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“Where is the value you are adding to your business?”

October 1, 2015

Having started and run your own business, how can you walk away from it with a spring in your step, money in your pocket and a clear conscience?

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In this thought provoking seminar, David Doughty will ask the following questions and provide practical insights from a lifetime of starting, growing and exiting his own businesses and advising other owner directors on their exit strategies:

  • Where is the value you are adding to your business and how do you get it out?
  • When is the best time to plan your exit?
  • What do you need to do to make your business exit ready?
  • How much is your business actually worth – with you and without you?

As with many things in life that are put off to the last minute, such as writing a will, taking out a pension, or thinking about retirement, planning your business exit is usually not something that people think about when starting a business.

Find out what you should be doing now to secure both your financial security and the continuation of the business you have put so much time and energy into growing by attending this seminar.

Business Network SW Logo14 October 2015 – Old Down Manor , Bristol 10:00am – 02:00pm

Call 01981 540708 For your invitation

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Working with the board in the 21st century

January 8, 2015

working with the board

Challenges

Boards of organisations of all shapes and sizes in the private, public and voluntary sectors face new challenges due to the way society expects businesses and not-for-profits to behave.

These challenges have been brought about by the corporate excesses of the last century and the dramatic failures of the financial sector, particularly banking, around the world since the 2008 crash.

Whilst demanding a new way of thinking from boards and their directors, the new legislation and corporate governance code also provides new opportunities for coaches, mentors and consultants to work with boards, either on a one-to-one basis or as a team.

Keywords

corporate governance, directors, non-executives, coaches, mentors, consultants

The Challenge for the Board

Corporate Governance in the UK as set by the Corporate Governance Code and the 2006 Companies Act has a very different feel to it in the 21st century than in previous times when it was assumed that a director’s duties started and finished with making sure that shareholders received an adequate return on their investment.

Today, company directors are expected to create and maintain a sustainable business which creates wealth for its stakeholders, employees, customers, suppliers and shareholders and adds value to society at large – in sharp contrast to the ‘unacceptable face of capitalism’, asset-stripping, short-termism which was prevalent in the 80’s and 90’s.

In parallel with this sea-change in company governance we have also seen the rise of a new breed of leadership, reflecting the need to engage and empower employees rather than keep their ‘noses to the grindstone’ or their ‘feet to the fire’.

The Board’s prime purpose is to set and maintain the organisation’s Mission, Vision and Values. Often it is the values, which are seen as ‘soft and fluffy’ by a significant number of Small to Medium-sized Enterprises (SMEs) which cause directors the most difficulty.

Yet, as we have seen recently with Tesco, it is when a business loses sight of its core values (protests against new stores and boycotts by farmer suppliers) there is probably much worse to come.

The Challenge for the Coach

Given these changes in the ways boards are expected to work we can expect similar changes in the support that boards and directors require. For example, it is now commonplace for executives to have a personal coach or coach/mentor and the government backed GrowthAccelerator programme, now re-badged as the ‘Business Growth Service’, has funded a number of business coach interventions for SMEs with high growth potential.

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Boards are also looking for more permanent support in the form of Non-Executive Directors (NEDs). Looking at the skillset required to be an effective NED it is clear that there is a significant overlap with the skillsets of Consultants, Coaches and Mentors. Indeed many people have built successful portfolio careers by performing a number of these roles at the same time (though probably not with the same client).

Diagram 1: The Board support model

Board Support Model

Examining the four roles, it is useful to consider them in pairs, sitting at opposite ends of a spectrum, as shown above. On one axis we have the Coach / Mentor spectrum and on the other the Non-Executive Director / Consultant spectrum. That is not to say that the two axes are mutually exclusive – in any given situation, individuals can perform a number of roles, although one will always be dominant.

NEDs

In the UK unitary board structure, Non-Executive Directors have exactly the same legal duties and responsibilities as the Executive Directors. In a way, this is what gives them the authority to be listened to at Board meetings – they have just as much to lose as the executives if anything goes wrong.

They do, however, perform completely different roles to the executives, who are full-time employees with functional responsibility for running the business. Non-Executive Directors are part-time, ‘hands-off’, officers of the company who take a longer term-strategic view. The NED role is best summed up by the two words ‘critical friend’, and it is striking the right balance between challenge and support that makes a NED effective.

Coaches

In the context of supporting the board, a Coach is a catalyst – someone who will enable the board members, either individually or as a team, to develop and face challenges by self-realisation and awareness.

