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Even the best boards can be better

14 May 2018 by Henry Ker

Even the best boards can be better - Read more

Directors should be continually striving to build their knowledge and skills

Photo credit: © Marco Iacobucci EPP / Shutterstock.com

‘Directors sometimes give the impression they are the finished article. They are not. Things change,’ said Peter Swabey, ICSA’s policy and research director.

Speaking at ICSA’s Jersey conference on director induction, as part of his presentation on bringing stakeholder voices into the boardroom, he added: ‘Experts are not always what you think. While they may be authorities on one subject, that does not mean they are on everything’.

We often use sporting analogies as a way of understanding business issues and an example that resonates with Peter’s comments is that of England rugby union head coach, Eddie Jones.

Jones was the winner of World Rugby’s coach of the year award for 2017, after he led England to back-to-back Six Nations championships and 22 wins from 23 matches in two years (although things have gone a little downhill this season).

What I find interesting about Jones is his relentless desire to better himself and improve his own knowledge and skills.

In 2016, Jones went to watch football team Bayern Munich’s then-coach Pep Guardiola run a training session. ‘It was absolutely fascinating. I watched him taking a training session and it made me embarrassed by my coaching … It changed the way I coach,’ he told Sky Sports.

In his quest to improve his own abilities and the team he oversees he has drawn inspiration from coaches and techniques in the likes of hockey, cricket, cycling and judo. ‘I talk to a lot of people. I try to meet people who are smarter than me,’ Jones said.

This is not due to a lack of self-belief – as anyone who has witnessed Jones sparring with journalists will attest – but recognition by the official ‘best rugby coach in the world’ that he can still be better. That publicly-acknowledged level of self-awareness is perhaps not something associated with, or as prevalent among, company directors – maybe when a mistake is made, but less so when the going is good.

“Directors will certainly be talented and experts in their own field, but their authority will not be universal”

You can understand why. Business is competitive and to reach the top level you need a huge amount of ability and drive, and perhaps a little arrogance. Directors will certainly be talented and experts in their own field, but as Peter explained their authority will not be universal.

This might not be an obvious issue. After all, that is why we have a board, with unitary responsibility to challenge management and wide-ranging expertise among the members, so that all knowledge bases are covered.

But when I discussed this recently with an industry expert, they relayed the following anecdote to me. A board member, who was a well-regarded expert on one subject, had confessed to the chair he had not had time to review a board paper in his field of expertise due to personal reasons.

The chair decided to proceed anyway, but despite being able to see himself that the proposition in the paper had serious flaws, none of the other board members raised any issues. When the chair questioned this, the other members bashfully admitted they had not read the paper because they had assumed the ‘expert’ director would and if nothing concerned him then it must be fine.

Where was the collective responsibility to challenge management information there? It was lost amid assumptions of individual delineated expertise, with the board at risk of blindly following the assumed expert. When your role is to contest, this is reckless.

As EY wrote in its 2015 report ‘Board effectiveness: continuing the journey’: ‘[It is] important that NEDs … are able to contribute to board discussions across all areas, and not just within their area of expertise.’

Take one example. As business adopts new technologies and the fundamentals of how companies operate change, it has been argued that many directors do not have the necessary digital skillset. A recent report from Amrop, a global executive search firm, found just 5% of board members in non-tech organisations have digital competencies.

One of the solutions mooted has been to make ‘digital’ directors obligatory on boards. But this falls into the trap of the ‘individual expert’ again; instead boards need a breadth of understanding across their membership.

Although performance in sport is comparatively easy to analyse, there are useful assessment mechanisms in business, such as board evaluations. This is commonplace, with frameworks such as the UK Corporate Governance Code requiring it on an annual basis.

However, it is vital it is not treated as a tick-box exercise but, as the FRC’s guidance on board effectiveness states, a ‘powerful and valuable feedback mechanism for improving board effectiveness, maximising strengths and highlighting areas for further development.’

That last statement is key. Directors are often the best at what they do – but that does not mean they cannot be better. As with Jones, perhaps a little personal embarrassment is needed now and again.

Henry Ker is editor of Governance and Compliance

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