Tag Archive: boardroom effectiveness

Identify the Enemies of Effectiveness and Think Like an Activist: 5 Insights From a Philadelphia Master Class

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At the National Association of Corporate Directors’ (NACD’s) Master Class program in Philadelphia June 3-4, nearly 50 experienced directors engaged with corporate leaders on the key elements that will shape the boardroom in the coming decade.

NACD’s Master Class takes place over two days and comprises eight modules presented as panels, keynote speeches, and intensive breakout sessions. Modules are highly interactive and are led by veteran directors, leading business executives, and corporate governance experts. Each Master Class is organized around a specific theme.

In Philadelphia, discussions centered on ensuring effective boardroom dynamics and strengthening the board’s role in strategic planning, cybersecurity, and mitigating global risks. Below are five takeaways that emerged in Philadelphia.

  1. Search out the enemies of effectiveness. Vague expectations, absence of process, inadequate delegation of authority, and individual sabotage can individually or collectively compromise board effectiveness. Independent chairs and lead directors should be attentive to poor board dynamics, which often have root causes that can easily be addressed. Boards can also help counter dysfunction by establishing a foundation of shared principles that will guide the board’s decision-making, agenda-setting, discussion management, and self-assessment.
  1. Analyze the causes of gradual deterioration in performance. Management often rationalizes small performance drops by pointing to macro-economic trends or solvable business execution problems. Boards should consider adopting a forward-looking posture in order to understand the long-term impact of disruptors on business performance. They can do this by engaging with management in frequent discussions about the assumptions that undergird the company’s strategy and the “what-if” events that could invalidate those assumptions.
  1. Think like an activist shareholder. Activists usually know the industry and sometimes even the company better than the board does. To avoid being ambushed by well-informed activists, boards should learn from the consultants and investment banks that serve their company, industry, customers, and competitors. They must also challenge management’s conventional wisdom about the firm’s current performance and future direction.
  1. Clearly delineate the roles of the board and management in developing and executing strategy. Boards can offer more value by engaging “early and often” in the strategy development process, by pressure-testing management assumptions, and by selecting the appropriate metrics to assess strategy success or failure. When seeking a more active role, boards must collaborate with management on defining the boundary between directing strategy and managing it. Addressing this tension over where the lines should be drawn is a critical challenge that will demand ongoing attention from the CEO and the lead director.
  1. Anticipate the consequences of global disruptors. In a hyper-connected global marketplace, economic and political shifts in distant corners of the world can instantaneously impact company performance through supply-chain disruptions, foreign-exchange volatility, and regulatory activism. Boards can increase their understanding of emerging cross-border interdependencies and evaluate whether management is sufficiently agile to respond when conditions change.

The Connected Boardroom

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A couple of NACD’s members recently attended the Consumer Electronics Show in Las Vegas and have blogged their reports from the future for the information of the director community. First: Fay Feeney from NACD’s Southern California chapter.

I just got back from my first visit to the Consumer Electronics Show (CES) in Las Vegas. As much as I enjoyed the first look at the gadgets, my attention was on the CEOs who spoke about this $186 billion U.S. consumer electronics industry. When I listen to a CEO, my focus goes to the support, guidance and contributions coming from the board chair and directors.

It was a great experience, with a very special invite from Walt Mossberg and Kara Swisher of AllThingsD to attend the Wall Street Journal Digital @ CES session. As a Twitter user, hearing about their business strategy from the CEO, Dick Costolo, was a treat.

I also attended a CEO/chairman session with Jeffrey Immelt, CEO and chairman, GE; John Chambers, chairman and CEO, Cisco; and Ursula Burns, chairman and CEO, Xerox. They gave me a new appreciation for the challenges of leading a global company headquartered in the U.S. The overall mood was optimistic, yet with concern about the need for infrastructure investments to support the future. They are selling to global markets and made it clear that the U.S. opportunities are 300 million people vs. the projected 7 billion worldwide.

 The CES highlighted some key trends in the developing electronics industry:

1. Disruption and invading rivals’ turf. Tearing down walls between industries and platforms was the focusSteve Ballmer, CEO at Microsoft, started his CES keynote with an example about creating a future version of Windows that runs on both Intel-compatible x86 chips as well as ARM-based processors being developed by Qualcomm, Texas Instruments and NVIDIA.

Then Samsung announced a deal with Comcast and Time Warner Cable to put their programs on Samsung’s TVs and other gadgets. This web-based content allows Samsung to provide the cable companies a way to break out of their geographic territories. This kind of deal liberates content, breaking down artificial barriers.

2. 4G and Smartphones arrive. Fast connections are here which make mobile devices work anywhere. Verizon 4G service will cover 100 markets with more than 175 million people by the end of 2011. Lowell McAdam, Verizon CEO, said that faster broadband will spur innovation and create jobs for those who exploit the networks.

3. Tablets and mobile are here to stay. The Motorola Xoom was one of the most impressive among the 80-plus models of tablets that were at the show. Motorola is reportedly aiming to sell one million Xoom tablets in the first quarter of 2011.

4. Glasses free 3D. These still have a way to go to get past the hype. Lots of 3D TVs and content filled the halls.

5. Motion controls move to the PC and beyond. Microsoft Kinect shipped more than 8 million units in 60 days, proving that Xbox 360 gamers want motion control. That quite possibly makes Kinect the most popular consumer electronics gadget in history.

So what can a boardroom do to keep up with these trends?

I believe the time is now to embrace these trends for your business. The time is right for chairmen to explore how the connected, social movement of customers is impacting their boardroom and business. It is becoming a 2011 imperative for business strategy.

Social networks are changing the world, with a mission to empower people by giving them a broadcast platform. They are constructed to make people more powerful, have more control and be more aware. Social networks have given individuals the ability to express their views to friends and the world.

During the session, Kara Swisher asked Twitter CEO Dick Costolo to give us the company’s vision and goal, in light of their recent growth and investments. Twitter Inc. gained more than 100 million registered members this year and approaches the new year with a fresh investment of $200 million. Now it must prove it can live up to its newly elevated valuation of $3.7 billion.

Costolo said that “40% of all tweets come from mobile devices. This is another way of demonstrating mobile’s increasing importance to the social media company. This is up from around 20% to 25% a year ago.”

When I speak with directors about using Twitter as a source of board information, I still get a nervous laugh. Now that I know Twitter’s business strategy I hope we can have a conversation on how it can be used as an independent listening channel for a brand.

 “We want to instantly connect people everywhere to what’s most important to them,” he said. He expanded on that by saying Twitter is about connecting for a purpose, not just connecting. Some people use Twitter just to keep up with their friends or interests; others use it as their daily source of news.

The new vision falls in line with Twitter’s re-branding as an information network. It isn’t focused on just social connections but rather on connections between “tweeters” and relevant information, whether that information is from a company, a celebrity or a close friend.

My time at CES strengthened my belief that chairmen who are interested in seeing their boardrooms adapt to this new transparent, engaged business environment will be rewarded. I leave you with a question for 2011: How will your board confront this world changing movement?

Fay Feeney, CEO at Risk for Good (www.riskforgood.com), helps corporate board chairmen monitor, leverage and govern the fast moving landscape of social media and the internet. The impact of this movement is changing business strategy. We apply our expertise in risk management to help corporate boards and CEOs survive and thrive in this digital landscape.