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Corporate Governance: Boardroom questions for challenging conventional wisdom and shaping things to come

By Professor Coulson-Thomas

Too many boardrooms are like chapels of rest, the only signs of life being the ticking of corporate governance checklists. Colin Coulson-Thomas, author of three handbooks for ambitious directors* argues that if boards are to add more value and create a better tomorrow they must challenge conventional thinking and current practices.

Many boards are failing to deliver. They are rubber stamping rather than shaping things to come, picking over the past rather than creating the future. Debates focus upon details and trappings within the rules of an existing game. Assumptions are not challenged. Efforts are not made to create a new game that might deliver more value to customers and shareholders and greater satisfaction to employees.

In a world of benchmarking and preoccupation with prevailing fashions and fads certain behaviours, approaches and practices are assumed. People with similar backgrounds to their peers go with the flow. They look over their shoulders at others and imitate and copy them. They use the same or similar tools, techniques, systems and processes. Not surprisingly they come to similar conclusions as their competitors.

Different suppliers produce very similar offerings aimed at the same and largest customer segment their analyses identify, even though the many smaller segments of the market ignored might collectively constitute an overwhelming majority of people whose requirements could have been better addressed by alternatives. Cosy consensus, inertia and intellectual laziness prevent many companies from providing new and better options. Fundamental questions need to be asked in boardrooms.

A systematic investigation of the differing approaches of successful companies (winners) and their unsuccessful competitors (losers) has assembled sets of questions that directors can use to challenge prevailing assumptions and create new offerings that provide greater choice for consumers and communities. ‘Shaping Things to Come’ is a handbook for bringing more creative thinking into the boardroom*.

The essence of good corporate governance is to achieve an appropriate balance between a number of critical factors, for example performance today and the capability to compete and win in the future. The investigation of how directors actually behave reveals that the practices and unchallenged assumptions of many boards are likely to condemn them to presiding over a losing company.

Striking a different balance, for example between activity and reflection or between action and reaction is often the key to greater boardroom effectiveness and marketplace success. Thus, whereas many losers appear to value activity for its own sake, reflection was much more evident among the members of successful boards. Often losers are so busy that they simply do not have time to think.

The concern of losers to be seen to be active and to be ‘doing things’ is evident in their approach to change. They exhibit an unquestioning and naïve faith in the benefits of change. Very often changes appear to be made for changes sake, for fear that a lack of restructuring or re-organisation might be taken as an indication that they are ‘asleep on the job’.

Winners strive to achieve a balance between change and continuity. They recognize that while some change may be desirable, indeed inevitable, it can also be stressful and disruptive of valued relationships. Continuity is important in areas such as purpose and service. Customers who are unsure of what to expect may become unsettled, and they might take their custom elsewhere.

Looking at the balance different groups strike, for example between change and continuity or complexity and simplicity is also the key to creating new offerings. Winners are alert to trends and developments in the business and market environment. They seek emerging communities, new niche opportunities and changing preferences.

Not everyone has the same interests and requirements, or makes the same trade offs between different factors. Thus many consumers - from members of re-enactment groups to purchasers of classic brands and houses with Georgian features in conservation villages - may favour continuity and might prefer aspects of the past. Others might desire products with fewer features that are easier to understand and use.

Losers are also more pre-occupied with reacting to the competitive moves of others, following fashions and jumping upon bandwagons. In comparison, winners are more likely to be proactive, for example when seeking ways of helping their customers and delivering more value to them. They take the initiative and approach prospects they would like to do business with, and work with them and business partners to explore new possibilities. They are not afraid to venture out in front, explore and discover.

Whereas losers are also pre-occupied with their own agendas and the achievement of corporate objectives, winners are more concerned with achieving a balance between individual and corporate interests. If changes have to be introduced they will strive to ensure they benefit the people concerned as well as help achieve corporate goals. They recognize that relationships which are mutually beneficial to all parties involved are more likely to last.

Directors, particularly independent directors, should question, probe and challenge. Is the right balance being struck in the above and other areas examined? Is there too much focus upon fads while insufficient attention is paid to the fundamentals - the core building blocks of corporate success, the critical success factors for competing and winning? Is the board addressing surface symptoms or the underlying substance?

Losing boards of struggling companies engage in spin to explain and rationalize events where winners would identify and address root causes. A balance has also to be achieved between packaging and assembling the elements that make up the package. Within the mix that makes some directors competent and certain boards effective the willingness to pose critical questions that others overlook or are reluctant to ask can be a crucial ingredient.

To increase the likelihood of becoming a winning company, consciously build an effective board of competent and questioning directors. Avoid the distractions of trappings. Invest in director and board development. Be professional when selecting, appointing and inducting new directors. Go for those likely to shake the cage.

Some individuals add value, others are parasitic or distractions. Aspiring winners should avoid the bloodsucker brigade and devious courtiers. Don’t let your board become a form of outdoor relief for the semi-retired. Select practical and competent contributors. Find candidates who are quiet thinkers and will do what is right.

© Colin Coulson-Thomas, 2007

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