Mentors

Business Mentors provide guidance from the perspective of having ‘been there, done it and got the T shirt’. The end points of the Coach / Mentor continuum are well understood but there is much debate about where Coaching stops and Mentoring begins. In my experience, at board level, most support is delivered somewhere near the middle of the spectrum – with a mixture of coaching and mentoring as appropriate. This is likely to be delivered to individuals and the board as a whole.

Consultants

The prime difference between being a Non-Executive Director and a Consultant is that a NED has the same legal duties and responsibilities as all the other board members, whereas a Consultant only has a duty of care to deliver a specified programme of work.

There is a commonly held misconception, particularly amongst SMEs, that having a NED on the board is a cheap way of getting consultancy. NEDs should be wary of this and should try to avoid getting sucked in to a ‘hands-on’ role within the business.

There are times in the life of a business or not-for-profit when it is appropriate for everyone, including NEDs, to get stuck in to resolve specific issues – and there is nothing wrong with this, providing it is not a regular occurrence.

I have known cases where, in order to avoid conflicts of interest, NEDs have resigned from the board, undertaken a piece of consultancy work and then re-joined the board when the work was completed. This is a little extreme, but as with the Coach / Mentoring axis, in reality individuals may be asked to provide a mixture of Non-Executive and Consultancy support and the key is to make sure that the nature of the engagement is fully understood by the board with transparent arrangements for remuneration and performance management.

The Challenges of Diversity

Much is being made these days of the need for greater Board Diversity in terms of gender, ethnicity and disability. There is certainly a body of evidence to support the proposition that a more diverse board is more effective when it comes to making strategic decisions, and I fully support the move towards greater board diversity, especially with regard to having more women on board.

However, there is no clear agreement as to how this increase in board participation by women, ethnic minorities and those with a disability should be achieved. Countries such as Norway and Germany have imposed a legally enforceable quota for gender diversity, but even within these countries this move is not generally supported – especially by the ‘women on boards’ pressure groups. The feeling here is that women should be appointed to the board on merit and not as part of some box-ticking arrangement.

It is generally agreed that the make-up of the board should reflect the demographics of the employees, which in turn should be similar to the demographics of the wider community. The problem is that this is likely to take some time to achieve, and until there is a sufficiently large pool of diverse candidates to draw from, something more radical needs to be done to address the problem.

This is where our pool of talented, experienced, Non-Executive Directors, Consultants, Coaches and Mentors can play a significant role. Due to the ‘baby-boomer’ population bulge, there is a significant number of people with relevant commercial experience ideally placed to support boards as they become more diverse.

Unfortunately, it is these people, often white men, who are classed as ‘male, pale and stale’ and find it difficult to secure NED appointments. As the majority of boards are not diverse and the number of candidates with the desired characteristics, in terms of diversity, is low then this inevitably means that people will be appointed to boards without the necessary skills, experience, background or qualifications – thus reducing the effectiveness of boards which is exactly the opposite outcome to the one that is intended.

There is a solution to this problem and that is to use Associate & Alternate Director appointments to introduce new blood to the board without diluting its effectiveness. Combined with suitable support from experienced board members, this approach can achieve the aims of the board diversity agenda in an acceptable timescale.

Developing Associate and Alternate Directorships

An alternate director is someone who reports to a functional executive director and can take that director’s place at the board if the executive is unavailable. It is a way of ensuring that the key business functions are always represented at every board meeting and, by exposing non-board level staff to the workings of the board, it is a way of succession planning for the board.

Similarly, associate director appointments can be used to add new Non-executive Directors to the board in a non-voting capacity, so that they can gain valuable board experience and grow into the role rather than being thrown in at the deep end.

In both cases, formalised arrangements for coaching and mentoring the alternates and associates by the executives and non-executives are put in place with suitable one-to-one ‘buddying’. This arrangement benefits from the significant skills, knowledge, background and experience of the established directors to bring-on the aspirant directors before their first formal board appointment.

I’m a coach – get me in here!

Boards in general and SME boards in particular are reluctant to take professional advice. This may be due to the common perception that the meter is always ticking, racking up exorbitant bills whenever advice is sought form an accountant or lawyer. But it is essential that boards, in all sectors and of all sizes, take appropriate advice. Insolvency practitioners often tell me that if only businesses with financial difficulties had contacted them sooner they might have been able to save them.

