Biting back? When, and how?

In the last few weeks I’ve seen two sad episodes of former employees taking shots at their former boss or their successor. When do you “kick and tell”?

If you want people to know they can trust you, and perhaps to consider offering you a senior role in the future, the simple answer is, “Never”.

The first case that caught my eye was an ex-employee of a multi-national organization, who, in my view, took advantage of his high-profile communications background to celebrate, via his blog, the transfer of a former work colleague out of a very visible management position, into a more internally focused role. His colourful language included references to “this person’s malicious self-service” and “hundreds of venomous emails...” I expect you can fill-in the rest.

I have met the blogger and his target and I understand that they might not get on, professionally or otherwise. But this public e-flogging seems likely to ricochet, as well as damage its target:

• The target (the bloggee?) is tarred by one person’s allegations, which are now stored on hundreds of servers, and there’s no realistic right of reply (call me outdated, but has the idea of “natural justice” totally disappeared?). As a result of this blog, is there any realistic hope that this accusation can ever really be buried? Surely the better approach - if the writer had been genuinely well-intentioned - would have been to raise it with the individual in person, or if that didn’t work, confidentially with the person’s boss, the CEO?

• For the blogger, on the other hand, I’d recommend that any potential employer or client should read his blog post and think carefully of what might happen if they too were to fall out later. As a result, the new employer or client might well ask themselves, “Why take the risk?”

So, no winners from this.

Then, a couple of weeks ago, at the height of Telecom’s troubles with its new mobile network, the company’s former CEO, Theresa Gattung, indulged in the print version of kicking her successor with heavy boots while he was bruised and flat on the canvas.

Of course she will have insights that most of us don’t and probably there will be some truth in her analysis of the issues. But one thing she should have learned in her time as CEO is that it’s easy to offer gratuitous solutions from the touchline; it’s much harder to apply them when you’re on the field (what the Americans call a “Monday-morning quarterback”).

Among her more headline-grabbing comments was rather disingenuous criticism of her successor’s salary, which you could read as either sour grapes or simple envy - neither of which fits well with a former chief of the country’s largest listed company.

I don’t expect Ms Gattung needs to look for another job, since she was well remunerated in New Zealand terms - even if the amount was, as she noted, far less than that of her successor. So perhaps the fallout for her won’t amount to much. Her comments may even help to sell a few more copies of her memoirs. But a Board looking for a chief executive, or for another Board member, would hope that confidentiality and loyalty will endure beyond the term in office.

From a practical governance perspective, what goes on in the Boardroom isn’t usually that sensitive - you could publish much of it without a second thought. However, if you’re concerned that you might be misquoted or taken out of context later, you will inevitably lose the spontaneity and full, open discussion that are so valuable in getting to good decisions.

So, again, if someone shows a tendency to “reveal all”, a Board might be inclined to ask, “Why take the risk?”

Many years ago, an executive headhunter had a sketch on his wall: an outline of the lower half of a wading bird. The caption read, “Remember that the toes you tread on today are attached to the feet, that are joined to the legs, that support the backside you may have to kiss tomorrow.”

Tread softly.

The chairman as 'super-CEO', or something else?

Earlier this month I saw a friend who had just been appointed the independent chairman in a medium sized business. As he went on about what he hoped to achieve, how he had a clear picture of what he wanted to do with the company, and so on, I sensed that he was falling into the classic trap of confusing the role of the chair with that of the chief executive - and perhaps saw it as some type of super-CEO position, or in his words the ‘ultimate decision-maker’.

For those who've never been in the position, this is a common misconception. When you look at the role of chair for the first time, it can be tempting to think that you’ve finally made it. But this can soon change: one of the first things you learn is that it's not your job to run the company. As an independent member of the Board - even as the Chair - you don’t have any executive authority of your own. (Having been in the CEO's position, I also know how frustrating, and potentially undermining, it is to work with a chairman who can't leave the place, or your office, alone!)

