Category: Leadership, management & governance

A few days ago, I wrote an article about the need for startup companies to have a good Board of Directors (BoD) from day one. I had a few lines about the notion of “good Board” but too few to my own and my readers’s satisfaction. So i will go a bit further here.

What I pointed last time as a first step was to choose a good Chairperson i.e. someone who will care for the success of the business, someone senior who can manage meetings adequately and someone who has “a strong voice”. Actually the perfect Chairperson is more than that. In any board, in any company or non profit organization, big or small, the Chair (in this article I will use the word “Chair” to designate “Chairperson” for the sake of simplicity) is key as a balancing agent and a catalyst. That’s why the rules of conduct of corporate governance strongly recommend to separate the function of CEO from the one of Chair. This is going against the idea of “PDG – Président Directeur Général” still quite common in France for example.

I recommend that any Chairperson consider this:

Making sure that the Board’s composition is optimal

This is a key point to consider . As I already pointed out in my previous article, a good balance is needed between executive and non executive directors. Balance of skills, competencies and experiences is as important. But it’s not only about cv’s ! Personalites should also be examined. It’s good to have some devil’s advocate in the group, it’s recommended to mix entepreneurial, risk taking, minds with more conservative and careful heads. It’s also great to have people able to see the big picture while others are caring for details. Finally, all should have a strong sense of the ethics linked to their function, especially a clear sense of the company’s interest first. It means that the Chair should have thorough discussions with shareholders about the board “casting”. Promoting a regular turnover of Board members helps keeping a good balance. The Chair should care for it.

Interacting with other Board members outside of the boardroom

It’s a pity to see Boards limited to boardroom interactions. Opinions on future decisions should better be examined in separate one-to-one meetings at the Chair’s initiative. Board members can voice their concerns in a confidential setting. They will also be better prepared for the coming meetings. The Chair should be neutral here as his or her role commands. (S)he should ask relevant questions, listen carefully and probe the Director’s opinion, not impose his or her one. This may seem sometimes hard for some strong personality Chairpeople but it’s indispensable !

Setting the numbers of meetings and the agenda of each meeting with care and thoughtfulness

This may seem a trivial point but in my opinion it’s a major concern. Especially when the CEO is a strong leader, which is what we expect from her or him, (s)he wouls have a tendency to control the Board. A number of Chairpeople let the agenda decided by the CEO letting him or her control the discussion flow. Meetings are always too short to cover all points of an agenda. And long, endless board meetings are ineffective. I’ve seen a lot of agendas in my life and most of time they are overcrowded. Sometimes eight to ten issues to discuss on the same half day or evening ! Or it can be the opposite: two or three general points with no focus. Neither is good. The Board should focus on real Board issues, period ! A Board meeting is not a place to inform about issues, it’s a place to decide about issues. It’s not the same. The Chair should care for that. Decide on the agenda, decide on priorities and make sure that no important point that management wants an agreement on is put at the end when no time is left to discuss it freely and profoundly (this is by the way a well known tactic used by CEO’s to get a point easily approved…)

Managing meetings in the most efficicent way

Again this seemingly trivial consideration shows the difference between a strong and a weak Chair ! The agenda having been set, it must be respected with an equal distibution of time. I’ve attended numerous Board meeetings where timing is non respected leading to some prominent Board members leaving the room before the end of discussions. This is generally due to a lack of focus and never ending talks lost into details. In these situations it seems that no one dare to remind the Chairperson that (s)he is the guardian of time. (S)he is also the guardian of the debate’s quality. The Chair should care for reminding board members that they should be clear and focused. (S)he should split time evenly, inviting silent individuals to express themselves while reminding talkative ones to refrain from talking too much. The Chair should then summarize points of views and lead to decision making preferably through consensus.

Following up on decisions after Board meetings

A good Board meeting always ends with a document called “minutes of meeting” written by he Board’s secretary. Besides notable comments of Board members, it should include a list of decisions and a “to do list” until next meeting. It’s not unusual to see some “homework” given by the Chair to Board members in preparation for next meeting (an issue to investigate, a report to pre-read, some figures to reflect on,…). Actually, i recommend it firmly. This is keeping Directors under pressure and is always reminding them of their responsibilities. Time is scarce and procatrination is frequent. We should always avoid Directors coming to the boardroom poorly prepared or unprepared at all. The Chair should order the Board’s secretary to have a regular recall procedure a few weeks or days before next meeting. But this is not the most important. The Chair should hold regular meetings and talks with the CEO to insure follow up on key strategic decisions (strategy moves, investments, management hiring…). In bigger companies, (s)he should do the same with board’s sub-commitees (audit, compensation,…).

I could write a book on this subject ! There are a number of roles and tasks dedicated to the Chair I didn’t even touch here (inside and outside representation and PR, chairing in times of crisis, realtionship with CEO and executive committee, etc.). Most of the Boards I attended in my life were poorly managed due to lack of adequate chairing. Even with prominent, competent and highly experienced members, a Board without a great Chairperson cannot work greatly !

Be inspired !