This reluctance to seek external advice is particularly difficult for consultants, coaches mentors and those looking for non-executive director appointments. There are a great many boards out there, many of them are dysfunctional, and would benefit greatly from some external support. However, relatively few make effective use of what is available.

One of the key duties of a board is to manage the strategic risks inherent in the business. Effective risk management and assurance provides a framework for the board to determine how it should devote its time, paying particular attention to the areas where it should seek external advice and support.

The 2006 Companies Act

Companies have been around since Elizabethan times, yet it is the 2006 Companies Act, which for the first time, defines exactly what a company director’s duties are. One of the most important of the seven duties is the requirement for all directors to promote the success of the company.

The Act goes on to explain that this means having regard (amongst other matters) to:

  • The likely consequences of any decision in the long term;
  • The interests of the company’s employees;
  • The need to foster the company’s business relationships with suppliers, customers and others;
  • The impact of the company’s operations on the community and the environment; and
  • The desirability of the company maintaining a reputation for high standards of business conduct.

Implications for future coaches and mentors

In pursuit of these objectives, with the goal of creating and maintaining sustainable businesses, boards can make use of the guidance and support provided by Non-Executive Directors, Consultants, Coaches and Mentors.

If you have the skills to work with boards in these roles, then it is vital that you have a thorough understanding of the issues facing boards in the 21st Century which are shaping the way in which businesses of all shapes and sizes in the private, public and voluntary sectors need to be run.

References

The UK Corporate Governance Code 2014

https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

The 2006 Companies Act

http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf

The Business Growth Service

http://www.greatbusiness.gov.uk/businessgrowthservice/

What skills do Non-Executive Directors need?

http://www.nedworks.net/non-executive-director-careers/skills-non-executive-directors-need/

The UK Model of Corporate Governance Institute of Directors

http://www.iod.com/intershoproot/eCS/Store/en/pdfs/policy_publication_The_UK_Model_of_Corporate_Governance.pdf

Is your board dysfunctional? Australian Institute of Directors Volume 11 Issue 11, 12 Jun 2013

http://www.companydirectors.com.au/Director-Resource-Centre/Publications/The-Boardroom-Report/Back-Volumes/Volume-11-2013/Volume-11-Issue-11/Is-your-board-dysfunctional

About the author

David Doughty is a Chartered Director with a Masters in Company Direction from Leeds Business School. He works with boards and their directors in the private, public and voluntary sectors to improve their effectiveness and the performance of the organisations that they lead. David is a registered and approved GrowthAccelerator Coach and a certified EQ Mentor

You can contact David via E: david@doughtymail.com or M: 07876 653 563.

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Published in

The future of coaching and mentoring: evolution, revolution or extinction? Part 1

Journal of the Association for Management Education and Development

Volume 21 ● Number 4 ● Winter 2014


Is your board dysfunctional?

August 22, 2014

Does your board have directors who trust each other, are committed, are comfortable with conflict, hold each other to account and are focused on results?

Corporate GovernanceIf not, your board is likely to have some degree of dysfunctionality and is possibly in need of an intervention.

I have been working with boards of organisations of all sizes in all sectors for a number of years and most of them exhibit some degree of dysfunctionality,

I use a board evaluation and diagnostic tool based on the book by Patrick Lencioni, The Five Dysfunctions of a Team, to discover the level of dysfunctionality within a board.

The foremost dysfunctionality is; Lack of Trust – if there is no trust on the board, directors will:

  • Conceal their weaknesses and mistakes from one another.
  • Hesitate to ask for help or provide constructive feedback.
  • Hesitate to offer help outside their own areas of responsibilities.
  • Jump to conclusions about the intentions and aptitudes of others without attempting to clarify them.
  • Fail to recognise and tap into one another’s skills and experiences.
  • Waste time and energy managing their behaviours for effect.
  • Hold grudges.
  • Focus time and energy on politics, not important issues.
  • Dread meetings and find reasons to avoid spending time together.

The next dysfunctionality is; Fear of Conflict, The symptoms of this dysfunctionality in boards is that they will have boring meetings, create environments where back-channel politics and personal attacks thrive and ignore controversial topics that are critical to board success. They will also fail to tap into all the opinions and perspectives of board members and waste time and energy on posturing and interpersonal risk management.

