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Non-Executive Directors – ‘Guinea Pigs’ or highly trained professionals?

February 17, 2016

Guine Pig Director

Over 130 years ago, in the 1870s, company directors were not very highly regarded. In 1871 Temple Bar magazine refers to them as “Guinea pigs” – “the pleasant name for those gentlemen of more rank than means who have a guinea and a copious lunch when they attend board meetings”

This derogatory term for a board member persisted. In 1895 A J Wilson said “A man who lives by getting himself placed upon the Boards of a number of companies whose business he can have neither the time nor the qualifications to assist in directing, is a ‘guinea pig’.”

They even coined the verb ‘guinea-pigging’ to describe the practice of acting as director of a company for the sake of the guinea fees. It was said that a large number of the ‘bubble’ company boards of the 1928 boom were packed with ‘guinea-pig’ directors.

Fast forward to today – it is 22 years since the publication of the Cadbury report which established our current thinking regarding Corporate Governance and in that period we have made great strides in improving the way the boards of our listed companies are run in the UK.

The UK Corporate Governance Code, even though it only applies to listed companies, has been adopted by the boards of many large un-listed companies and is seen as a best practice guide to running a limited company.

One of the key principles of the Code is the importance of having Non-Executive board members and we have seen the rise in portfolio career directors, typically middle-aged men and women who have retired from their corporate careers and have taken up a number of Non-Executive board positions.

So, are these people “Guinea Pigs” or highly trained professionals?

Unfortunately, despite all the advances in Corporate Governance and the associated pre-eminence of the City of London as a global financial centre, the numbers of company directors who regard their role as a profession in its own right are few and far between.

It is 15 years since the Institute of Directors established its Chartered Director qualification and yet there are now just under 1,200 Chartered Directors sitting on boards out of a total of 5.6million directors registered at Companies House in 2014.

My own experience working with boards of all different shapes and sizes in the private, public and voluntary sectors would lead me to believe that the majority of company directors have no, or very little, training to equip themselves with the skills and knowledge necessary to undertake their roles effectively.

In terms of Non-Executive directors, we still seem to have a number of “Guinea pigs” – the titled, current or former politicians and the well-connected who occupy a string of boards without seemingly having the qualifications to do so.

It is a great thing that anyone with £17, an internet connection and 5 minutes to spare can form a limited company and become a company director – ease of creating a business entity is seen as a major competitive advantage when it comes to inward investment.

However, that does mean that we have a large number of company directors who are blissfully unaware of their duties, roles and responsibilities as set out in the 2006 Companies Act.

Being a company director requires much more than simply knowing the law, however. In the case of Non-Executives, the board’s ‘critical friends’, the skills needed are completely different from that of the executive director.

There seems to be a general disinclination for directors to get trained. Is this something to do with not wanting to be seen to not know everything? – or is there an assumption that if you have got so far in your career as to be appointed to a board then there is nothing more to learn?

Or, dare I say it? – is there a gender factor here? Are men less willing to admit that they need to learn what being a company director entails than women?

Certainly there is no shortage of training courses out there, from half day on-site training costing a few hundred pounds through to the 6 month Financial Times Non-Executive Director Diploma at £5,900 and the Institute of Directors Chartered Director MBA-level qualification at £12,500.

So the question is – if you are a company director are you a guinea pig or a highly trained professional?

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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


Directors train to speak like the geeks

June 4, 2013

If you don’t know HTML from CSS, digital opportunities may be missed

Hannah Prevett Sunday Times 2 June 2013

Kathryn ParsonsCode breaker: every business has been affected by technology, says Kathryn Parsons

When a company sees its future as digital, the top brass need to be in the loop. WPP, the global marketing agency, has sent 250 of its senior staff on one-day courses to teach them computer programming skills.

The aim is not for WPP’s chairman to build the company website, but for the board and other executives to gain a better grasp of the impact that ever-evolving technology is having on the organisation.

“We need all our leaders to have an understanding of how technology is changing business,” said Mark Read, who is the director of strategy and also chief executive of WPP Digital. “It’s not just affecting marketing. It’s changing the whole way you interact and deal with customers.”

He explained the thinking behind the one-day course. “We have to distinguish between being able to code and having an understanding of how you code. We want to give our more senior people an understanding of what’s possible, rather than to teach them how to code.”

The course was provided by Decoded, a company set up by Kathryn Parsons, who won the New Generation prize at the 2013 Veuve Clicquot Business Woman awards. She said businesses across all sectors were struggling to get to grips with the digital agenda — even technology companies.

“Every business has been affected by digital,” said Parsons. “It’s not just traditional businesses and boards that come to us. We’ve had tech companies such as Microsoft and Google too. To be amazing at your role, let’s say as a board director or a leader of a business or department, doesn’t require you to be a programmer. But to navigate this sea change and how it’s impacting your business and day-to-day life, you need to be literate and quite skilled at tech, and not be afraid of it.

