Norman Broadbent: Build a Better Board, Together – Sue O’Brien
Change has to come from the top and, in uncertain times, consulting for effective leadership becomes vital. Sue O'Brien, CEO of Norman Broadbent, one of the market leaders in global executive search, and Helen Pitcher, chairman of IDDAS, the well-respected board-level coaching and advisory services company, explain how a combined approach to hiring and mentoring has become the most successful model.
Diversity of thinking on boards has become an increasingly significant part of every company's agenda, irrespective of gender or cultural background. However, a lack of confidence in economic growth continues to dampen risk-appetite, and so the need for external strategic resources to assist in board-level hires is greater than ever.
'Convincing leadership experience' was top of the list of requirements for chairmen in the Walker Review of Corporate Governance in the UK Banking Industry. Clients frequently insist that they "need someone charismatic - someone who can inspire others and has a real vision for the future". This is equally applicable for both chairmen and CEOs. However, charismatic leaders are not always the answer.
"Organisations are facing an interesting challenge," says Sue O'Brien, CEO of Norman Broadbent. "Having a charismatic leader to take you forward as a business, driving growth and profitability, is fine, but corporates do need a board with the right balance of knowledge, skills and attitudes. That is where a close and collaborative partnership with external resources adds value. At Norman Broadbent, we work closely with organisations such as IDDAS or Human Asset Development International Limited (HADIL), depending on the client's needs."
Charismatic to a fault
Dr Mike Rugg-Gunn, a chartered occupational psychologist with HADIL, stated in a recent paper that "any study of charismatic leadership is inextricably linked with the psychological concept of narcissism. On the bright side, productive narcissists enjoy a great vision, paint in 'broad brush-strokes', and have expansive thoughts and ideas. On the dark side, however, they tend not to listen too well. Most likely they will be keen to give the illusion of listening while preparing their next verbal intervention."
In times of economic downturn, the positives of charismatic leadership can outweigh any of the darker issues, and there is a recent and notable trend of CFOs at large organisations making the step up to the top post. O'Brien says that these individuals are usually less flighty and not as self-centred as some CEO stereotypes, demonstrating particularly valuable qualities in an uncertain market.
"Analysis, risk aversion and their steady state are all reasons why CFOs are now a popular choice to fill the CEO role," she says. "Of course, it's important that they are given the right coaching to make sure they don't become that dark side of charismatic leader and build upon the attributes that have got them there in the first place."
IDDAS chairman Helen Pitcher agrees. "Board effectiveness is at the heart of our offering; our role is to develop leaders that will sit within an organisation, challenge it, support it and move it forward," she says. "We work with boards to make sure they are effective and appropriately governed."
While the chairmen of best-practice boards have always played a pivotal role in balancing the board with an assertive CEO, the management of risk and effective decision-making, today those boards are increaingly in the spotlight, with the shifts in the governance and diversity agenda entering 'game-changing territory'.
While chairmen could previously rely on shareholder apathy with regard to corporate governance, there will be no such hiding place on the women's diversity issue, and even shareholders are starting to more actively engage with the support and encouragement of the Stewardship Code.
The challenge a chairman faces in harnessing the benefits of both an engaged CEO and risk-adverse CFO, and an increasingly challenging set of NEDs, should not be underestimated. Good board evaluation ensures a rigorous assessment of corporate governance standards, and can highlight relevant strategic gaps and risk-control issues.
Measuring how fit-for-purpose the board is as a whole, as well as assessing the individual strengths and development needs of each of its members, can exponentially strengthen it, as coaching or mentoring programmes can be developed to suit both sets of criteria. In particular, the focus on the board as a team in its own right, its behaviour, interpersonal dynamics and ability to make effective decisions, has been recognised in the Financial Reporting Council's revised UK Corporate Governance Code - updated in May 2010 - and is writ large in the same institution's guidance on board governance.
The revised UK Corporate Governance Code created a new principle that clearly stated the chairman's responsibility for leading a board and reflected Sir David Walker's belief in the importance of leadership skills. The Walker Review emphasised the importance of the assessment and calibration of boards and senior management. However, a recent study of board dynamics by IDDAS concluded that not only do boards - and chairmen in particular - find recruitment a significant challenge, but few had received mentoring or coaching for their first chairmanship or subsequently, although they would have welcomed it.
This is not to say that boards are unaware that a diversity of skills, experience and perspective would enhance their effectiveness, but when questioned very few believed this can be translated into a traditional diversity agenda. Board evaluation processes were not always felt to be effective, and the importance of a collaborative process is something passionately expounded by Pitcher and O'Brien.
In the climate emerging from Lord Davies' independent review of women on boards, published in February 2011, effective succession planning is becoming a critical issue. Not only will diversity and the percentage of women on the board become drivers of action, the feeder levels of the executive committee will need to be addressed. At present, only 17% of such staff in the FTSE 100 companies are women.
This issue can be seen in the broader context of women's development and emergence from the lower levels of the organisation, where coaching and mentoring can provide a critical unlocking mechanism. While one might argue that men have had it their own way for too long to draw sympathy, the reality is that they will be competing more fiercely for fewer senior executive positions; coaching and mentoring support to help the brightest talent to achieve this level will become a watchword for best-practice development.
A key element of effective leadership is that all leaders are defined by the qualities that their followers attribute to them and, as such, this is much more about a social relationship than a set of particular personality characteristics. This works within the context of an exchange relationship and, Rugg-Gunn writes, may take two forms: socialised charisma, "where the leader is focused on the needs of the followers and invests particular time to both develop and empower others"; and personalised charisma, "where the leader is much more focused on the self and, as such, more self-serving and self-aggrandising in nature".
The value of a coaching or mentoring partnership in both types of leadership cannot be underestimated, while the benefits in terms of understanding that a targeted and bespoke board evaluation process can bring in enhancing and improving a board are immeasurable. Managing this process demands a range of skill sets often not fully represented within a company's boardroom; as such, corporates are increasingly looking beyond their own organisation for partners with the specific specialities required to ensure it runs smoothly.
"It has always been understood that hiring to the board is significant, which is why executive search is used," says O'Brien. "The amount of pressure that boards are now under is enormous, and that's why ethics, a rigorous examination of background and gauging a candidate's ability to withstand pressure once they're appointed are vital aspects of the executive search service. It isn't just about attracting these individuals; they must be right for the position, with the relevant skill set and stamina to deliver the required results."
Pitcher adds: "As we move forward with a strengthened agenda for women's development into senior leadership positions, supporting them will be vital to ensure that the road is not littered with failure. Women have traditionally required high degrees of certainty in their capability to both aspire to and succeed in senior leadership roles. Coaching and mentoring has a proven track record of supporting this transition and seeing women step into significant leadership careers."
Rather than being disheartened by a push towards a greater diversity in the boardroom, companies are looking for consultative partners to rise to the challenges they face. Using two objective businesses - one an expert in search and the other in board evaluation - to act as foils for this process is increasingly seen as good corporate governance. The creation of deliverable strategic succession and development plans for board members and emerging board members of both genders will provide the platform for board governance and effectiveness without the lurching pain of disappointment, failure and damaged reputations.