A chief executive’s prime responsibility is to drive the operational side of the organisation based on the strategic direction of the board. This sounds simple, but in practice of course it isn’t necessarily.
The role of the board is to establish the strategic direction of an organisation along with delegating the policies and environmental parameters it expects the organisation to work within. It’s expected the chief executive and management team will then take these directions and run the business successfully. Unfortunately, it is never this simple as there are strong and well-informed boards and management teams as well as weak ones. Also it sometimes happens that there are strong managers working with weak board and vice-versa. Adding to this interesting mix of governance and management relationships is the normal grey area lying between what the roles and responsibilities of these two entities are.
The key to effective board/management development and understanding is the absolute importance of establishing relationship that embraces:
* an understanding of the board’s role and expectations;
* the integrity of the parties;
* quality advice to all parties;
* timeliness of advice;
* clarity of what information should be provided to the board;
* analysis of risk and opportunities for the organisation;
* effective reporting to the board.
In order to deliver on the board’s expectation chief executive and the other senior managers must be able to come to grips with the business. In the ’80s it was fashionable to appoint professional managers rather than people with professional skills related directly to the organisation’s needs. Quite often this thinking would go down to at least second level management to the point that the technical skills on which many businesses were based and relied on, were not being heard at board or senior management level.
It’s not surprising therefore that some organisations failed to deliver or worse still, their prime products or services could not be delivered for key periods of time (eg, electricity) to the detriment of the whole community. Appointment of chief executives or senior managers with technical skills in key areas of an operation is probably the most effective safeguard against an organisation’s failure.
However it’s important that if technical professionals are to proceed through to become senior managers, they must be trained beforehand in the concepts of management. This is too often left to chance and as consequence ends in failure.
Otherwise an alternative to direct appointment of technical professionals into senior management roles is to have very skilled general managers who know what questions to ask and know that they can trust the advice they receive from technical experts.
Again, using the electricity industry as an example; you might have excellent marketing and financial skills on the senior management team and these skills are essential, but if the engineers have not been heard on the security of the supply of electricity, then no level of marketing or financial manipulation will convince the consumer that non-supply of product or service was just bad luck. After the event evidence normally points to inadequate attention to advice or lack of understanding or planning for such events as being the root cause of major problem.
The technical professionals, especially scientists and engineers, need to seek out appropriate training to ensure they are able to participate at senior management level. Technically trained people, especially engineers, are trained in key areas like project management, which is significant skill-set requirement in any organisation. However, technically trained people often lack the skills to see the big picture of an organisation’s requirements, eg marketing and financial management. They tend to hang on to technical excellence rather than develop the skills to weigh up what essential standards are needed to achieve commercial objectives given the limited capital available and the need for return on an investment.
In New Zealand there is already considerable shortage of technically skilled people without using more of these skills in the wider organisation management scene. Therefore, in the interests of improved organisational performance it would appear that increased encouragement of technically trained professionals is urgently needed and that many of these people should manage their career development to the point where they can ultimately play significant role as
Dr Robin Dunlop FNZIM is chief executive of Transit NZ and chairman of NZIM Central Division. managers of New Zealand organisations.