Posts Tagged ‘Leadership’

Culture and Leadership Critical for Future Boards

July 18th, 2013 | By

The rate and complexity of change in the marketplace is greater than ever before—and not showing any signs of slowing. From innovation and disruptive technologies to regulatory activity and stakeholder scrutiny, companies are constantly presented with new risks and challenges. As NACD’s new Chair Reatha Clark King observed, writer William Gibson captured the inflection point most corporate boards find themselves approaching: the future is here, it’s just not evenly distributed. As these changes force global economic shifts, it is necessary for those in the boardroom to understand and prepare for the future structure of directorship now.

This week, NACD held the second in a series of exploratory meetings in Chicago to discuss how the boardroom can define and prepare for the challenges and opportunities expected in the next five to seven years. This meeting series—held in New York City, Chicago, and Los Angeles—will culminate in the kickoff of NACD Directorship 2020 at the 2013 NACD Board Leadership Conference. An effort to provide directors with a clear vision of what their roles will resemble in the future, NACD Directorship 2020 will extend from educational programs and roundtable exchanges to publications, all shaped by feedback from these events.

At the Langham Hotel in Chicago, more than 100 directors attended the afternoon session to discuss two topics: the future state of communications between the board and C-suite and how to select performance metrics that will generate sustainable organizational profit. Sessions were led by NACD President and CEO Ken Daly; Akamai Technologies Lead Director and Audit Committee Chairman Martin Coyne; NACD Chair King; and former Bell and Howell CEO, current NACD Director, and Northwestern University Professor Bill White. During the highly interactive sessions, each table was given a specific set of questions to discuss and provide thoughts among their peers. Takeaways from the event include:

  • Directorship is a part-time job with full time accountability. Inherent in the board/C-suite relationship is an information imbalance. However, with the right culture and board leadership, the board and senior management can easily communicate expectations and necessary information.
  • A CEO’s leadership style can serve as an indicator that the risk of information asymmetry has become too high. Directors establish a level of trust with the CEO and management to allow for board access to other members of the senior team, as well as site visits to see the company’s operations.
  • With an expanding board agenda, process and expectation setting are critical. The board should clearly communicate to management the types and format of information that need to be presented.
  • An empowered lead director or non-executive chair can help mitigate the risk of information imbalance. By facilitating communication channels and work between the independent directors and the CEO, this leadership position can break down some of the road blocks that may develop between the C-suite and directors. The relationship between the CEO and lead director or chair should be transparent.
  • Culture is critical in effective dialogue between the board and senior management. With the right culture, directors can be sure they are aware of the risks that are keeping the CEO up at night.
  • Sharing information via performance metrics, which are focused on what directors need to know, can bridge gaps in information flow. Ultimately, the board has to make winning decisions which are informed by data.
  • Today, directors balance short-term shareholder expectations with generating long-term sustainable profit. The role of the stakeholder, though, is more significant than ever before and expected to grow. In the future, directors will have to be increasingly focused on balancing shareholder return with stakeholder concerns.
  • It may be difficult for the board to address and to communicate with every stakeholder. The board should identify which stakeholders are critical to the strategic plans, and target communications to those groups.
  • Balance also extends to leading versus lagging indicators. The board should first approve the right strategy and set goals accordingly. Leading indicators will drive ensuing performance—but lagging indicators are also necessary to provide the right feedback loop.
  • Innovation is important to the success of any company. How innovation is defined, though, is largely dependent on the company, and should be rooted in the corporate strategy. For some, innovation will manifest in processes, products, or both.

The next NACD Directorship 2020 event will be held Sept. 10 in Los Angeles. Between events, NACD’s blog will feature viewpoints and research from our NACD Directorship 2020 partners—Broadridge, KPMG, Marsh & McLennan Cos., and PwC—that will take a deeper look into the emerging issues and trends that will redefine directorship.

How C-Suite Perspectives Can Strengthen Board Performance

November 27th, 2012 | By

Over the past two decades, I’ve worked with an array of boards in multiple capacities—serving as general counsel, secretary, board advisor and board member.

In my current role as general counsel and head of NACD’s Board Advisory Services, I’ve had the opportunity to counsel and facilitate board evaluations for companies ranging from large family-run businesses to the top of the Fortune 500. Over the years, I’ve concluded: no board evaluation is truly holistic without some form of feedback from senior management.

The management team’s participation in the evaluation process creates a critical 360° view that often brings to light factors that are limiting the board’s ability to operate at peak performance. This approach can naturally raise some very sensitive issues between executives and directors. Yet my belief that anonymous, candid input from the management team is essential to a complete and credible evaluation remains constant.

The insights and information that the c-suite and beyond provide are invaluable. Not only does the input enhance the quality and validity of the evaluation, it typically uncovers information that will directly lead to concrete action steps to improve alignment between the board and senior management.

