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Archive for boards

Where boards fall short

By Mary Morel | 27 March 2015

Where boards fall short

An article in the Harvard Business Review by Dominic Barton and Mark Wiseman states that ‘boards aren’t working’. This is in spite of regulatory reforms and a host of guidelines from independent watchdogs.

A 2013 McKinsey survey of 722 directors found that only 34% agreed that their boards fully understood the organisation’s strategies. In March 2014, McKinsey and the Canada Pension Plan Investment Board asked 604 executives and directors worldwide which source of pressure was most responsible for organisations’ over-emphasis on short-term financial results and under-emphasis on long-term value creation.

The answer surprised me – the most frequent response (47%) was ‘the board’.

Barton and Wiseman state if directors keep their fiduciary duties in mind, changes in the boardroom should follow. Fiduciary duty involves directors putting the organisation’s interests ahead of their own and applying proper care, skill and diligence to business decisions.

The article outlines four areas where change is essential:

  • Selecting the right people (‘Boards that combine deep relevant experience and knowledge with independence can help companies break through inertia and create lasting value.’)
  • Spending quality time on strategy (‘Strategy is the fundamental challenge of the organisation and it should engage the entire board.’)
  • Engaging with long-term investors (‘Boards can and should be far more active in facilitating a dialogue with major long-term shareholders.’)
  • Paying directors more (Directors should be paid more, and be asked to ‘put a greater portion of their net worth on the table’. This could be achieved by a portion of directors’ shares vesting years later and directors purchasing shares with their own money.)

I would add a fifth point to this list: better board papers.

In my experience, board papers address risk much more comprehensively than they do strategy. Strategy is often dismissed with a statement such as ‘this is in line with our strategic objectives’.

Also, some strategic decisions don’t reach the board’s attention. Financial delegations are usually clearly spelt out, but whether an issue is of strategic significance is not as clear-cut.

For example, the cost of a project may fall within management’s delegation, so management does not seek board approval or endorsement. However, the next step in the project may involve spending several millions and suddenly board approval is needed. Directors are now confronted with making a decision about a project that is already well underway and that they know nothing about.

Or a project may seem ‘like a good idea’ and will benefit customers and make money, but it may not fit comfortably with the organisation’s core business. I have listened to senior managers debate whether such projects need to go to the board and, if they do, if they should be information (noting) or decision papers.

Read the full Harvard Business Review article.

Tell a story in a decision-making board paper

By Mary Morel | 1 March 2013

storytelling for decision board papers

In a decision-making paper, you are telling a story. An issue has arisen – it could be a problem or an opportunity – and you are providing a solution. Unlike a novel, in a board paper your readers know the ending upfront in the recommendation. But as with a story, they want to understand the ‘why’ that underlies the issue.

The challenge is telling a convincing story (in about three pages) that answers a single question: Why does the recommendation make sense?

Given the tight length requirements in board papers, writers often worry about what to include and what to leave out. The answer is to focus on the story and delete everything that is not essential. If your template calls for a summary, this is a good test of your story’s clarity. If you can’t summarise your paper in one paragraph, you need to rethink your story. Your summary may ultimately be longer than a paragraph, but you should be able to condense the main ideas of your paper into one paragraph initially.

Good stories have a tight focus, so a question that writers often ask is: Should you plan at the beginning or as you are writing? There is no black and white answer to this question. It depends on what works for you. If you plan first, you still need to plan as you are writing because your thoughts will often change. If you plan as you write, there is a danger of becoming too wedded to what you have written and being reluctant to change it.

My daughter rang as I was writing this blog post, moaning about an 8,000-word essay that she had been writing for so long that she didn’t think flowed well. I suggested she treat everything she had done so far as notes and start again. She didn’t like that idea because she was too committed to her words.

Planning first makes more sense, but is it what I do myself? Not usually, unless I am writing a lengthy document. I am a rewriter, but I like to think (kid myself?) that I am willing to delete anything that does not pass the ‘so what?’ test.

As you plan and rewrite your paper, you need to consider how the sections link together. In a story, one scene usually triggers the next. In a board paper, the transitions should also be seamless. Subheadings help as signposts, but you still need to provide context to bestow meaning and connections between the sections. I think of it as joining the dots.

Good luck with your next story!