The third dysfunctionality is where a board Fails to Commit to being a Team – this results in:

  • Ambiguity among the board about direction and priorities.
  • Missed opportunities due to excessive analysis and unnecessary delay.
  • A lack of confidence and fear of failure.
  • Revisiting discussions and decisions again and again.
  • Second-guessing among directors.

Dysfunctional boards are unable to create clarity around their direction and priorities and cannot align directors around common objectives. They move forward with hesitation and are unable to learn from mistakes.

Fourth, a board that Avoids Accountability:

  • Creates resentment among directors who have different standards of performance.
  • Encourages mediocrity.
  • Misses deadlines and key deliverables.
  • Places an undue burden on the Chair as the sole source of discipline.
  • Does not ensure poor performers feel the pressure to improve.
  • Does not identify potential problems quickly by questioning each other’s approaches without hesitation.

Finally, if a board is not Focused on Results, the organisation will stagnate or fail to grow, rarely defeat competitors, lose achievement-oriented employees, be easily distracted and encourage individualistic behaviour where board members focus on their own careers and individual goals.

So what should boards be doing?

Directors who can agree with most of the following are likely to be sitting on more effective boards:

  • Board members are clear on what is expected of them.
  • Board meeting agendas are well planned so that the board is able to get through all necessary board business.
  • Most board members come to meetings prepared.
  • Written reports to the board are received well in advance of meetings.
  • All directors participate in important board discussions.
  • Different points of view are encouraged and discussed.
  • All directors support the decisions reached.
  • The board has a plan for the further development of directors.
  • Board meetings are always interesting and frequently fun.

How many of the above statements are you able to agree with?

If you disagree with a number of them, the likelihood is that you are a member of a dysfunctional board … and If your business has a dysfunctional board, it is also likely to be a dysfunctional business.


Becoming a Non-Executive Director can be a win-win-win situation

May 14, 2014

boardcircle non-executive director

When an SME executive takes a Non-Executive Director position on another SME board, not only does it benefit the individual and the board on which he or she sits as a NED, it also benefits the board on which they are an Executive Director – a true win-win-win situation.

That is the message from Boardcircle – a company dedicated to helping small and medium sized enterprises (SMEs) to benefit from having Non-Executive Directors on their boards.

non-executive directorKatherine Amery, Head of Operations at Boardcircle says that:

“Boardcircle provides a unique opportunity for small and medium sized companies to effectively ‘share’ directors, as non-executives. The non-exec positions are not salaried but aim to serve the professional development needs of directors; at the same time providing an independent director to help companies develop. ‘Sharing’ directors is not a straight swap, so Boardcircle works with companies to find the best fit. Companies join to promote someone as a non-executive and look for one. This encourages business leaders to develop executive skills in other organisations and creates opportunities for companies to experience a non-executive from a pool of talented professionals.”

non-executive directorBoardcircle was conceived by Martin Hawley, who has a passion for value-creating ideas, from his experience working in SMEs. He often found that the talented professionals he worked with at board level were closer to the mark than many professional advisors. Yet they could also be disadvantaged by being overly close and emotionally involved. Looking around the boardroom table Martin realised that his colleagues could add exceptional value to other boards, and in doing so develop their own skills as directors. Maybe some companies could share their directors as non-executives? And if this could be done at low cost it could revolutionise growing businesses, accelerating growth through better and more diverse governance.

This, in a nutshell, is the problem that Boardcircle are solving; SMEs, especially those with high growth potential, are often running with a very lean board that is focused on the day-to-day challenges of growing a business. They do not have time to stand back and take a longer term view, or reflect on what they are learning as they address each new business challenge – and they are more often than not unable to afford to pay for any external advice that they may need.

Boardcircle’s propostion is simple yet very effective – by creating pools of potential SME Non-Executive Directors in each locality they can offer:

  • NED opportunities for SME executives – giving them exposure to other business challenges and development of their skills to enable them to take the ‘helicopter view’ of a business
  • A cost-effective way for SMEs to benefit from having a Non-Executive Director on their board – someone who can be a ‘critical friend’ to the business
  • Development for the SME executive’s own board – bringing back the learning from the NED appointment to make their own boards more effective.