There are a couple of important dynamics that the evaluation process commonly uncovers:

Talent vs. Engagement

  • In more cases than not, management teams believe they have strong assets on the board. Yet they often find that some very qualified directors are not as engaged as they could be. The company is not fully benefiting from the wisdom and unique experience these talented advisors bring to the table.
  • Often, management sees—and reports to my team—that one or two strong personalities on the board dominate meetings, limiting the opportunity for others to contribute.

Tactics vs. Strategy 

  • Many directors tend to drill down into tactical issues, moving away from the real responsibility of the board to provide strategic direction. The board may not realize how serious the issue is until the management team reveals the extent to which that misplaced focus hinders their ability to get things done.
  • Conversely, boards often find that it’s the management team that spends too much of the meeting focused on operational minutiae, trapping them in “PowerPoint hell.” With limited time for the full board to meet, the agenda should be devoted to the most critical strategic opportunities and risks facing the company. Operational and tactical issues should be reserved for the committees.
  • Interestingly, we’ve often found that the reason for this is that management tends to drive meeting agendas, which naturally results in a focus on operational issues. In most cases, management would welcome collaboration with the board on defining the agenda to ensure the board’s time is devoted to strategic discussion and risk oversight.

We recognize that giving management a voice in a board evaluation process can be extremely sensitive for both the board and management.  To facilitate the most valuable and practicable outcomes from board evaluations, NACD’s approach ensures that feedback is completely anonymous with no risk of attribution. Our approach of weaving the results into strategic education lowers defensive barriers, enabling the “ah-ha moments” that focus the entire process on solutions rather than criticism.

Unless c-suite-boardroom disconnects are brought to light, they can fester and potentially jeopardize the organizational mission. Done right, the management team’s involvement in board evaluation clarifies expectations and fosters a healthier collaborative environment.

My experience has led me to conclude that senior management has a sincere desire to capitalize on the wisdom, leadership and unique business experience of each and every board member. By involving the management team in the evaluation process, boards capitalize on management’s expertise in the same way. Result: the organization’s full intellectual capital is leveraged for the collective benefit.

Future-Proofing: Planning C-Suite Succession

September 4th, 2012 | By

Recently, several companies made headlines after facing dramatic leadership changes. In the current environment, it is critical that directors actively ensure their company has developed a robust executive talent management program. However, according to preliminary data from the 2012-2013 NACD Public Company Governance Survey, more than half of respondents (54.7 percent) classify their company’s CEO succession plans as informal: general discussion, but no formal documentation.

As part of NACD’s effort to share key insights and help boards plan for the future, a session of the upcoming NACD Board Leadership Conference is designed to address this very issue. During the panel discussion, three current directors will share their stories, insights and strategies for future-proofing the C-suite. Slated to speak are:

Kathy J. Higgins Victor, director, Best Buy

Last April, Best Buy experienced a significant executive upheaval when former CEO Brian Dunn resigned amid allegations of misconduct. In May, Founder Richard Schulze also stepped down. The board found themselves in a crisis situation, with two key vacancies to fill in a short period of time.

Higgins Victor, a Best Buy director since 1999, proved to be an invaluable asset to the company. With her extensive experience in executive development, succession planning, and leadership coaching, she served as the nominating committee chair during the transition. During the discussion, Higgins Victor will share the lessons she learned as well as expert insights on effective succession planning.

Michele J. Hooper, director, PPG Industries, UnitedHealth Group, NACD board

Hooper serves on the NACD board of directors and on the boards of PPG Industries, Inc. and UnitedHealth Group. She chairs the audit committee for PPG and the nominating and governance committee for UnitedHealth Group. She previously was a board member of Target Corp., AstraZeneca PLC, DaVita Corp., and Seagram Co. Ltd. She is president and CEO of The Directors’ Council, which specializes in corporate board of director recruitment.

Andrew McKenna, chairman, McDonald’s

McDonald’s faced rapid-fire changes in executive leadership in 2004. Six months after Chairman and CEO James Cantalupo’s sudden death, his successor Charles Bell resigned after being diagnosed with a terminal illness. By the time James Skinner was named CEO in December 2004, the company was well-versed in emergency executive succession.

Current McDonald’s chairman McKenna will discuss how the company worked through this challenging period, safeguarding both corporate reputation and shareholder value. He will provide insights on proactive succession planning and how boards might “future-proof” their companies.

We anticipate a candid and instructive dialogue with Higgins Victor, Hooper and McKenna. Don’t miss out on this CEO succession planning session and the many other invaluable discussions at this year’s NACD Board Leadership Conference, Oct.14-16 at the Gaylord National Resort in National Harbor, MD—just minutes from downtown D.C.