While the review process may not necessarily be comfortable, Robert Gordon GAICD believes it should always leave the directors feeling reinvigorated, more purposeful, more committed and more capable.
'A good review will be one that re-energises the people around the table,' says Gordon, founder and director of Programs at Board Accord. 'That’s why it’s crucial to get buy-in from all participants, for the process
itself and for following up on recommendations'
- AICD Company Director Magazine Oct 2013
Gordon sees the value in what he describes as a yearly professional health check. "Boardroom breakdowns don't happen overnight," he says.
"Yale's Jeff Sonnenfeld says that healthy boards exemplify a virtuous cycle of respect, trust and candour which, when it goes awry, can turn into a vicious cycle where all three are lost.
Early intervention can prevent the downward spiral and, done routinely, an externally led annual review can provide the invaluable ‘stitch in time’.
Technology is adding a new sense of urgency to the evolution of board evaluation. "Digital disruption is going to have as much impact on boards as the companies they oversee", Gordon continues.
“The current governance model was largely formatted after the industrial Revolution so its hardly surprising that it's outdated and totally our of synch with the Information Age.
Many CEOs are already aware of this and, if boards are going to stay ahead of
the curve, its vital that they start thinking about how that model might develop over the next decade.
A good evaluation needs to disrupt the board's thinking and empower it to govern the coming disruption"
AICD Company Director Monthly –
‘Appraising Board Form’ - September 2015
Over the last six months, Robert Gordon, director of programs at Board Accord, has seen a change in the Australian boardroom.
"There's definitely a growing appreciation of the need to take climate change into account and sign off on genuine, rather than perfunctory policies and practices, in relation to this", he says.
"However, there is also a growing imperative for boards to understand and capitalise on the tsunami of disruptive technologies and innovations that are on the horizon in response to climate change.
I think that this has yet to take its rightful position centre stage - but hopefully, the recent Federal Government innovation push will be a carbon reduction game changer."
AICD Company Director - March 2016
"A Two Degree World"
Surely all directors, public officers and financial advisors have a fiduciary duty to perform as if their own assets were on the line", says Robert Gordon, GAICD, CEO of Board Accord. "It's true that research on the growth and success of private equity over the last decade has confirmed that having skin in the game brings better performance and outcomes, but this is because, for many organisations, dollar return on investment is the sole raison d'être".
"Commercial return at the expense of people and planet is increasingly being challenged, " says Gordon. "The current iteration of Capitalism requires the inclusion of other metrics to ensure not only sustainable success for the organisation but the sustainability of the capitalist system itself.
There are numerous examples of the necessity of this re-evaluation, including the recent failure of BHP and its partners in Brazil to compute the risk of the tailings dam disaster. Ironically this cost-cutting failure of judgement, risk strategy and operations, will cost BHP and its partners billions of dollars."
He advocates a more sophisticated view of skin in the game - a model which embraces all stakeholders. "The directors and executives charged to manage the organisation in the current climate of volatility, uncertainty, complexity and ambiguity (VUCA) need top rely more on consciousness than compliance - and this is not only significant from a moral and ethical point of view," he continues.
"As BHP has discovered it is also in the long-term commercial and sustainable governance framework to maximise returns to all stakeholders"
AICD Company Director - May 2016
"Skin in the Game" -
Does holding equity in a company help align directors with its shareholders? Or does it undermine the true value of independence?
Gordon recommends a balance of qualitative and quantitative parameters, online assessment metrics and personal interviews. “The diagnostic tools should be forensic, concise and user-friendly,” he says. “Leaders don’t want to be bogged down in analysis paralysis”.
He also believes the Chair, CEO and anyone else who actively participates in the board meetings should be included in the review.
“The evaluation requires buy-in from all who are involved but most importantly, it needs the leadership team to set an example by embracing the process, confronting the outcomes and implementing the recommendations’, he says.
Gordon suggests that the cultural dynamic of the boardroom and C Suite is challenging, often poorly understood and a major causative factor in unaligned or dysfunctional boards. We’re seeing increasing recognition of the importance of Emotional Intelligence (EQ), psychological and behavioural typologies’, he says.
In response to this, Board Accord has incorporated a Sociometric Network Analysis into our metrics to profile interpersonal dynamics around the table and inform one-on-one coaching to realign directors and management.
Another common concern is that there is not enough follow-up to reviews. “This is where most board evaluations fall down”, says Gordon. “The follow-up is just as important at the evaluation, but too often the board either sees the evaluation process as a box-ticking exercise or considers itself to be too busy to engage seriously with the recommendations. We only work with boards that commit to engaging with the recommendations”
The intention is to affirm what’s working, identify where the challenges lie and plot and support continuous improvement of personnel and processes,” says Gordon. “A genuine evaluation will challenge individuals, like elite athletes, to reflect seriously on their current performance and how it might improve.”
AICD Director Monthly. Sept 2014 – Putting the Board under the Microscope.