Architecture becomes important here not only because of the venue, but because the centrepiece of this seminar run by Massey University and sponsored by Sheffield, was ?Governance architectures’. Speakers illustrated the impacts of different types of ownership on both culture and returns in entities ranging from private companies to trusts. They also raised the possibility of boards being supported in variety of circumstances by mezzanine tier of advisory boards.
Architecture is also about facades and in the Heritage and overseas, some corporate veneers were being exposed. Like all such exposures the reality beneath them was sometimes discomforting. Take the facade of image. Here’s some angst on the subject from Bob Tricker, writing in the English Director last year about company’s directors’ standing:
“… study done by the Adam Smith Institute and MORI, published last year, asked young people which professions they most respected. Doctors, teachers and policemen came top, by large margin. The least respected were journalists, MPs and company directors.
“Why should this be? Three reasons spring to mind: ignorance, prejudice and envy. Most people have little appreciation of what directors do; their knowledge is limited to alleged excesses based on investigative journalism. Reports of directors’ ever increasing perks, while the prices of their products rise and their employees lose their jobs, raise doubts about the wealth-creation process.”
Maybe, but people aren’t silly – some corporate excesses about self-serving wealth-creation justify informed scepticism. Directors, like journalists, may have to live with the perception. Unless of course they want to join the image industry where PR has finally triumphed, promoting ?spin’ as thread in TV sitcoms and, in the process, glamorising the unacceptable.
The next facade exposes the reality behind consensus among Kiwi directors that strategic vision is important. It was revealed in research carried out by Nick van der Walt, Massey’s chair of international business, and Coral Ingley, lecturer in management and international business at Massey.
Peeling away the layers in boardroom architecture, they found an alarming disparity between what was said about strategic vision and what was done. Directors provided the information in survey and ranked what was most important to them. First was protecting the assets of the firm (68.4 percent), followed by representing shareholder interests, (63.8 percent) and supporting new ventures (51.3 percent). So far so bad, but the rankings then went on in order to list directors and officers’ responsibilities; evaluating activities of the firm; enhancing performance and finally, providing strategic vision (43.5 percent).
The responses indicated that despite the talk about strategic thinking, the top three priorities related to compliance and stewardship issues. Van der Walt and Ingley wrote:
“Items relating to adding value to the firm in the form of support for new ventures, evaluating the activities of the firm and enhancing performance were all rated as being of an average or relatively low standard by about half the respondents (at 48.4 percent; 52.6 percent and 53 percent respectively). In respect of providing strategic vision, this item was rated average to low by majority (57 percent) of directors. Of the nine items measured in this construct, the ratings for strategic vision placed it near the bottom at seventh on the list.”
What’s the reason for this disparity between the talk and the walk? Van der Walt and Ingley speculate that it might lurk in the perils of personal liability which accompany directorships. They feel it is possible that these deterrents also focus the collective minds of boards on compliance and risk avoidance rather than on strategic thinking.
Sheffield’s Garry Diack, who spoke at the seminar with van der Walt, says boards and companies feel strongly about what they are trying to achieve strategically. They opt for jargon, position themselves with strategic goals and put them all in place and feel satisfied.
But sometimes, the logic between intent and achievement of those goals is lost he says. Part of the problem lies in information flow.
“The information flow boards get is geared to the operation of the business rather than the achievement of the intent. There is sometimes bit of laziness going on because it’s easy to accept the information in the board papers rather than design what you need.”
One result is that boards remain static entities when they could be dynamic says Diack, who also points to another accomplice in the neglect of strategic issues.
“We have lot of compliance professionals on our boards – lots of lawyers and accountants and they tend to look at what’s required, not what’s possible. It puts things back to more risk-management type of approach.”
Diack enjoys challenging directors by simply asking them the basics of their trade.
“I ask boards what is your fundamental role in life? They say ?monitoring and strategic decision making’. I ask ?what skills do you have?’ – and the answer you look for is rigorous debate. The answer you often get is ?don’t rock the boat – get on with it’.”
Paul Smith confesses to being journo – and company director.