new technology and the pressure to operate more efficiently mean that operational structures need to be scrutinised with a clinical eye. Identifying where changes are to be made is one thing; making them actually happen effectively is something else entirely.

The key to success is to get the buy-in for any proposed reforms. “A company’s culture is the hardest thing to change and normally this is only achieved under a severe crisis or over a generational period,” says Bob Emmins, the Finance Director at ABF Ingredients.

Inevitably, opinions vary over how long it can take to bring about new ways of working. David Turner, CEO of outsourced contact centre company HEROtsc, says: “Done properly, it takes a minimum of six months to really change behaviours in your business. One can only enact these types of changes if the people that are going to drive this through have the same values and belief structure of the business leaders.”

The tone has to be carefully judged when explaining why a fresh direction is required. Katharina Auer, Head of Internal Communications for Rio Tinto, says: “Realistically, not every employee will be involved in shaping strategy or change – but every employee can be involved in shaping what happens at the team or local level. It’s therefore important to address the ‘me’ questions: ‘What does this mean for me?’; ‘What’s in it for me?’ Without that relevance, engagement and commitment are unlikely, and change initiatives will be slowed down or fail.”

Create a narrative

Back in 2010, Colt announced plans to simplify its structure in order to improve customer intimacy, drive growth, increase efficiency and improve service. The company rebranded from COLT to Colt Technology Services and, for COO Andrew Powell, the success of this transition hinged on giving people the opportunity to understand the reasons for going on this journey.

“We had to explain to Colt employees why we needed to take the business into the integrated network and [computer services] space,” he says, noting the importance of telling the story of the company, rooted in its telco heritage, and how it had to evolve.

Andrew continues: “We rolled out a series of workshops for all employees, with the aim of turning the story of the business into something practical. These were run by their managers and began by articulating Colt’s new values and strategic actions, then building the stories of success around them. Personal stories brought to life what individuals and teams did well and where they needed to change or continue in order to meet the needs of customers and colleagues.”

It’s a point taken up by Lynda Gratton, a Criticaleye Thought Leader and Professor of Management Practice at London Business School: “The starting point [has to be] an understanding of the story of a company. It is both implausible and naïve to think of a company outside of its context, which invokes heritage, values, shared experiences, norms and myths.”

Peter Cheese, Chairman of the Institute of Leadership & Management, comments that “the art of all this comes down to the way we communicate and build trust, bringing people with you by reducing the impacts of change to simple, palatable points which are relevant to them and which they can understand”.

The real skill is to bring about change without killing the business in the process. Geoff Wilmot, CEO of Centaur Media, a publishing company which needed to quickly come to terms with the migration from print to digital, says: “You’ll need to have the right people in place that understand why the business strategy is changing and are engaged and passionate about its future direction. In addition, you need to be prepared to invest in quality staff in key management roles.”

There also has to be an appreciation of what to leave alone when looking to transform an organisation. Martin Balaam, Managing Director of BT Engage, says: “You should first understand what the group’s core objectives are and how integrated it should be. Are you a collection of different companies where the group’s ownership allows each the freedom to be autonomous, or associated businesses where being part of the same group might afford you comparative advantage in, for example, drawing on a customer base? Or do you want to be seen as ‘one’ company to your customers?”

Last the distance 

Whatever the drivers of change may be, the leadership team can’t afford to lose momentum. This often happens in the case of acquisitions, where the proposed synergies and alignments become forgotten and what emerges is a misfiring mishmash of the old and new. Peter says: “What I’ve seen in too many organisations is that you start out with the business case which defines why you’re doing it; you keep sight of it for a while but then it disappears.

“It may be that you actually have to come back and refresh the business case because other contextual things have gone on which means you should revisit some of the objectives. But you very rarely do that so you’re not really holding people accountable for the delivery of all the elements of the business case. You shouldn’t be too surprised, therefore, if you can’t actually point to a clear line of sight that says you’ve delivered a successful change programme.”

It’s that mixture of consistency, clarity and commitment that will bring about the desired results. “I’m delighted we did it with integrity, transparency and speed,” says Andrew. “We rolled out the tough conversations quickly and stopped the ‘fear’ culture from taking root.”