I don’t want to disillusion any budding Board chairs, but the reality is that you’re not the boss: under good governance practice, you are ‘first among equals’, with any formal decisions still coming from the full Board; you’re the chair of the Board as long as you have the confidence of your fellow Board members. One of the most useful ways I heard it described, when I was first appointed chair of a small Board, was that you are the chair of the Board... you are NOT chair of the Company.

While the CEO’s job is to run the company, yours is to run the Board so that it can add value and give the CEO the best possible chance to succeed. As an aside, a useful reality check on whether the Board is adding value is to ask at the end of any Board meeting, ‘Is the organization better off now than it was at the beginning of the day?’ If the answer is ‘No’ or even ‘I don’t know’, a valid response might be, ‘So, remind me again why we met today.’

I was thinking how to identify some of the practical attributes that make a successful Board chair, when I came across this short article from Harvard Business, called ‘Leading when you don’t have formal authority’.

The article describes what an effective project manager or independent contractor needs, when he or she doesn’t have authority to give orders or conduct performance reviews of the people they work with, but whose performance will determine their success (and attributes you'll see in almost every effective Board chair):

• Letting your enthusiasm be contagious;
• Demonstrating excellence without wearing your ego on your sleeve;
• Acting more as a coach than a captain.

They're three really valuable pointers, which need to become second nature if you're going to do the job well - and if you plan to stay true to them when times get tough in the boardroom.

As you can see, they're not the type of thing you'll read in a CEO's job description - although they are also not totally removed from some modern management thinking. The more I thought about it, the more I realised the article could have been written for my friend - yes, he now has a copy... and having chaired his first Board meeting, he also understands how true (and timely) it is.

A recipe for New Zealand

Last year, John Williams, one of New Zealand's relatively unsung entrepreneurial heroes wrote a piece for the website nzedge.com setting out ten strategies that would restore New Zealand to the league of wealthy nations, where most of us - I suspect - believe we should be. John used to own Marton-based company PEC (New Zealand) Limited, which developed some revolutionary petrol-pump technology that is now in common use around the world.

From this smart, technology-based platform, which has successfully been taken to global markets, John has produced a list of his 'must-dos' that would see New Zealand transform itself into a genuine knowledge-based, smart economy that we need to become if we are to remain globally competitive.

The list begins, not surprisingly, with a suggestion that New Zealand industry should emulate his success, by 'maximising growth in the sectors where we currently produce world-class products and/or services.'

He includes several strategies for business and commerce, but he also recognises the need for a sound basis in a strong and fair society, recommending (No.4) that the values-based "Kiwi-Can" programme should be extended to all primary and secondary schools.

Whether you agree with the details of this 10-step recipe is, I think, less important than that here at last is someone taking a long-term, strategic look at what New Zealand needs to do. One of the features that I feel has been sadly absent from our national debates over the last decade has been that we have not really talked about what sort of a country we want New Zealand to be. We have argued at length about policies, fairness and tactics; and we've even talked loftily about 'knowledge economies', 'growth waves', 'innovation frameworks' and so on; but without some hard decisions about what we're actually going to do, these will remain simply as cliches.

This debate isn't optional: if we don't at least have the discussion, we'll continue on the current path, where, while enjoying its best trading conditions for decades, New Zealand has barely held its place in the OECD's income rankings. If we have the debate, it's quite valid that we might reach a consensus that we don't want to get back among the rich nations. But I doubt that will be the answer.

What I think we might discover is that dragging ourselves back up the growth curve is in reality the best path to those global standards of health, education and social outcomes that most New Zealanders instinctively want. Unless we're generating the wealth, we can't spread it around. New Zealand's general election is only seven weeks away. Let's challenge ourselves, and the people who aspire to represent us, to take this national debate seriously... to show us their strategies for growing the pie, rather than changing the way we divide the existing one... and to make sure that all sectors of society take part and help to develop a sense of vision and purpose for the next decade.

And, while we're at it, let's not leave it just to the politicians. As leaders in our own sectors, we need to have these discussions around our board tables: how do we build our company to take advantage of the global opportunities (and counter the threats) of the increasingly complex global environment we're in? If we all address these questions, the sum of our answers will go a long way towards providing the answer for New Zealand.