You can register your business for the Boardcircle program on-line at https://www.boardcircle.me/register

For more information about how Boardcircle can help your business contact Katherine Amery or call 020 8144 7205


IoD Young Business Forum (Bath/Bristol) – Thursday 20 March 2014

March 13, 2014
iod logoIoD Young Business Forum (Bath/Bristol)
Thursday 20 March 2014 from 6:00 PM to 8:30 PM
at: Waterhouse, Waterhouse Lane, Monkton Combe, Bath BA2 7JB
YBF
The IoD Young Business Forum (YBF) has been created to reach out to ambitious directors and create a safe place for them to interact, learn and engage with peers and mentors.  The aim of the group is to help develop business leaders and provide them with support and guidance on their business challenges; whilst allowing relationships to be built and developed outside a purely commercial context.
 
Many business owners starting out in business, particularly those who have left behind a corporate career, can find their formative years in business a lonely and challenging experience stripped of the support and resources they may have taken for granted earlier in their careers.
This group aims to reach out to directors of businesses early in their entrepreneurial careers and create a safe place for them to interact, learn and engage with experienced business professionals from both the Institute of Directors (IoD) and other successful and established organisations.
 
The event is open to both members and non-members of the Institute of Directors.  The format of the event starts with open networking followed by a sit-down 2-course dinner; over which to discuss business issues and challenges with peers in a safe, confidential environment, share common experiences, information, and to seek and provide help and guidance.

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The evening will finish with a short talk by David Doughty, on strategies for young businesses to access professional input and strategic advice on business growth & strategy on a limited – or even without! – a budget.  David is Chief Executive of excellencia, the corporate governance experts, providing Board effectiveness and Leadership development services to organisations in the private, public and voluntary sectors.  He has extensive executive and non-executive experience in small and medium enterprises in both the private and public sectors and is also a consultant at Board level to multi-national organisations.
 
The Institute of Directors mentoring team will be on-hand to introduce the mentoring service and match potential interested parties with mentors. 
To book your place, please register here.

For further information please contact Roger Plahay on: 07771 772222 or roger.plahay@sandler.com


MPs lambast ‘incoherent’ support for small firms

February 4, 2014

MPs criticised the management of the Treasury and Bank of England’s Funding for Lending scheme

A man walks past the Bank of England in the City of London
Philip Aldrick The Times
Last updated at 12:01AM, January 21 2014

Small businesses are being held back by the Government’s failure to manage properly the financial support that it offers the sector.

According to a leading committee of MPs, “ad hoc” oversight of state-backed loans and a lack of specific goals are holding back efforts to improve the supply of credit to the cash-starved sector and wasting taxpayer money.

The Public Accounts Committee has urged the Government to give the new “business bank” powers “to start managing the various schemes as a coherent programme”.

The committee said: “The Government spends a considerable amount of taxpayer-funded money promoting better access to finance for SMEs, but the departments could not demonstrate that their schemes have successfully addressed the market failures they were designed to correct.

“Far from encouraging more lending to SMEs, investment has declined.”

The Government has made helping small companies, which employ half of Britain’s 30 million-strong workforce, an economic priority. Since 2011, the Department for Business, Innovation and Skills (BIS) has been running six schemes providing £2.85 billion of loan support.

The Treasury and Bank of England’s Funding for Lending scheme, established in August 2012, has handed banks and building societies a further £17.6 billion of cheap credit to pass on to small companies and households.

In addition, the department has launched the British Business Bank, with £1 billion of capital at its disposal. The efforts were supposed to stop banks pulling credit out of the sector.

However, Bank of England data shows that lending has shrunk by £16.8 billion since May 2011, when figures were first collected. The stock of loans in November was £167 billion, with banks withdrawing credit most months of last year.

In damning comments about the schemes’ management, the committee said that BIS and the Treasury “have not done enough to raise SMEs’ awareness of the financing options available”.

It added in its report, Improving Access to Finance for SMEs: “The departments have no common understanding about which parts of the sector generate the most growth, and where government support would therefore be most beneficial.”

The MPs urged the Government to hand oversight to the British Business Bank, which “is designed to better identify and fill gaps in the market for financing SMEs”. The Business Bank has financed £1.3 billion of loans and investments so far and will be spun out of BIS once its clears European Union state aid rules, expected later this year.

The committee’s report also demanded that the Government set clearer goals, reserving particular criticism for Funding for Lending. The Bank has committed to start publishing a breakdown of usage data by sector after the end of the month, when the scheme will become focused on the small business sector.

A Government spokesman said: “The PAC’s assessment does not reflect the reality, which is that credit conditions for SMEs are improving. But we want to do more, which is why the British Business Bank will be fully operational later this year.”


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