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

Leadership: Winning Hearts and Minds

Enough is enough. That seems to be the view of the general public when it comes to the great and the not-so-good abusing their power and wealth. In the face of this crisis of confidence, leadership teams are finally getting their act together and realising that transparency and trust are vital business assets in the 21st century.

Professor Colin Mayer, a Criticaleye Thought Leader and Professor of Management Studies at Said Business School, Oxford University, argues that balancing morality with market conduct is a key issue: “Is there a fundamental conflict with the pursuit of profit and integrity? Are we undermined by a shareholder culture and our capitalist system? The answer to all these questions is straightforward: trust.”

Regaining it won’t be easy. Martin Sutton, Group Head of Propriety at Camelot Business Solutions Limited, suggests that executives and non-executive directors need to be aware of the wider socio-economic forces now at play and what these mean for the lives of ordinary people. “I firmly believe that business leaders have to ask themselves how members of their organisation are going to cope with these future prospects… Boards need to be sensitive to how they are perceived in this harsher environment.”

But, given the pressure companies are under to deliver results, is it somewhat fatuous to bring ethics and how an organisation strives to hit its targets into the moral spotlight?

Simon Bicknell
, Senior Vice President, Governance, Ethics and Assurance, GlaxoSmithKline, says that trust and integrity must be core to an organisation’s strategy and operations. “It’s not bells and whistles. It is part of the anatomy of the company, part of the culture in which we want to be seen to be operating.”

For this to work, it has to come from the top. “The single clearest thing that is important in an organisation today is the shadow that a leader casts,” continues Simon. “The chief executive officer needs to be utterly credible as the leader of an organisation in everything they do and say. It also has to be done in a way that is completely seen as joined-up with the business so it is not any kind of add on.”

Do the right thing

The confidence this creates ought to improve performance too. Peter Cheese, Chairman of the Institute of Leadership & Management, comments: “Good leadership development should always begin with the notion of building trust. Without trust you cannot expect your team or employees to follow you, be engaged and give their best.”

Gwen Ventris, Former COO, Europe and Executive Director, AEA Technology plc, says: “A lack of trust in senior management can negatively affect the implementation of strategy, company performance, shareholder relationships, employee turnover, customer relationships, recruitment and employee morale generally with direct results on company performance. The issue of trust and ethical behaviour therefore sits at the heart of a business, its leadership style and performance.”

Irrefutable as this may be, the antipathy of the public towards the business community suggests that boardrooms need to work harder at winning hearts and minds. “Many executives are driven by the bottom line in the short-term. It seems astonishing when we hear of an executive who behaves ethically, as it often suggests they are doing so at the expense of the bottom line,” says Rod Lohin, a Senior Lecturer & Executive Director, Michael Lee-Chin Institute for Corporate Citizenship, Rotman School of Management at the University of Toronto in Canada.

A dose of pragmatism is required when assessing questions of trust and running a profitable venture. Clive Ansell, Group Managing Director – Technology, Tribal Group, says: “You need to build a sustainable business with your stakeholders where there is an environment of trust…That being said, in the real world, there is always scope for firms which are seen as tough, almost brutal negotiators, or who build major market power through their own efforts which they then exploit, or for firms with large financial resources which they can lever… Even in most of those instances, however, there still remains an attempt to build trust with employees and some selected stakeholders.”

Thou shalt…

Failure to take this into account proves counter-productive on a number of levels, not least when poor behaviour becomes a political issue and the question of regulation is raised. Peter says: “What concerns many is that there is little evidence among too many business communities in taking more responsibility themselves and acknowledging their failures in the broadest sense – ie, it is not just about their short-term financial position, as is perhaps demonstrated through executive pay rises off the back of improved performance from saving costs by cutting jobs, versus seeking long-term growth and putting something back into the economy.”

Where excesses do occur, regulators will and are stepping in with varying results. “Regulations become a complex code of do’s and don’ts in order to lay down the law of what is right and wrong and can easily degenerate into mindless obligations,” says Rudi Kindts, an Associate Consultant at Duke Corporate Education and former Group HR Director at British American Tobacco. “A possible outcome is that people simply concern themselves with following rules rather than behaving from deep-rooted ethical motivations.”