Measuring real success

I realised I'd had enough of the Olympics for another four years when I found myself staring at a semi-final of the women's Handball tournament between, I think, Norway and Georgia. Now come the analysis and post mortems, including the recent discovery that Bronze medallists ('Wow, I got an Olympic medal') are generally happier than those who win Silver ('If only I'd gone just a little harder ...').

New Zealand has had a successful fortnight, with a haul of three Gold, one Silver and five Bronze (that's why we needed that earlier analysis), placing it twenty-fifth in the overall Medal rankings.

We're sure to see commentary around New Zealand's traditional area of strength - medals per head of population. Here we are near the top again this year, with just over 2 medals per million of population, pretty much in line with Australia. On this measure, we're six times as successful as the USA (three million people per medal) or Britain (1.2 million per medal), but we all trail Jamaica, who dazzled on the track with eleven medals in total (six of them Gold), from a population of fewer than three million (remember 'Cool Runnings' - the movie about the Jamaican bob-sleigh team?). If you want more, see this forecasting model produced by Professor Andrew Bernard in the United States and this clever graphical analysis by the New York Times, showing relative performance at each Olympic Games since 1896.

Enough jingoism for one blog post! What I really want to write about is a more meaningful, and sobering, measure of a country's success - New Zealand's ranking in GDP per head of population. Here we have little to be proud of over the last forty years. From being one of the wealthiest countries in the 1960s, we slipped to 22nd out of 30 OECD countries by 2005, sitting between South Korea and Spain, with about 85% of the OECD average Real GDP per head. In 1970, we were up at about 115% of the OECD average.

The good news is that we stopped sliding in the early 1990s. The bad news is that, despite stated political ambitions to return to the top half of the OECD ladder, and enjoying New Zealand's best terms of trade for some decades, we've made no real progress in the last few years.

Looking ahead, I think we face two dark clouds, both related to our remoteness: the growing issue of 'food miles' presents yet another non-tariff barrier to our food exports. Regardless of the science, and the proven fact that total carbon emitted in sending our produce to Europe is less than that of European produce (where stock are generally housed under cover during winter), what really matters is what the supermarket shopper believes. We need to get our message across.

The second point is similar: whether we can remain a destination of choice for the world's tourists, if they get more concerned about the carbon footprint of long distance travel.

As a resource-rich country, we're blessed with some of the world's best conditions for producing protein, we have plenty of fresh water (usually) and a broad range of options for our energy needs. Until recently, we've been sheltered from the adverse trends by high prices for our commodities and a strong and growing global economy. The latter is fading fast, while the former may continue for a few years. But we need to face the reality that one day we won't be the world's cheapest food producer: South America and Eastern Europe are not standing still.

This is a challenge for governance at all levels: for Boards, it's important that we all play our part in thinking how we can genuinely transform our businesses, to get ouselves back onto a faster-growth path. We have the raw materials, we have the brains and the education; we need to commit to investing in a country that wants to grow the pie faster, rather than simply distributing what we have differently.

Next time, I'll look at one person's recipe (non-party political) for restoring New Zealand to the levels of wealth we could enjoy - with all the other benefits that flow in health, welfare and life expectancy.

Welcome a-board - more news on better balanced boards

If you read The Economist, you'll know that it never lacks confidence in its own rightness.

It promotes a liberal, free-market view of the world and, healthily, has little time for the fuzziness of much modern economic policy making. So I think that an article this week, Getting more women on board, is quite significant. As you'd expect, this article is about the improving gender balance on Boards and in top-level management (known these days as 'The C-Suite' - as in 'C' for 'Chief [insert function - Financial, Information, Executive ...] Officer').

The article discusses the slightly disappointing findings of a survey by Catalyst, an NGO that promotes equal opportunity in workplaces, indicating that the rate at which women have reached the top floor offices has 'stalled' in the last few years. Even now, Catalyst estimates that women occupy only one in seven board positions in Fortune 500 companies.

One interesting, and not surprising, finding is that the strongest predictor of how women will progress into the top executive positions in the future is the current proportion of women on their board:

• 'Companies with 30 percent women board directors in 2001 had, on average, 45 percent more women corporate officers by 2006.'

