Saturday, 19 August 2017IMS HomepageHome

Creating a Winning Board

By Professor Coulson-Thomas

The boards of many companies axe jobs, cripple prospects and destroy shareholder wealth. Enron was advised by leading professionals, used fashionable approaches and invested in the latest technologies. Yet it all went wrong. What did the corporation’s directors overlook? What do boards of successful companies do differently?

The leading performance improvement and transformation research programme led by the author has examined why some companies grow while others stagnate. The experience of over 2,000 enterprises reveals that the prime responsibility for wide gaps between potential and achievement, and between intentions and outcomes, lies in the boardroom.

The essence of the difference in approach and behaviour between effective and ineffective boards is given in two books just published: ‘Developing Directors, a handbook for creating an effective boardroom team’ and ‘Winning Companies; Winning People’*. They suggest the corporate governance debate has done little to improve the contribution of many boards.

Corporate performance depends primarily upon what boards actually do and how their members behave. Winning boards are distinguished by the attitudes and conduct of their members. Corporate governance arrangements are often a symptom rather than a cause of board effectiveness.

The board should be the heart and soul of a company, the source of its ambition and drive. Whether or not a company competes and wins, sustains success and remains relevant usually depends upon its board. Without a sense of purpose, a sound strategy and the will to achieve, well endowed corporations wither and die.

Winning boards display the will to win and are driven to succeed. Their actions demonstrate they care. They understand what is happening in the business environment and marketplace. They anticipate events. They confront realities, take a longer-term view and provide strategic leadership.

Directors of winning boards assume personal and collective accountability for their actions. They understand the distinction between direction and management, and their directorial duties and responsibilities.

Winning boards concentrate upon the external, strategic and business development aspects of corporate governance. They strive to benefit shareholders by delivering additional value to customers. They provide and communicate clear direction, a distinctive vision, a compelling purpose, achievable goals and clear objectives.

Winners focus upon the critical success factors for competing and winning. They develop additional income streams, new capabilities and fresh intellectual capital. They invest in director development and the professional selection, appointment and induction of new directors. Their chairmen consciously build effective boards of competent directors.

In comparison, ‘loser’ boards lack will, drive and heart. Their members mouth generalizations and are easily distracted by pleasantries and trivia. They avoid responsibility and blame others for disappointing results. Their perspective is essentially defensive and short-term.

The directors of losing companies are preoccupied with their own status and remuneration. They confuse the roles of director, manager and shareholder. They concentrate upon internal, policing and stewardship aspects of corporate governance, and engage in spin and damage limitation exercises to protect their reputations.

‘Loser’ directors confuse operational and strategic issues, and muddy personal and corporate interests. Many charming individuals who effortlessly assemble portfolios of independent directorships instinctively know when to look the other way and can be relied upon not to rock the boat. Insecure chief executives seek out their services.

Board members of loser companies fail to engage, excite or motivate people. They respond to developments rather than influence events. They focus almost exclusively upon financial measures of performance and the control of costs. They make little effort to review and improve their own effectiveness.

The boards of both winner and loser companies attract articulate and highly paid people. However, they distinguish themselves particularly in their respective approaches to managing change, leading transformation and creating future opportunities.

Winning boards inspire, energise and motivate. They avoid rhetoric, blather and hype and address specific issues. They are determined, pragmatic and positive. They strive for success rather than survival. Instead of rationalizing disappointment they learn from it.

Winners are also proactive. They approach those they would like to do business with. They set out to become business partners rather than commodity suppliers. They are also selective. They focus upon areas that make a difference. They understand that change can disrupt valued relationships, and only change what needs to be changed.

Winners support and enable the achievements of others. They trust reliable people and take calculated risks. They delegate and encourage entrepreneurship. In comparison, losers are self-interested and fear the unknown. They play it safe and avoid commitments.

‘Losers’ mouth platitudes, spread themselves thinly, and bark up the wrong trees. They also react, imitate and copy. They jump on band-waggons and adopt me-too approaches. They duck issues, fall for fads, embrace panaceas and search for single solutions.

Winners think for themselves and reflect before they act. They read the road ahead and assemble what they need to succeed. They adopt simple solutions and differentiate their companies’ approaches, products and services. Th