Global Board Best Practice

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Andrew Kakabadse. Professor of International Management Development. Cranfield School of Management. Recognise fundamental divisions exist within their top team concerning the future. 20% NHS Top Team. ID: 530754 Download Presentation

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Global Board Best Practice




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Global Board Best Practice

Andrew KakabadseProfessor of International Management DevelopmentCranfield School of Management

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Recognise fundamental divisions exist within their top team concerning the future

20% NHS Top Team

21% NHS Board20% Sweden23% Japan25% Finland30% U.K.31% Austria

32% Germany33% China39% France39% USA40% Spain42% Hong Kong48% Ireland56% Australian Public Service

Strategic Alignment

Visioning – Top Team

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Strategic Alignment

36% France

47% UK

49% Finland

50% Sweden58% Hong Kong61% Germany62% USA

63% Spain66% Australian Public Service67% Austria68% Ireland66% NHS Board70% NHS Top Team77% Japan80% China

Believe there are issues which should be discussed but are too sensitive to be discussed in the top team and are NOT

Dialogue – Top Team

Global Board Best Practice

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Strategic Alignment

Top TeamThe greater the problem, the greater the painThe greater the pain, the greater the insightThe greater the insight, the greater the paralysisOnly one third of Top Teams are ALIGNED

Global Board Best Practice

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Board / Chairman Research

Demographics14surveys;2001; 2003/4; 2005/2006; 2007/2008; 2009/2010; 2010/2011US/UK/Australia/Turkey/Ireland/Germany/Russia/Belgium/ China/France/South Africa/Scottish Public Services/Abu Dhabi/Saudi ArabiaInterviewed NEDs, CEOs, Chairs, Executive DirectorsSpread of responsesIdiosyncraticContext significant

Global Board Best Practice

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Board Dynamics (UK)

UK/Ireland – Executive/Non Executive balanceIncreasing importance of NEDsSelection criteria for NEDs unclearFew penetrating insights (NEDs) – 85% NO shared view on competitive advantage of companyRole of SID opaque/irrelevantSome inhibitionApproach to governance/corporate reputation variesGreater Sarbanes Oxley orientationDEVELOPMENT MINDEDBetter use of searchSize of NED portfolio – great variation

Global Board Best Practice

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Board Dynamics (UK)

LOW TRUST – Executive Board Directors of Chairman/NEDs

Executives

v

NEDs

/NEDs

Global Board Best Practice

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Board Dynamics (USA)

Average Companies (Majority)High inhibitionDefensivenessLimited use of NED/external director capabilitiesAppointed from networkDiscouraged from talking toStaff/ManagementExternal Director portfolio extensiveStrategy/board dynamics driven by CEO / President / ChairmanDismissive of CSRNOT DEVELOPMENT MINDEDLegal culpabilitySarbanes OxleyGone too farMay induce more ‘corruption’

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Russian Directors

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South Africa Directors

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South Africa Directors

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Chinese Board Directors

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Chinese Board Directors

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Scottish Third Sector

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Scottish Third Sector

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Scottish Public Services

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Global Board Best Practice

The Chair

Other Positions

Biggest

Gaps

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Board Dynamics (Australia)

Respect for BOARDNED FUNCTIONALITY HIGHHighest use of search consultantsSelection criteria for NEDs clearestShared view onCompetitive advantageDifferentiationIndividual NED – most balanced portfolioGreatest Board role/contribution/added valueGreater clarity on value of governance/corporate reputationMost development mindedInternational outlookLittle/No attention to CSR

Company

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Board Dynamics (Australia)

Board Performance - shared/cohesive views

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Chairman

Importance of Chairman – Why?Bad Chairman – bad BoardGood Chairman – good BoardEffect onShareholder/market trustStakeholder trustCorporate reputationPhilosophy of corporationRole modelMentor of leadersStrategic understanding/alignmentBoard contribution to enterpriseDefines purpose/contributionGovernance requirementsYet, underpaidResearch shows 6 disciplines

