There is an ancient Greek saying:
“When a fish rots, it rots from the head down.”
This cliché’, while not anatomically valid, is politically valid.
If your corporate Board of Directors is not the corporate role model of institutional culture in action, then why should employees at lower levels behave differently?
We consult with Boards on governance and then we work on team building at mid management levels at the same company. No psychologist would be surprised to find that middle management communications takes on the same characteristics of Board of Director communications. And this mimicry exists even though middle managers have never attended Board meetings. In many cases, they don’t even know the names of Board members.
Psychologists know that emotions within a social system are contagious, just like germs. If emotions are contagious why would communication dysfunction also not be contagious?
Innovation: Everybody Bows When the Word is Spoken, But…..
When it comes to the Board as a corporate role model for innovative thinking, remember our cliche’ about where the body begins to rot. Boris Groysberg and J. Yo-Jud Cheng are with Harvard University Graduate School of Business. They conducted a large sample survey (N=5,000) of Board members around the world to better understand Board attitude towards innovation compared with other governance issues facing corporate directors. (2018)Are Boards of Directors
According to the authors:
We found that concerns about innovation fall behind other issues for most directors. Fewer than one-third (30%) of respondents to our survey see innovation as one of the top three challenges their company faces in achieving its strategic objectives, and just 21% think that technology trends are a major strategic challenge.
Innovation ranks fifth, after more-conventional concerns such as compliance with regulations.
When the researchers examined responses by industry, they found that Directors in the health care, IT and telecom industries were most likely to consider innovation a top strategic challenge.
Only 13% of directors in the energy and utilities industry consider innovation to be a major strategic challenge.
The authors did not conduct research with Directors of nonprofit companies, but our experience suggests that many of these Board members spend more time on compliance and fun raising than innovation.
Leader Peripheral Vision
As vehicle speed increases, driver peripheral vision decreases. Try it yourself!
As the speed of business increases, CEO and Board peripheral vision decrease.
The classic business example is Blackberry.
Blackberry was THE #1 mobile device used by corporations for mobile communications. Apple comes out with its IPhone.
The Apple iPhone was nothing more than an Apple iPod with mobile phone features.
It didn’t even have a decent keyboard!
The IPod is no threat to Blackberry dominance in the business market
By the time Blackberry figured out that Apple was a threat, it was too late.
Is your company going to be the Blackberry of its generation?
If you believe that competitive threats/opportunities at the periphery of visual tend to revolve around technology, then the authors’ findings are pessimistic. Technology includes 5G, Artificial Intelligence, Internet of Things, Robotics, and 3d printing:
“We asked directors which three areas of expertise they prioritized when filling their most recent open board seat. Only 13% highlighted tech expertise.
“Boards typically looked for expertise in their firms’ industry (51%), strategy (34%), and financials (30%).”
Those Who Control the Board Agenda Control the Board.
In most situations, the Chair of the Board and the CEO work together to establish the Board of Director agenda for each meeting.
When the role of Chair and CEO are combined, then only one person drives Board agenda-setting.
Given the limited time Boards meet to discuss issues, those who drive the Board agenda control the Board of Directors.
If Innovation is not a regularly scheduled agenda item each year, then why are you surprised that your company is constantly playing “follow the leader?”
As one director noted:
“We spend a lot of time on operational strategy — growth, acquisitions, etc. — [and] not much on risk, people, or innovation.”
Instead of making innovation an occasional event, we recommend that Board agendas have this issue as a one-hour focus of discussion every six months.
Once it is standardized in the agenda by a vote of the Board of Directors, then the CEO knows there is a mandate for the CEO to give it more importance.
Who Is the Board of Director’s Chief Learning Officer?
As the speed of business increases and peripheral vision decreases, the Chief Education Officer of the Board of Directors is the person who helps expand peripheral vision or helps shrink it.
Your Board has no Chief Learning Officer?
Who steps into the power vacuum: the CEO.
We recommend that the Nominating & Governance Committee be clearly designated as having the responsibility for insuring continuous and appropriate Director education.
We recommend that the Committee retain an independent third party to meet with the CEO, the Chair, and the Nominating & Governance Committee once a year to map out issues (competition/technology/people) the Board of Directors needs to be aware of over the next twelve months.
That third party will be responsible for curating “best of breed” information in each area and sending out bite size pieces of information to Directors every thirty days.
This bite-size education program could be articles, book reviews, blogs, TED Talks, Podcasts, conference papers, or news stories.
It is important that this third party be retained by the Nominating & Governance Committee of the Board of Directors. The party should report to the Chair of this Committee. If the independent third party is retained by the CEO, then the educational material is going to be biased towards advancing the CEO’s agenda.
Let’s Get Real.
In an ideal world, Board members would have the free time and the curiosity to hunt down peripheral information for themselves.
In the real world, Board members lack the time to sift through all the information that appears on the Internet and in academic journals. They are busy with their own lives between Board meetings. Finally, they (like most of us) have a bias towards receiving information that supports their world view.
For all the above reasons, an independent Chief Learning Officer accountable to the Nominating & Governance Committee helps Directors have peripheral vision at the speed of business.
CEO as Chief Board of Director Learning Officer?
As discussed earlier, if the Nominating & Governance Committee does not grab hold of its responsibility to insure an educated Board, then there is an information vacuum for the CEO to fill. The Chief Executive Officer now assumes the unofficial title of Chief Learning Officer for the Board of Directors.
Given the Board’s core responsibility to hire and fire CEOs, is there something wrong with this picture?
CEOs are not the “villain” in this piece. Like Directors, their own peripheral vision decays as the speed of business increases. An outside party acting as Chief Learning Officer can also be of great value to the CEO.
Summary and Conclusion:
As the speed of a vehicle increases, driver peripheral vision decreases.
As the speed of business increases, leader peripheral vision decreases.
If your business is moving at increasing speeds, it is time the Board of Directors fired its CEO as the Board of Director’s Chief Learning Officer.
Your CEO will thank you for it.
Cheng, J. & Groysberg, B. (2018) “Innovation Should Be a Top Priority for Boards. So Why Isn’t It?” HARVARD BUSINESS REVIEW.
Source: Pixabay/OpenClipart-Vectors / 27433