CEO Insight speaks to Professor Andrew Kakabadse, Programme Director of the Board Directors’ Programme at Henley Business School, to explore the increasing importance of boards and board engagement, and how to improve the performance of top executive teams, leadership and corporate governance.
Patricia Cullen: Your international research identifies a range of factors that contribute to effective governance of organisations. I want to ask you specifically about two of these- ‘diversity of perspective’ and ‘shared vision and strategy’. How have each influenced your work and how much prominence is afforded to each as well as other factors within the Board Directors Programme?
Andrew Kakabadse: The first thing about governance and boards that emerged was we didn’t know what boards did. In fact, when we conducted the UK survey of boards, including approximately 1,200 companies, the FTSE 100 and 200, not one board was respected by their management. We concluded that a lot of board work that is concerned with compliance, processes, legalities and ticking boxes, was not only irrelevant, it was near to damaging. What boards need to do is offer far more stewardship, they need to facilitate,as well as control. It’s that critical balance between mentoring and monitoring, and it was interesting to see how few boards did that.
Diversity of thinking is critical; do we have peoplethat think sufficiently differently to handle the problems that the boards and management face. Shared vision is a very delicate issue. When we conducted the survey even in the States we found that over 80% of board directors did not know their firms’ competitive advantage. If they don’t know the competitive advantage of the firm, how can you trust the decisions board directors make? These two concepts emerged as so important. It indicated that the board had not given some thought to how they add value. Most board directors treated the board as a committee, ticking boxes etc., so there is work to be done.
PC: Your research is international in its scope. Geographical, political and cultural differences provide distinct challenges. How best do Boards respond and adapt to these and other challenges, what are the clear messages around the role of human engagement and can you provide an example of where this has been effectively demonstrated to overcome challenges?
AK: Political, religious or locational differences emerged as not that important. What was important was the competitive advantage of the company and how you could make the product/service work in America versus Asia. Cultural differences really only showed their head when the board and management team were not engaging with the shareholders, employees or management. Local, cultural differences were used as a block. For example, a company in the drinks business in Europe, owned by the Americans, rejected the gender diversity training from the United States. The Europeans were not interested. The Americans didn’t like the macho attitude of the men. In reality, in the European company there were more women appointed in managerial roles than men.
The women were highly respected. The local management played up a macho stereotype because they wanted the Americans off their back. And they achieved it. Honda is an alternative example. They didn’t want to be Japanese, they wanted to be a global car company. In the American plants, the Americans were trying to be more Japanese than the Japanese and vice versa. They almost went overboard trying to create a unique culture that allowed them to compete. That’s the message – take no notice of national cultures. Create a culture globally that helps this organisation compete on anyof the dimensions you pursue.
“The Programme encourages the senior executives to realise a shared vision when they are being pulled in different directions.”
PC: How important are ethical considerations where an organisations sustainable value and resilience is concerned and how do these considerations feed into the Board Directors Programme?
AK: Ethical considerations are probably as vital as considerations of competitive advantage. The problem is the reality does not feed into many boardrooms.From our research, about 80% of companies, who operate outside their governance regime, bribe as a matter of course. It’s now a professional skill. Take the Economist Corruption Indexand look at the top ten corrupt countries and the companies that operate there. Look at their sales figures. Sales tend to be going up every year. Ethics are absolutely vital, but many boards don’t want to, or don’t know how to handle ethical challenges. So rather than the ethics being actioned by the board or the senior management team, the group that actually actions the ethics is the general management, two levels below the board. The Board Directors Programme gives this attention, as reputation is as important as product. We look at ethics from both a moral and practical point of view, and that’s a boards responsibility.
PC: How important is the visioning process in terms of finding solutions to dilemmas and how does the Board Directors Programme develop the concept and importance of strategic alignment in the boardroom?
AK: Shared visioning is not easy to realise because different members of the board, will have different perspectives. For example, theGlobal Manufacturing Director’sbiggest concern is quality and cost. The Global Marketing Directoris focused on the penetration of new and existing markets. And the General Manager, the European Director, wants to compete across Europe and perhaps is less concerned with how to compete in the States or Asia.
Each one of those individuals with will have a different view on competitive advantage with a different vision of how it should be implemented. What we are finding on boards and top teams is over 34% of the world’s top teams are permanently divided on vision and strategy, so the organisation can never realise full value. However, once you have fundamental respect in the boardroom it is possible to work with the other directors and see what each will give up in order to reach a shared vision. It’s not easy to blend selling in Europe versus the US.
Different tastes, different pricing structures exist, but the supply chain must produce the same materials consistently. If the board and the directors cannot think corporately, then you will have internal tensions. The Programmeenables senior executives to take steps to realise a shared vision when they are being pulled in different directions. Loyalty needs to be to the corporate centre, not each director’s business, and that’s the challenge. It’s not about getting a shared vision, it’s getting the shared commitment to work together to make the shared vision work. This is central to the Programmeand there is a whole module focused on it.
“Ethics are absolutely vital, but many boards don’t want to, or don’t know how to handle these ethical challenges.”
PC: You’ve spoken about the ‘Five Q’s’; the attributes required of successful leaders. How does the Board Directors Programme nurture and develop these qualities in course participants?
AK: The Five Q’s is core reading and its message runs right the way through the Programme. When new learning comes up we refer back to the Five Q’s. The Five Q’s are fundamentally the way individuals engage with different perspectives within the board. How you negotiate, how to reach a balance on the board concerning investments, divestments and other strategic issues requires sensitively applied political skills. On the Programme when engaging in risk and reputational type exercises, the final question will be’ ‘How did you convince the board?’ and that question refers you back to the Five Q’s.
PC: Finally, the Board Directors Programme is international in terms of the breadth and calibre of speakers and contributors. How important is this?
AK: It’s vital. There are two Board Directors’ Programmes. There is the Introduction to Boards Programme.I and two colleagues have further created the first Master’s Degreein the world for practising board directors. We will be attracting people from all over the world. We have a very good relationship with Romania. We are talking to two or three other countries and will be making an offering to the City of London. We are working very hard with colleagues in Brussels. We need Ministers and Chairman, CEOs and thought leaders to present on the programme and we treat them the same as faculty. That is what will make the Programme work.
Ten years ago, boards and governance were more of a luxury. Now they are an absolute necessity. In mature markets what’s the difference between one car and any other car in the minds of many consumers? Brand and price more than anything else. If it’s not product that is a critical distinguishing feature, then what is? Its reputation and trust, which determines service, and these are very specific board issues. If as a board you do not pursue good governance, ultimately the business could go bankrupt. It’s the soft issues, not the hard ones that are the differentiators, and these issues rest with the board.
For more information: https://www.henley.ac.uk/