You'd expect this if a company has a culture that creates a work environment providing opportunity for all its people - as seems probable if there is real diversity around its Board table. There is also some evidence that female directors are seen as role models who both inspire and support aspiring female executives.

The Economist takes this a step further, getting close to what I see as the real point - the incentive for shareholders to select leaders from the broadest possible pool of talent, regardless of gender or other demographics (apart, one would hope, from ability).

Several years ago, I was a member of a Board of five directors. Normal succession processes had resulted in my being the only male on the Board. The best part of that experience was that it was three or four months before anybody even noticed this rather unusual circumstance. And that, surely, is the end-game - when surveys such as Catalyst's, and blog posts like this, are redundant, because all of us around the table are seen simply as directors, each appointed because the shareholders considered us to be the best person for the role.

Realistically, I think it'll be a while yet.

Does absolute power corrupt absolutely?

Last week British retailer Marks & Spencer faced attacks from shareholders and members of the financial press, when Chief Executive Sir Stuart Rose was promoted to Executive Chairman.

23% of shareholders abstained or voted against Sir Stuart's re-appointment to the Board because they considered it went against good governance principles to have one person holding both positions, Chief Executive and Chairman.

This is an old debate and I think it's very easy to over-simplify it - right or wrong. The real answer, as always, is much more complex and depends on the substance rather than the form of the appointment.

If we start with what we're trying to achieve - a successful company - we can find case studies that both support and oppose the appointment.

In many large American companies (which Marks & Spencer is not, of course), the roles are combined. This has often been quoted as one of the weaknesses that led to the fall of companies like Enron and Worldcom. I think it's always a risk if one person holds too much power in an organisation, but the American system provides balance by having, usually, one or two other positions in addition to the Chairman and CEO: we usually find a President and Chief Operating Officer and, since Sarbanes-Oxley, the position of Lead Independent Director. So, in practice, this 'standard' American model builds in some real checks and balances on each individual.

What really matters is not so much the Board's structure, but how (and if) Board members fulfil their roles adequately. There's plenty of evidence to show that the difference between effective and ineffective Boards comes down to how Board members act, whether they deal with the tough issues and have the necessary debates, and that this matters far more than details about the Board's structure. If you've got the right behaviours in the boardroom, you can deal with deficiencies in the Board's structure or composition. But not vice versa.

As has been in the case in several of my previous 'posts', it comes down to the substance of the matter, not just the form.

Marks & Spencer will be an interesting case to watch. As an English company, it would not be typical to have the President/COO and the Lead Independent providing balance. However, my guess is that the Deputy Chairman and other Board members will be very conscious of their obligations to perform: perhaps we'll have material for another comment in a couple of years.

I learned about succession from that

They say we learn best from our mistakes ... some people would say that explains why I never stop learning.

I was reminded the other day of one of the biggest boardroom mistakes of my career. If it's any comfort - which it wasn't to me - it was in an area that many boards fail to deal with well, board succession; or in this case choosing a successor for the Board Chair.

I had been Chair of a medium-sized non-profit organisation for about six years and we had agreed it was time for a change, for both the Board and me. First, breaking all my own rules (see my recent post 'How do we fill his boots now he's gone?'), I agreed to lead the succession process. Without realising it at the time, that alone probably restricted our search criteria to people I thought would be good for the role.

After defining the attributes we were after, we developed a list of possible targets. Our preferred choice, from what we knew of the people, was a just-retired highly-successful Chief Executive who we knew had a passion for our sector. Although several of us had met him a few times, none of us could say we really knew him. (Does anybody hear warning bells yet?) I was given the job of phoning him to ask if he'd be interested.

To my mild surprise, he told me this was his first approach to join a Board since his retirement and yes, he was flattered and delighted to be asked. Abbreviating a long story, we felt that we'd 'got our man', so we didn't approach any of the other candidates (I think that's still quite normal, especially with non-profit Boards, because I think there is an understandable reluctance to approach people for voluntary roles, only to say 'sorry' to them later).