In short, you can’t legislate or codify trust. Peter says: “Increasing regulation is happening, but alongside that needs to come other messages that reinforce the wider issues of ethical behaviour and encouraging business leaders to act and take responsibility within their own organisations. This needs to be driven by the arguments that this is good business as well as being good for business.”

Maria Tereza Leme Fleury, another Criticaleye Thought Leader and Dean of Fundação Getulio Vargas (FGV) in Brazil, says: “A business leader has to establish a ‘win-win’ game. In other words, aligning what is expected from each person with the organisation’s goals and objectives. The importance of ‘walk-the-talk’ to create a culture of trust and commitment is paramount.”

The loyalty this can engender could make all the difference. Gwen gives an example from her own leadership career when she had to ask employees to take a 5 per cent pay cut. She reflects: “I engaged all employees in the process of making this decision with a commitment that executives would take a 10 per cent pay cut for the same duration and would give up their bonuses. This was delivered as committed and 99 per cent of employees signed up for the pay cut with no employee fall out.”

Given the volatility in the markets and fluctuations in the fortunes of businesses, it makes sense for boards to ensure relationships are solid with employees, shareholders and, of course, customers as all will be needed to navigate the economic storm. “True leadership is really all about what happens in a crisis and when things go wrong – that is when leaders are tested,” says Gary Kildare, Vice President, HR, Americas, Europe & Asia Pacific for IBM.

It’s a high risk game. Kevin Murray, Chairman of communications firm Bell Pottinger, says: “A brand is a promise. People buy into that and every time you fail to deliver you damage the brand and breakdown trust. In a world that moves at lightning speed, you have to build an organisation that’s agile because one of the ways you’re going to destroy trust is [by] not responding quickly enough.”

Values, principles, ethics, authenticity, trust – call it what you will: if stakeholders are misled or mistreated then reputations can be left in tatters in an environment where forgiveness and patience for authority figures are in short supply.

But get it right and the long-term value is clear for all to see.

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon

Matthew

www.twitter.com/criticaleyeuk

Joint Ventures: The Agony and Ecstasy

Optimism is the lifeblood of driving a business into a new territory. But when forming a partnership through a joint venture, a healthy dose of cynicism is required as no one wants to be locked into an agreement where targets are missed and a supposed partner is manoeuvring to your disadvantage behind the scenes.

“Joint ventures have given me the most frustration and the most fun,” says Bryan Marcus, Regional Director, South America Region, Volkswagen Financial Services AG. This reflects a wider view that a smartly-judged partnership can be a formidable way to establish a presence and accelerate growth, but there is also plenty of scope for tears and disappointment.

Robert Bailey, President and CEO of travel specialist Abacus International, says: “You don’t want to get into an arrangement where the expectations or interests of both parties start to diverge. You need to have a forum and regular meetings to review the business and partnership objectives to make sure they are on course and alive. You must have the sufficient authority to take steps if something needs to be adjusted.”

The basic principles – all too often ignored in the excitement of a deal – for keeping a JV on track are:

•    Have an escape plan
•    Work hard at the relationship
•    Get the governance right
•    Take nothing for granted
•    Set performance targets

Geraint Anderson, CEO of TT electronics, comments that “the first thing in any JV is to establish an exit plan as, if anything goes wrong with the relationship, you clearly need to understand how you will cope with it”.

Bryan agrees, noting that there’s no room “to be full of English embarrassment about having a pre-nuptial agreement – not only at the starting point but if it isn’t working you will want to have a graceful and painless exit”.

Power of Two

If the terms and conditions are right and both parties believe they are on the same path, the potential for expansion can be rapid. Mark Hunter, CEO of Airclaims Holdings, says: “We’re not big enough to have our own legal entity in every geographical region that we’re required to be working in so, for us, using representatives or agents and essentially entering into a joint venture with them, is an absolute must as it’s our first route into a region.”

Graeme Butterworth
, General Manager of Global Process Services at IBM, says: “Trust, integrity and a two-way partnership are essential factors. In general, partnerships are dictated by the nature of the market but, whether you are going into China or elsewhere, you always need to pick a partner that will create agility on entry and be with you for the long run. Having partnered with many smaller growth firms in the last 15 years, we know that speed and access to markets, scalable services, business continuity and management are all absolutely vital.”

