This post describes Corporate Boards –

  1. What do they do?
  2. How do I join one? and
  3. What are my responsibilities as a Director?

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A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization, which can include a non-profit organization or a government agency or corporation.  In a stock corporation, the board is elected by the shareholders and is the highest authority in the management of the corporation. The board of directors appoints the Chief Executive Officer (CEO) of the corporation and sets out the overall direction for the company.

What does the Board do?

herman-daemsProfessor Herman Daems is teaching today on the IESE Advanced Management Program.  His course is “The role of the Board of Directors in Evaluating and Selecting the Strategy”.  Dr Herman Daems is professor at University of Leuven and visiting professor at Harvard Business School, and currently he is the Chairman of the Board at BNP Paribas Fortis SA/NV.  He has been part of many public, private and charitable boards over his career.

I wrote a few notes as I sat at the back of the classroom.  What does the board actually do?

  • Develop an Ambition for the Company – an ambition is not a strategy.  An ambition might be to “Climb Everest”.  A strategy would be the specific path to gather the necessary resources and execute the climb of the mountain.
  • Find the Leadership to develop a Strategy to realise the ambition – management must develop strategy.
  • Approve a strategy – Important to be clear that a board does not make the strategy, only approve that the leadership’s strategy supports the Company Ambition.
  • Provide Resources (Financial and Human) – importantly the board establishes the dividend policy
  • Balance the Power of Differing Interests (shareholders, management, employees, government, public) – board members must have general business experience.  Specialist members do not make good board members.  Board must make collective general business decisions, not just good specific decisions.  Individual members must have credibility and be willing to raise their hand and make an impact.
  • Monitor and Control Strategy – the board plays a much greater role on controlling strategy than on deciding the strategy.  Management will rarely say that their strategy is not working.  This is where the board is really necessary.
  • Control the use of Resources, control the risks involved – see next item…
  • Assume responsibility for the actions and risks of the company – The Board of Directors have “collective responsibility” for the actions and risks of the company.  Members are not personally responsible.  Some legal attempts to hold a finance expert or an audit committee member personally responsible have always been pushed back by courts on the basis that board is collective responsibility.  In banking crisis, some executives have been held personally responsible, but in no cases have board members been found personally responsible.

 

How do you get onto a Board?

“People often ask me ‘I’d like to make a change in my career and play a role as a board member.’  I first ask how much money they are making now.  I don’t want your role as a board director to be the significant source of income for your life.  If you are dependent on this income, you are not going to be a good director.” Herman Daems

In most countries, board members can be fired at will.  You do not want to depend on this income.

There are 5 specific reasons why you might be appointed to the board of a company:

  • You represent a shareholder or stakeholder of the company – you represent a reference shareholder, a private equity company, a venture capitalist, a strategic owner
  • You bring specific knowhow or capabilities to the board – technological, financial, market knowledge, legal
  • You bring a specific experience – you are a former CEO or a director in other companies
  • You have a reputation for reliability, independence; you bring reputation to the company – …also you are always contactable (crisis happens on Sundays, board is like fire service…  emergencies happen)
  • You have access to a relevant network for the company

 

What is your role on the Board?

  • It is important to find an equilibrium between the interest you represent and the company interests.  A board member is responsible to all stakeholders.  Take into account the specific traditions, structures, culture of this board.
  • Come well prepared
  • Ask questions, be critical… but solution oriented.  Directors who are always critical start to lose engagement with management.
  • Do not get stuck into details (do not become a shadow executive) – do not try to prove how smart, wise you are
  • Be aware of your legal and societal responsibilities
  • Speak your mind
  • Be courageous, remain friendly

Further Reading

I have the privilege of teaching at a number of top business schools around the world.  Last week I gave classes at Harvard and at MIT.  This is a video from IEEM Business School in Montevideo, Uruguay where I spend a week each October teaching on their MBA and Executive Leadership programs.

The video is a good short (90 seconds) description of what I want participants to learn through my Leadership Communications program.

The 4 Keys to Great Communication

  1. Have something to say
  2. Say it well
  3. Say it with intensity
  4. Connect with the audience

Check out the video

and here’s a gratuitous photo of me at Harvard last week…

This is a guest post by Tobias Rodrigues who will be collaborating with me next week in the IESE Executive MBA intensive week in Barcelona.  Tobias broke his foot this summer - and learnt some surprising lessons about himself, his family and what it means to be dependent on others.  

Over to Tobias…

39 Days, 11 Hours and 30 Minutes of Bandage

On June 29th at 10:30 pm, while I was out enjoying an evening jog, I tripped and broke the 5th metatarsus (the main bone of the pinky) of my right foot. On August 8th at 10:00 am the cast was removed.

This is a series of 10 interviews with the expert coaches during the IESE EMBA Intensive week 2013.  (If you are viewing via rss, video on the blog here).  The Expert Contributors are:

The Speaking Guru Interviews

Questions from You

What questions do you have for next year’s set of expert interviews?