“You don’t want to be sitting quietly while thinking you don’t understand what everyone is saying to you.”

Lee Chant, managing director of Hays’ IT department, agreed that being digitally savvy at board level can only be a good thing.

“It’s the people who make the business decisions for the organisation who need to know what it means and how it works,” he said. “Are they going to be expected to adapt and change their skill sets completely to become coders? No, I don’t think so.

“But is there going to be a plethora of people beneath the boardroom who may wish to become more involved on the technology side? It’s certainly a possibility,” he said.

Encouraging employees and directors to become more digitally literate helps to create common ground in an organisation, according to Harper Reed, a technology consultant who was chief technology officer for President Barack Obama’s re-election campaign.

“This is all about trust,” he said. “Often there is an inbuilt lack of trust between technical folk and non-technical folk. You have people on both sides who are very smart, but they aren’t able to execute because they can barely communicate. Their vocabularies are different.

“It takes just a little bit of work to give people the vocabulary to be able to have value-adding conversations and increase the trust that will help more innovation to happen.”

It’s important that the work begins now, Reed added. “A lot of companies are waking up from a slumber and realising that a huge part of their organisation is powered by technology, and they don’t have a significant level of technology expertise on their board or in their exec teams.”

One way to approach this gaping hole in knowledge is to educate the chief executive and leadership team. “What this means is CEOs will now be able to understand when they talk to the programmers,” Reed said. “The second way is to hire a person who understands the CEO’s world.” This means hiring a skilled futurologist or technologist to marry the business imperatives with those of the technology department and act as an interpreter between the two.

WPP’s Read said it was important that boards did not feel threatened by technology and were able to seize the opportunities offered by the shift towards a digital economy.

“It’s an opportunity if you take advantage of the transformation and it’s a threat if you don’t, so having a more digitally savvy workforce at all levels is critical,” he said.


How to become a Non-Executive Director Course

February 16, 2012

March 28, 2012 at 9:00 AM – 04:30 PM

UWE Exhibition and Conference Centre
University of the West of England
Frenchay Campus
Coldharbour Lane
Bristol
BS34 8QZl
http://www.executive-transitions.co.uk/courses/non-executive-director/
Following unprecedented interest in the “Becoming a NED” series, Executive Transitions have developed a course in Non-Executive Directorship, which launches on the 18th April at the University of the West of England.
In association with Bristol Business School, the course is the first of its kind in that it blends corporate governance for large and small companies with insights and strategies that inform best practice in the role itself.
Importantly, the course also covers how to build a career as a NED.
Working with partners across law, accounting, education and directorship, Executive Transitions have developed a course that gives the right mix of experience and academic rigour to equip aspiring and serving NEDs to address the market and improve effectiveness within it.
The course is delivered by David Doughty, a Chartered Director and highly experienced NED, Chief Executive, Chair, Entrepreneur and Business Mentor. David has extensive executive and non-executive experience in small and medium enterprises in private and public sectors. He is also a board level consultant to multi-national organisations.
Highlights include:
  •  Leadership and ethics
  •  Finance
  •  NED Careers
  •  NED Perspectives
  •  NED Profiles
  •  Current Market and sectors
  •  Governance Obligations
  •  Function and Voice of the NED
Attendees also have a free place on the NED Careers Event on Thursday 23rd May worth £99.
This event covers a spectrum of career development strategies, and finishes with access to currently vacant NED positions.
The course not only provides robust and diverse information from experienced sources, it gives in-depth information and strategic guidance in career building and capturing opportunity.
The course is a full day and costs £450.
Book before 14th March for an early bird price of £395!
For more information or to book your place, please contact Ed Lobbett edward.lobbett@executive-transitions.co.uk

Portfolio Careers Day

February 16, 2012

February 25, 2012 at 9:30 AM – 4:00 PM

UWE Exhibition and Conference Centre
University of the West of England
Frenchay Campus
Coldharbour Lane
Bristol
BS34 8QZ
This event requires registration: http://www.executive-transitions.co.uk/page/careers-day
Executives Online is delighted to announce its support for the Portfolio Careers Day 2012 at University of the West of England Exhibition & Conference Centre on 25th February 2012.
Through workshops, keynote speakers and exhibitions, this event will highlight strategies and education interventions for the full range of portfolio careers including:
• Non-Executive Directorship
• Part-time Directors
• Investment
• Volunteering
With support from the Chartered Management Institute, Institute of Directors, Institute of Consulting and Bristol Business School as well as regional law and accountancy practices, the event will be packed with high-quality insights into portfolio careers.
Executives Online is a key partner in ensuring that you not only gain a full understanding of all practice areas but inside knowledge about the recruitment market, career development and strategies to secure new roles.
This event is a must for those embarking on a new career and everyone seeking to grow their portfolio career. We hope to see you there!
For more details or to reserve your place,see website
Labels: Coaches, consultants, interim managers, Mentors, Non Executive Directors, trustees
Event Organizer: Tony Stubbs (Regional Director at Executives Online)

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