Well, he joined, was elected Chair and I left the board. I've never believed in hanging around once you stop being the Chair: it's the governance equivalent of 'Dead Man Walking', when you don't want to be there and you know nobody else wants you around either.

From almost his first meeting, the appointment was a disaster. He started behaving as the 'super-CEO', over-ruling the employed CEO, getting involved in management details and barely including the rest of the Board in most decisions. Get the picture? Much to the Board's credit, they realised very quickly the damage this was causing and he was a very short-term Chair of that Board.

So what did we (or I) learn from all that?

First, there are very good reasons for checking references. We've seen several public examples of what happens when nobody did. Only a few months after these events, someone I knew quite well asked me quietly, but obviously in frustration, why I hadn't checked with him (yes, I know, there's a small thing about Privacy Law as well). He told me - too late of course - that the person in question was a superb CEO, but terrible to work with as a director, because he could never remove his CEO 'hat'. However big the reputation, we need to check whether it is relevant to the role we're considering: it's a big change in approach from being a CEO to joining a Board as a non-executive member (even as Chair), where effective decision-making comes from building consensus, and where we don't manage the business hands-on.

This example showed me that checking those references is vital, even for a voluntary, non-profit position, because the consequence of not doing so can be disastrous.

Secondly, should I have been involved in the process at all, considering it was my successor we were looking for? In an ideal world, I don't think so. Perhaps I was so keen to move on that I allowed (possibly even encouraged) some short cuts in the process. In retrospect, if I hadn't been involved, the rest of the Board might have been more rigorous in interviewing and checking references, rather than letting me influence the appointment too much. In my defence, none of the other Board members showed a lot of enthusiasm for putting in the time that was needed to find someone and make the appointment.

On the scale of how wrong things can go, this was possibly not too bad. But the lessons were clear, and more importantly they taught me that we've developed some good basic principles of how Boards should do things.

These principles have evolved through other people's mistakes: disregard them and people will be learning from yours!

How do we fill his boots now he's gone?

If you live in New Zealand or Australia, and have even a passing interest in rugby, you'll know that Robbie Deans, one of New Zealand's finest coaches (if not the finest - but that debate has filled plenty of other blogs) has said his farewells to the Crusaders, the most successful team in Super Rugby history.

Just in case you've been on a clandestine trip to Mars, suffered radio failure and missed the news while you were away, the ultra-successful coach of the Canterbury-based Crusaders, after missing out on his dream job of coaching the All Blacks up to the 2011 Rugby World Cup (even more blogs), has been lured - 'snapped up' might describe it better - across The Ditch to coach the Wallabies for the next four seasons.

Actually, this week's post has nothing to do with rugby. What caught my eye was a comment last week from Hamish Riach, the Crusaders' CEO, that Deans would have no say in choosing his successor. And the controversy that this has caused.

Surely, goes the argument, Robbie's been so successful that he should have a hand in picking his successor? Well, I agree with Hamish. However great a coach, or a CEO, or a Board Chair has been, you never, ever, want a clone to replace them. The people who will be held accountable for the success of the new appointment need the freedom to make their own choice. Certainly, let them consult the person who's leaving (more often I've seen the departing leader offer their opinion anyway), and let's have, preferably, a couple of people being groomed to take over when the time comes. That's just prudent succession planning.

But, come selection time, all bets and promises are off the table, and the Board's Appointments Committee must have a free hand. Usually the biggest mistake it can make is to try to find someone in the same mould as their predecessor ('...to carry on the legacy...'). This fails for two reasons: the new person will almost inevitably fall short of expectations (and unfair comparisons), and, secondly, the departure of a key person gives the Board an opportunity to look at what type of person we need for the next few years - rather than slavishly continuing what has worked over the last five or eight.

So, Robbie, I don't know what you think of this - if you've had time to think about it at all in your new job. But my instinct is that the Crusaders have already shown what makes them successful, in making yet another good call: brave management decisions are all part of the mix. I won't be in the least surprised to see the Crusaders continue their winning way, whomever they appoint to fill Robbie's boots.

And, living in Wellington as I do, it hurts me to admit it.