Nitin Nohria, Dean of Harvard Business School will be speaking at IESE Business School in Barcelona next Monday 13th.

“It is my desire to inspire people of all ages and social demographics to think about leadership on a broad level, contemplate what it means to them and what individual impact they can have when it comes to leading,” Nitin Nohria.

What does Leadership mean to you?

As a simple reflection, I share 2 short poems:

The Serenity Prayer

(paraphrased by me…)

Give me the strength to change the things I can change;
The patience to accept the things I cannot change
and the wisdom to tell the difference.

Author: Reinhold Niebuhr, 1943

“I Wanted To Change The World”

When I was a young man, I wanted to change the world.

I found it was difficult to change the world, so I tried to change my nation.

When I found I couldn’t change the nation, I began to focus on my town. I couldn’t change the town and as an older man, I tried to change my family.

Now, as an old man, I realize the only thing I can change is myself, and suddenly I realize that if long ago I had changed myself, I could have made an impact on my family. My family and I could have made an impact on our town. Their impact could have changed the nation and I could indeed have changed the world.

Author: Unknown Monk 1100 A.D.

Event Information

As the Harvard-IESE Committee celebrates its 50th Anniversary, IESE welcomes Harvard Business School Dean, Nitin Nohria, to speak to alumni at an exclusive session on January 13, 2014. Entitled, “Innovative Leadership: Learning from Asian Companies,” the session will be held at IESE’s Barcelona campus and organized by the Alumni Association. Registration is here.

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I have recently finished teaching modules on the Global Executive MBA (GEMBA) and on the Develop Your Communication Skills (DYC) Short Focussed Program here at IESE in Barcelona. The global diversity of participants really struck me. IESE has become a truly global experience – both in the MBA program, and in the variety of Executive Education courses on offer.

This video gives a glimpse of the people, the classrooms, the campuses and a sense of life at IESE Business School.

The Truly Global School

Here at IESE we are truly global. Our aim is to provide a global education whose international character isn’t just measured in numbers of passports but in the way we teach how to manage globalization and diversity.

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Join me for a Free Webinar on Develop Your Communication Skills

Conor Neill
In this webinar, IESE Lecturer Conor Neill will share his research on persuasive communication.
April 12, 2013, 13-14h CET
Register Now
Password: skills

Speak Powerfully

Discover how to speak powerfully and communicate effectively in a variety of contexts, capture the attention of your audience and make your body language work to your advantage.

Share this with your network:

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This webinar will serve as the perfect introduction to IESE’s upcoming 3-day program in Barcelona:

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A Short Focused Program of IESE Business School
IESE #1 in the World in Executive Education, FT 2012

What are the 3 words that managers find hardest to say?

They are possibly the 3 words that parents find hardest to say to children.  They are 3 words that teachers very rarely say to their students.

They are not “You’re the Best”. They are not “I love you”.  What might they be?

Confused…

The 3 hardest words for a manager to say are “I don’t know.”

The need to act under the lack of full information does not give the excuse of not needed to do the work.  One must do the work to examine the data that is available, to seek advice from wise counsel, to speak to others who have experience; but the analysis once done, must end.  A decision must be taken by the leader.

Orchids are not Fragile

I am reading Nassim Taleb’s latest book “AntiFragile” at the moment.  I received 2 gifts of this book for Christmas – I do hope it is not because I am generally seen as “fragile” and in need of some increased strength…

I remember a conversation with my friend Xavi, who runs a gardening business.  We were talking about Orchids.  He explained “there is a widespread idea that Orchids are difficult plants, they are fragile.  This is not true.  Any plant that has survived the millions of years of evolution to survive in its form today is in no way fragile.  It is not suited to certain environments, but it is not fragile.”

Most complex organic systems not only survive uncertainty, chaos, disorder, time… they thrive.  They grow stronger though dealing with their environments.  There are forests that need fire – certain trees can only grow past a certain point if they face fire.  A human muscle will atrophy if not used, it will grow stronger through being worked, through being damaged.

Modern education equates volatility with risk, equates non-standard with failing.  Statisticians hate the outliers.

Nassim’s central idea is that we cannot predict risks, but we can predict a system’s capability to cope with risk.  We cannot predict an earthquake, but we do know whether the 400 year old cathedral or the poorly built modern apartment block will fall first.  We cannot predict a financial crisis, but we can predict which bank will fail first.  We cannot predict loss of employment, but we can see which human will come back strong the fastest.

Leading in the Real World

The real world has surprises.  Hemmingway said that the “true” parts of his stories were the most un-believable.  Fiction is never as crazy as reality.

There are 3 things a good leader must learn to be able to do:

  • Act under Uncertainty
  • Take the Painful Decisions
  • Own the Decision

Acting Under Uncertainty

I teach a class towards the end of the course on the MBA program where my objective is to create uncertainty.  As the students give their answers, I give no expression, neither verbal nor non-verbal as to whether I agree with their answer.  This creates tension in the class.  The students are used to a class where they say their answer and the professor either writes it up on the board or grimaces.  If the professor writes it up, I got the answer right.  If the professor grimaces, I change my answer until I get a nod and a note on the board.

