CORPORATE GOVERNANCE Refreshing Ideas – Sheffield’s Ian Taylor on his new “old” role

Sitting in the client lounge of Sheffield’s 22nd floor offices in downtown Auckland’s ASB Bank building, Ian Taylor looks more relaxed than usual. Or perhaps that is just my take on his demeanour. He certainly smiles more and seems both philosophical and enthusiastic about his new “old” role. “I am happy to be back consulting,” he says reflectively. “I have lot of additional experience to give back to the business and on which to base my advice to clients.”
Taylor’s ‘three plus two year’ stint as managing director of what is probably New Zealand’s largest home-grown executive recruitment, search, remuneration and organisational performance consultancy ended on June 30. Christien Winter, partner and director at Sheffield since 1995, has stepped up to the plate. She will drive the business leaving Taylor responsible for the consultancy’s national executive search practice, Sheffield Accord. He will also continue to drive Sheffield’s Academy of Corporate Governance, which he established last year.
“Having managed the business [through an admittedly tough period] makes my advice more credible and substantial than it might have been had I not managed complex business like this,” he adds. “It is time to refresh emotionally and physically and I am looking forward to it.”
Taylor has successfully boosted Sheffield’s commitment to the governance market, more than doubling the number of directors the company recruits for boards each year and offering board performance evaluations for many of New Zealand’s largest enterprises. “People now want to talk to us about governance, governance practice, board evaluation and board effectiveness, as well as retaining and developing talent at both senior executive and governance levels,” he says.
The danger in taking Sheffield down the governance track was that the upsurge in interest in compliance and governance issues generally might prove to be yet another organisational fad. Having poured development funds into new services, would the landscape change? “It hasn’t and it won’t,” Taylor says confidently.
“There will be more board accountability in future, not less. Governance is about people and performance. It is about attracting talented people with specific skills onto boards, working with them as team and delivering competitive value in strategy and compliance knowledge, one company against another,” he adds.
Taylor believes the adage that performance is about competition between one management team and another has changed. It is, he says, about governance and management teams working together, one pitched against another. And it is in that market that he believes Sheffield is now well positioned, offering services to both the management and governance levels of the organisation.
The evolution of the role of boards and directors and the rules prescribing their responsibilities is encouraging many individuals to re-think their interest in joining board. It will, says Taylor, become increasingly difficult for organisations to “find people who are willing and able to be directors in more accountable world”. It is, therefore, increasingly important that companies and organisations like the Institute of Directors and consultancies, focus on developing, encouraging and supporting directors because they add “a great deal of value at the strategic level”.
Boards need the right combination of skills and aptitudes that recognise the uniqueness of the businesses they run and the development strategies they need in place at governance level to increase competitive advantage, market share, productivity, growth and profitability. “The boardroom needs to be dynamic place where people are consistently looking at each other and evaluating their skills against the needs of the business,” he adds.
And change will be commonplace in the boardroom of the future, just as it is now in senior management ranks. “The boardroom is place where decisions are made around the appropriateness of the skills needed by the business, rather than place that becomes too complacent.”
On the other hand, directors need expertise and depth of knowledge about the businesses they direct and that, says Taylor, “is garnered over period of time”. Rather than taking very generalist view, directors will increasingly specialise in sectors and industries that can utilise their special skills and knowledge.
He also predicts directors will become more thoughtful and reflective, particularly about where their organisations are headed. They will, as consequence of the need to be more thoughtful and spend more time working on the business outside the boardroom, take on fewer directorships. And that, in turn, means they will be paid more for their services.
“As the pool of directors in New Zealand shrinks and businesses become more international, boards will look to hiring from overseas, Australia and beyond, to complement the expertise the New Zealand board members bring to the table,” he suggests. “Compensation for directors is becoming critical issue. And, as with managers, director remuneration must be tied more to the performance of the business.”
Rewards at both management and board level must, according to Taylor, be transparent. “Our Executive Salary Surveys show insufficient balance between short, medium and long term rewards,” he says. “But in terms of directors it is little more complex because they don’t tend to serve for as long as say, managing director. That is, however, beginning to change. But as group, the board’s compensation needs to be tied to the ongoing performance of the business.”
Taylor also wants to study the nature of effective working relationships between chairmen and CEOs. “We need to understand how they work well together, how they implement strategies, iron out differences and establish platforms for mutual understanding of what the strategies are, how they can be developed and implemented through the board, on to management and into the business,” he explains.
“We need to better understand the transitioning of governance to management and on into successful enterprise. Too many boards still exhibit an isolationist attitude by which directors agree things and then, through some process of osmosis or magic, expect management to understand what the board has done and how it should be implemented.”
A good working relationship between chairman and CEO needs transparency, open communication and an understanding of how board and management relate as combined entity with the rest of the business. “It is fascinating area,” Taylor says enthusiastically. “But we are in our infancy in understanding the dynamics of working at board and management level and how the efforts of both are complemented to the benefit of the business overall. There is huge amount to be done and I’m keen to have Sheffield play part in that,” he says with smile.

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