The role of a “Board of Directors” (BoD) as a key component of a good corporate governance system is often misunderstood and a number of entrepreneurs think it’s a gimmick for big companies. Corporate governance itself is a vague concept for those who launched a business and are dealing day and night with operational issues. However, entrepreneurs should be more than concerned with the quality of their Board.

The BoD’s responsibilities are numerous. It includes: (1) defining business strategy, (2) naming the management team, (3) controlling execution, (4) deciding on major investments, (5) choosing the best financing structure, (6) checking on strategic KPI’s including financial inidcators. But what is misunderstood is the role that directors play outside board meetings. They can bring a specific expertise, a unique network, a wisdom forged by experience and a sense of responsibility linked to the function itself.

On the other side, entrepreneurs, business launchers are obsessed by a number of very down to earth issues: raising capital money, finding the first customers, getting a team on board, etc. Once the project is on rail, they go from one operational problem to the next, they face stress and tight schedules, they don’t have enough time to care about strategy. If success is coming early, they need to cope with growth. If it’s slow to happen, they need to adapt and reconfigure quite fast. For most of them, thinking of holding boards meetings with people asking strange questions is out of scope ! Well, they’re wrong !

It is when they are overwhelmed by operational problems that entrepreneurs need a good BoD ! The board will oblige them to raise the head above the daily shit. The board will oblige them to think about key elements of a successful strategy. Why did the performance overscored or underscored the business plan ? Why is this “wonderful manager” performing under expectations ? Why is the cash running so fast ? Why, why, why ? A good board will raise issues that entrepreneurs like to hide to themselves. In a determined but benevolent manner.

Now the question is: what is a “good board” ? It’s never easy to find the right answer but I can at least give some advice.

First, choose a good chairperson: someone who will care for your success, someone senior who can manage meetings adequately (not too long, nor to short, with a effective agenda), someone who has “a strong voice”.

Then, enlarge the board to outsiders. We call them “independent directors” because they have no (or negligeable) financial stake in the company and they’re not part of families of the company’s shareholders. So you’re sure they have no conflict of interest and can have a free judgement.

Finally, look at competencies and personalities. Finding board members who can bring an expertise that nobody has in the business yet is great. Having someone with a cool and wise judgement is always good. A personality liking to play devil’s advocate is also bringing value.

One of my Harvard fellow classmate who was quite successful in business creation told me once: “I hate to prepare these boards meetings. I’m pissed off by reports and paper work. But each time I leave the board table, I feel better to have met these great professionals. Without them, i would never have so much success”.

So, my dear readers, if you’re an entrepreneur and you think of making your business a big business, go for a great board from the start. You’re great, right ? So, remember: “First class people hire first class people. Second class people hire third class people” .

Be top class ! Be inspired !

Last Friday, I was reading with interest a quite surprizing Financial Times article about John Stumpf, Wells Fargo CEO, hearings by the US senate banking committee. Wells Fargo (https://www.wellsfargo.com) is a US bank that built its recent reputation on a consumer friendly, no nonsense strategy of nationwide presence in every corner of the United States. “Main street” vs “Wall street”. They’re just doing normal retail banking. Nevertheless, they were caught in a scandal a few weeks ago. Their branch officers, under huge pressure of their Chief Operating Officer, did anything to reach their daily sales quotas and get their regular sales bonuses.

Selling, selling, selling ! So much pressure that they started opening millions of fake accounts for clients who were not even aware of it because they were not even informed. Crooks ! Conservative bankers became crooks ! Terrible ! Again ! More than that, the CEO, now under scrutiny, doesn’t even think of resigning. And he’s not ready to give up is personal bonus !

This reminded me how important corporate governance is in our world. Corporate governance: a much discussed concept. Now a little forgotten. But so important. If you don’t remember, corporate governance is a system made of internal or external regulations or commonly agreed practices aimed at guaranteeing companies and institutions to be managed in a normal way. Normal means in a coherent and honest way, avoiding excessive power of top managers as well as incoherent decisions. The system also aims at protecting minority interests to be spoiled in any way.

Corporate governance is insisting on the role of the Board of Directors (BoD) as governing body. The BoD should not be confused with the Board of Management. Directors’ roles are to decide on the strategy, choose members of top management, give them a clear responsibility and control the execution. They are stimulators, decision makers and watchdogs. The BoD is elected by the shareholders assembly and typically regroups representatives of majority shareholders, minority shareholders and so called “independent directors” (means they are independent of shareholders and management). BoD work is now a professional work, at least in big corporations. I was personally involved in corporate governance thinking as an active founder of the Foundation of Board Directors some years ago.

I will write some other posts about corporate governance in the next future, especially in the case of entrepreneurial companies, but I’d like to draw your attention on the influence of a governance system on your own future. In the case of above mentioned Wells Fargo where management was not controlled adequately, the final victims were middle managers who were fired on ground of mismanagement and mishonesty. Top management was not ! It’s almost always the same. Guys at the top always go at worst with golden parachutes and enough money to pay for good lawyers. Middle managers are collateral victims.

It’s time for you to check the governance system of your company. It’s about strategy and execution. It’s about integrity and values. After all, common sense should guide us in management practice but the fact is that, most people care for their own interest, money and power. Don’t be the victim of some crooks who could be leading tour corporation !

Be inspired !