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6 Disciplines

Delineating boundariesChair/CEO/NEDsBoard/ManagementSense MakingStrategic realityTop team alignmentInterrogating ArgumentInfluencing outcomesLiving the ValuesIntegrityTrustEthicsAction not wordsDeveloping the Board

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Discipline 1 – Setting Boundaries

Purpose of BoardCEO mandateDiscretionary choice – CEO/Chair boundaryInternal v external orientation, but strategy drivenVisionCompetitive advantageValueDifferentiationGovernanceDetermine role/contribution of Senior Independent Director (SID)Lead Independent Director (LID)

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Discipline 2 – Sense Making

FRUIT TESTPassionHow do we interpret the world around us?Chemistry (rationalisation + ‘philos’)Diversity of thinkingGlobal view/Local realitiesStrategic responsibilities per projectCanvass realityReview progressEncourage feedbackLimit sense damagingUnderstand dysfunctional dynamics

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Discipline 3 – Interrogating the Argument

Break down the argument - workable components (relevance/alignment/evidence)Position the argumentContinuityCoherenceCompetenceManage expectations (prepare management/prepare the Board)Full and frank discussionRework the argumentRobustness/resilience – key qualitiesTake nothing personallyDialogue not debate (Discipline 4)

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Discipline 4 – Influencing Outcomes

Guide the ConclusionSurface sentimentsWork through divisive emotionsOratory – 5,000 years of philosophical debateSocrates, Aristotle, HabermasTone/framing of conceptsUse of wordsFocus on salient points in debateThink meetings ahead

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Discipline 5 – Living the Values

Integrity and Trust – two most powerful wordsActions not Words (words help) GMs are organisation's barometerPersonal EthicsTeleologyDeontologyLead by exampleAs ChairmanSelf insight (mixed messages)QualitiesOthers see how you live your valuesResponsibilities of the corporationKnow your organisationDiscipline of follow through

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Discipline 6 – Developing the Board

Board assessment and reviewPowerfulChecklists/QuestionnairesInterviewProfiling (Individual and Team)Who does it?Director developmentParticularly SIDs/LIDsRole and contribution of SIDs/LIDsTraining – tailored/contextualised !!Knowing the BusinessKnowing the ManagementDetailed insight of company

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Discipline 6 – Developing the Board

Development of ChairmanCRITICAL but most underdevelopedIdiosyncraticExperience basedBeing NED of same boardDinnersPerformance review from SID/LIDPoor use of SIDs in the UKTransition curve4-15 months transitionUse of SearchGrowing the talent poolGM as NEDs elsewhere

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Being World Class

Board/ChairmanOthers say SoPurpose/contribution/value add of BoardWhat management thinkBalance of boardCompetence v capability debateDetailed insight into companyQuality of board dialogue/discuss the uncomfortable issueClarity of task/role of each NEDSuccession planningParticularly of CEO/ChairmanUse of SIDs/LIDs

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Being World Class continued

Board tenureBoard Director/Chairman DevelopmentAlways contextualisedPersonal Portfolio2 Chairmanships3 or 4 NEDshipGovernancePositive mind setEnhances performanceNeeds thought and attention

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Being World Class continued

CSRMake clearThree views of CSRAnglo American PhilanthropyCommunitarian – Scandinavian/FranceEnvironmental – Germany/FranceBusiness case for CSR + follow throughDetermine forward looking agenda

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A GOOD BOARDISA GOOD CHAIRMANISOUTCOME OF DEVELOPMENT

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Questions for Boards

What is role of Board in strategy?What are roles of Chairman and CEO?How much attention is given to role, contribution and value add of each NED?How does management know they have value add contribution from Board?How does Board know they add value?Do these questions shape and influence Board development?Without soliciting views, is there a shared view on the role, contribution and purpose of your Board as far as the organisation is concerned (not generalities)?

Global Board Best Practice


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