By: Ram Charan
Publisher: Jossey Bass
Price: $43.95
Reviewer: Reg Birchfield
Like so much of the growing body of governance literature this book is, in some measure, an outcome of the spate of corporate calamities of recent years. Its focus is not pre-occupation with the resulting regulation and compliance but rather with the means to embrace good governance and by so doing, create competitive advantage.
Stiffer penalties and new regulations may help prevent fraud but they don’t, as the book’s author Ram Charan points out, address the fundamental issue of creating value and improving company’s competitive position.
Charan should know. He is, as America’s FastCompany magazine once described him, “man of mystery” who lives out of “small wheeled black suitcase”. He reputedly travels 365 days of the year advising and teaching some of the world’s largest companies on how to get their leadership, management and governance right. He reportedly “lives nowhere and goes everywhere” to dispense his particular remedies for effective organisational performance.
Directors need to know intimately the rules and regulations that define the governance game but what they must focus on are the behaviours and practices that allow them to deliver good governance because governance is “on the move” and increasingly at the heart of successful and effective competitive performance.
Boards have and are changing rapidly. But they are not, Charan argues, yet fully evolved. “Most boards are in flux and still not living up to their potential of providing truly good governance… they haven’t figured out the ‘how’ of adding value.” Charan has tried to provide the guidance boards need to go from being merely active and in full compliance to making an important contribution to business. His book is, he says, road map for making the transition to the next step in their evolution, becoming competitive advantage for their organisation.
No question the US governance model underpins Charan’s thinking but given the influence of his extensive work in Europe this is globally accessible and applicable text. It is in four parts in which he first explains the transition process, outlines his three building blocks of progressive boards, identifies the contributions that count most and, finally, suggests how to maintain momentum.
There are, according to Charan, three evolutionary stages of boards – ceremonial, liberated and progressive – and he offers self test for boards to evaluate for themselves where they stand.
He argues for the third phase, the progressive board, in which active directors finally gel as team. At this point directors comply meticulously with the letter of the law and also embrace it in spirit. More importantly, they ensure that the “success of company is longer lasting than CEO’s reign, than any market opportunity and than any product cycle” to quote former Intel chair, Andy Groves.
The three building blocks of Charan’s progressive boards that lead to better governance are group dynamics, information architecture and the ability to focus on the “substantive issues” of an organisation. The book takes an in-depth look at the practices and collective behaviours that boards can use to transform themselves and suggests how directors can interact with each other and with management to become “productive force for governance”.
Charan’s description of the contributions that count most in transforming board is compelling. These contributions include the right CEO and succession, CEO compensation – major issue in the US, the right strategy, the leadership gene pool and monitoring health, performance and risk.
As he says: “in practice boards tend to give these areas relatively little of their time and attention, yet these are the real opportunities for board to become true competitive advantage”.
Management faces increasingly complex and intense demands in today’s organisational world. And as Charan sees it, boards have central role to play in helping management meet these challenges, and must exercise it fully. His personal contribution to the process of enhancing board performance and putting it into competitive context and perspective is significant. This book is very accessible summary of his core thinking and best advice. Easy to read and well worth the effort.
