Friday, 25 January 2008

The long-term vision - soft thinking or an essential building block?

I was thinking the other day about one of my last Board meetings of 2007. A year or so earlier, we'd agreed a broad-brush picture (aka vision) of what we thought the company should look like in 2020 - which will be long after the current leaders have all departed. This 'vision thing' is not uncommon in companies.
Then, at the end of last year, we found ourselves faced with a choice: either a strategy that would probably give an attractive return over the next four or five years, but which compromised the 2020 vision; or a direction that probably wouldn't pay for five or six years, but which potentially would contribute significantly towards that long-term vision.
It was a robust discussion; at the start I felt the majority mood was for the shorter-term option. In the end, though, and thanks to some outstanding chairmanship (that might be another story), the Board reached a unanimous position, sacrificing the short-term so that the 2020 vision remained intact.
To me, though, the real lesson from this was not whether we made the right decision - which I hope we did! - but how essential it was for us to have done that long-term thinking earlier.
If we hadn't done that, then I am almost certain we would have taken the superficially-
attractive shorter option. It's not that the long-term vision is necessarily right, but that, without it, we would have had no reference point to compare the short-term against longer-term decision. We could as easily have reached a conclusion for all the right reasons that the 2020 vision was flawed and have taken the shorter option.
As I said earlier, lots of boards develop long-term visions: I believe that one way to test whether it actually means something is how often you make hard choices, tested against that vision.
What do you think?

Wednesday, 23 January 2008

CSR - Necessary but not sufficient?

Like me, you've probably read a lot about how companies that actively practise Corporate Social Responsibility (CSR) generate greater returns for their shareholders than those that don't. It's very fashionable, but a recent article in Harvard Business Review challenges this comfortable PC view.


According to HBR, there's only a weak link between CSR and increased shareholder value. However, there does seem to be real evidence that the absence of CSR practices can increase risk - a string of corporate misdeeds has shown us all how damaging that can be to the share price, which may recover, and to directors' reputations, which sometimes can't. One of HBR's conclusions is that it may pay "to do good, but not too good": in only 2% of the companies actively dedicating resources to CSR did it actually cost shareholders value. So, for the cynic, perhaps you can think of CSR as another - inexpensive - insurance policy: if we do good things, and consciously don't do bad things, then we're less exposed to the downside. Think of it as a corporate variation on that old definition of conscience, "a mother-in-law who never goes home."


One interesting conclusion I think we can draw from the study is that increased profitability is a poor rationale for CSR. But, as HBR puts it, perhaps doing good is its own reward. And even in the corporate world, is that so wrong?

Monday, 7 January 2008

Welcome to my Better Boards blog!

I'm glad you've visited. I hope to make it worth your while to return from time to time. (You might want to make it easy by adding this page to your Favourites folder.)

This blog is about helping boards work more effectively: I plan
  • to include some of my own thinking,
  • to pose a few questions to make you think, and
  • to provide links to other articles that might help.
I expect the subject matter will be wide-ranging, but everything will be aimed at helping boards, and those of us who sit at the table, to add more value to our organisations. I think there's an opening for a forum like this - although I suspect many more boards than we might assume already work quite effectively: we just never hear about them because boards that do their job seldom attract the limelight. If I'm successful, we'll read about even fewer in the future.

As the old governance paradox has it: When an organisation is working, the CEO's the star; when it all turns pear-shaped, "Welcome a-board!"

I'm also keen to know your thoughts - whether or not you agree with what I say - so please don't be shy about adding your comments.

I look forward to your joining me on this exploration.