The goal, according to Geraint, is to be looking for a “win-win”. He says: “Both sides have to be looking to gain something and you must make sure that is very transparent early on. If one partner tries to get one over the other, it never works.”

Marriage of inconvenience

Inevitably, there are varying degrees of “win-win” as compromises have to be made. Robert says: “Sometimes the strength of the partner outweighs the cultural fit so you have to adapt – it depends on how influential and strong that partner is. In terms of making the business successful at an operating level, it’s very important that the key executives and staff are going to be interacting with one another and can communicate from the point of view of language and commercial focus; often, they can have diverging agendas.”

Mark comments: “When you go into a new territory for the first time, it’s not always easy to give the partner sufficient reward and remuneration and to get them to sign up to terms like an exclusivity agreement; there is no guarantee that the same partner is not also going to service the needs of one of your direct competitors.

“It doesn’t happen often because, if you strike up the relationship strongly and early enough, they know they can trust you to give them sufficient work to make it attractive to them and you know you can trust them to serve the needs of your company. It’s all about trust and building the business together.”

Jo Sellwood, Founder of executive service company Mullwood Partnership, says: “The people involved with building global partnerships must make sure the cultural fit is considered from the outset, as the cultures may often be widely different… You must be clear in what you are trying to achieve, with a tangible output and milestones, and you must communicate it elegantly, providing plenty of opportunities for people to ask questions.”

There are no shortcuts. “Forging a relationship can be very difficult,” says Mark. “Over the years, we’ve done it successfully by building up a relationship with a local firm and normally it works. You test them out and get some honest feedback from clients that have used them; if they’re not happy, they will normally tell you.”

Chance your arm 

Every JV contains a large element of risk and this won’t be eliminated entirely by a robustly negotiated set of terms and conditions. Chris Merry, the former CEO of Matrix Group and Whitehead Mann, has his reservations: “Don’t mistake compromise for a lack of long-term thought. In terms of the business structures that are successful for the long term, very few would reference a joint venture. They are useful for putting a toe in the water, experimenting and trying a market for the first time, but for a business with no defined time limit or purpose for a JV, you may as well operate through an agent, distributor or another type of third party.”

Laura Haynes, Chairman of brand and communications company Appetite, says: “You have to make sure that you are not simply being driven by a commercial opportunity which could be sustained by exports. Ask yourself: is the destination market part of your overall strategy? Will it add value to the rest of your organisation and be sustainable?”

In essence, assume nothing and accept that cracks can appear if results are either going badly or surpassing expectations. The fact is that the CEO needs to be engaged and have people on the ground involved who he/she can trust to provide an accurate picture of how the arrangement is faring.

Bryan
 says: “My personal approach is to be hands-on with the stakeholders in the JV all the time. The initial set up can go well, normally because everyone is enthusiastic and sees the opportunity. But there can be a slow erosion of that enthusiasm over a set period and that is why I, whether it’s at a board or operational level, like to be in contact so I know how the partners are feeling about the relationship rather than just hearing it second-hand.”

Given that commercial gain is the objective, you have to be alert to anything that may alter the dynamic between both parties. Bryan continues: “People can rely on the terms and conditions too much. You have to understand where the cultural and strategic differences and overlaps might be and also be realistic and accept that there is a bit of mutual benefit here – it’s not done for altruistic reasons.”

If this is kept in mind, there is no reason why a JV can’t give you an enormous boost and speedy point of entry into a new market.

Just be prepared for anything.

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

The Language of Leaders

An ill-judged remark has always been potentially devastating for a business, as the jewellery entrepreneur Gerald Ratner famously discovered when a joke about the quality of his products nearly led to the collapse of the company. But what has changed dramatically for business leaders in recent times is the ease with which they can slip on a reputational banana skin.

The rise of social media and round-the-clock reporting mean there is an ever-present, braying audience for bad news and PR gaffs. Paul Drechsler, Chairman and CEO of the building and construction company, Wates Group, says: “It isn’t that trust and reputation are more important today than they were before – it is that [business leaders] are more vulnerable in today’s world. I say to my colleagues in Wates that my number one concern is that, through their actions and behaviours, a brand and reputation that took 140 years to build up, could be destroyed in an instant.”

It’s all too easy to send the wrong message. The experience of Tony Hayward at BP following the Gulf oil crisis demonstrates how a  mighty corporation can be brought to its knees by an accident and subsequent mishandled communications. Graham Mackay, Chief Executive of drinks company SABMiller, says, “Businesses are much more like open democracies. People expect to be communicated to … and see themselves as part of a democracy where they consent to being led. As well as the need to communicate more with employees, there is increased regulatory scrutiny, the rise of global NGOs and 24/7 media. You have to represent yourself and explain your company and your actions all the time.”

In the spotlight 

There’s no ‘off switch’ or downtime for the leaders of the UK’s business community. Kevin Murray, Chairman of PR firm Bell Pottinger, says, “Good leaders steer organisations to success by inspiring and motivating followers, by providing a moral compass for employees to set direction and by communicating a compelling vision the future.”

In other words, communication is a key weapon in a modern CEO’s armoury. Sir Stuart Rose, former Executive Chairman of retailer Marks & Spencer and current Non-executive Director of Land Securities Group plc, says that “for a business leader, building reputation and trust IS the day job, which makes communication the day job too”. It’s a point taken up by Jeremy Darroch, Chief Executive of media giant BSkyB: “Organisations that aspire to long-term success have got to have trust as an important part of their agenda. You never trust somebody you don’t know, whose motives you don’t understand. So, as a leader, you have to give people inside and outside the company a sense of who you are, and what you stand for. That’s what will help people decide whether they are willing to trust you.”

High stakes

Companies are expected to communicate well and properly engage with consumers and clients like never before. John Connolly, Former Senior Partner & UK CEO of Big Four firm Deloitte, says, “I believe that we have come to a stage where we have now to imagine a new definition of the purpose of business. What is it for? How does it make a positive contribution? There has to be more of a focus on long-term sustainable success rather than just short-term gain. It is only if you think long-term that you build more value in your business. You cannot sustain your business in an environment, either social or physical, that does not have a future.”

Jeremy adds, “You’ve got to make sure that your mission and values are relevant to a broad range of audiences, and that they understand your endeavours are making a contribution beyond the narrow profit of your business. What is good for you as a business is generally good for others too, whether you are a partner, an employee, or a customer. So you have to be prepared to stand up and explain why your success is good for all of those people.”

If managed correctly, this transparency and openness presents a fantastic opportunity for businesses to get closer to their core markets. Dame Amelia Fawcett, Chair of the Guardian Media Group, says, “Most communications are just not fit for purpose in the Facebook, Twitter, blog and 24/7 news world. News is now being produced by professionals and non-professionals working together – in what we call the mutualisation of news. One correspondent on the Guardian has a following on her blog of 750,000 people; The Guardian has a circulation of 365,000. If you know how to engage with that sort of network it can be very powerful.”

For Sir Stuart, CEOs and non-executive directors should be proactive in explaining how trade and commerce are positive forces for society. “I think it is beholden on business leaders to spend time in educational establishments, especially schools, and explain to children that work is not a bad place and that, unless they are unusual, they are going to spend 30 years or more in work. One of the downsides of the financial crisis is that there is now a feeling in schools that the creation of wealth is a bad thing.

“We’ve got an obligation to explain to the community at large that business growth is good, otherwise we wouldn’t have roads, universities, trains, planes, and all the other infrastructure we need. People need to understand that the Government  is spending the money that business makes. This is hugely important and I’ve been quite vociferous about it.”

Jeremy agrees. “There is no use in doing a lot of good and then not communicating it. Business has got to get itself on the front foot. Leaders have got to start laying out the positive case for business and private enterprise in a much more compelling way.”

Silence and a hands-off approach won’t be tolerated any longer. But every communication needs to be carefully weighed-up and balanced as nobody wants to suffer the merciless consequences of ‘doing a Ratner’ in the digital age.

This Update has been inspired by the content of a new book on leadership by Kevin Murray. The book, which is due to be published in November, is entitled ‘The Language of Leaders.’ You can find out more by clicking here (enter ‘Language of Leaders’ into the search facility). A supporting article is alsoavailable here.

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon

Matthew

www.twitter.com/criticaleyeuk