I believe education from “The All-Knowing Professor” creates a dangerous tendency for future leaders.  In the real decisions of life, there is nobody there to nod their head, nor to say “no” or “incorrect”.  There are many people making lots of noise, and the leader needs to commit to their course of action without achieving 100% consensus, or 100% of the information that could prove the course of action.  Leaders must be able to do enough work to be fairly sure they have a good course of action, and then commit to that course of action; and get others to commit.

If MBAs are learning always to wait for someone else to give then certainty, then they are not learning to lead.  We need to ensure that tomorrows leaders are getting practice in the world of uncertainty.  They are getting practice at having to move forward without all the information.

Taking the Painful Decisions

Odysseus must choose between definitely losing a few of his men by passing closer to Scylla, or possibly losing all of his men passing nearer to Charybdis, the whirlpool.  There was no “good” alternative.  MBA cases, video games, TV series tend to allow the hero to find a “good” outcome.  They allow the business to survive with nobody losing their job.  They allow the main character to finish the journey and get back to a comfortable life.  If you have a good option and a bad option, this is not a decision.  It is obvious.  A leadership decision is always between 2 bad options.

Many of school’s choices are between a good and a bad outcome.  Most of life’s choices are between two bad outcomes.

Own the Decision

When I was young, 12 or 13 years old, I was once caddying for my father.  We were at a par 3 and we discussed what club to hit.  I suggested a 7 iron.  He thought it was not enough, but after a pause, took the 7 iron anyway.  He had a look at the green, the flag.  He took a few practice swings. He stood up to the ball.  He swung the club making good contact with the ball.  It soared up and was in line with the pin.  It hung in the air for 2, 3 seconds… and then dropped…  15 meters short, landing in the sandy bunker.

He made a pained grunt and as he returned the club to me I said “sorry, I gave you the wrong club”.  He said, “No, you are the caddy, but I am the golfer. I chose wrong.”  At the time I remember feeling bad.  I felt that I wasn’t “respected” by him, that he didn’t treat my advice as serious advice.  Now I think that he acted then as he has always acted.  He owned the decision.  I gave advice, but at no point did it become my “fault”.  He owns his decisions, whether in golf, in business or in life.

Blainroe golf club 15th hole, where I learnt my golf

Learning to take responsibility for the choice, where it is the leader themselves who must choose, is a challenge.  It takes psychological maturity to own a decision that cannot necessarily be justified with the data.  It takes psychological strength to deal with the slings and blows of others who have not had to take the decision.  Leadership is solitary.  Any education of leaders must help the leader find the mental strength necessary to be alone.

Being alone and being lonely are different.  Alone is a choice.  Lonely is the desire to have someone else to take away the burden.

A good leader has mentors, friends, advisors…  but when the decision comes, it is they and they alone who are responsible.

Increasing your Question to Answer ratio

In an uncertain world, the art of “Muddling Through” is of greater importance than the art of long-term strategic planning.  Dealing with the chaos requires accepting the chaos, and then taking quick steps to understand the map, the compass.  In management life, giving answers shrinks our understanding; asking questions increases our understanding, our capacity to adapt.

How many of your statements are answers and how many are questions?

The person asking the questions is in control of the conversation.  It is hard to remain open to other’s ideas.  It is hard to stop saying what it is that I want to say, and giving the other what it is that they need to hear.

The Best Questions…

  • The best Leadership Question:  “What is the next right thing to do?”
  • The best Teaching Question: “What do you think?  What other options do you see?”
  • The best Coaching Question: “You have achieved what you set out to accomplish.  Imagine yourself there.  What does it feel like?”
  • The best Friendship Question: “How are you?”
  • The best Parenting Question: “What was the best moment of your day?”
  • The best Sales Question: “(I understand that price is important.)  What other criteria are important in making this decision?”  (The implicit question: “What are you comparing this to?”)

These questions come from my blog series The Origin of Leaders over at ActiveGarage.com.

What do you think?

Let me see how many times I can say “I don’t know.  What do you think?” today.

So… in the comments below…  What do you think?

We are coming up to Global Entrepreneurship Week #GEW next week, November 12-18. Organizations all over the world will be putting on events sharing the entrepreneur experience as widely as possible. Events in Spain are listed at the bottom of this post.

Entrepreneurship 2.0: The rise of the Growth Hacker.

In 1995 the web consisted of 16 million people on dialup connections. Today, 2 billion are connected. The rise of the superplatforms Facebook, Twitter, LinkedIn gives a nascent Internet startup access to millions of potential customers from the day they put out a beta version.

Traditional marketers are at a loss. Their skills are for 1-many channels that could reach hundreds or maybe thousands, but not for this new era of 100+ million customer channels. The route to customer is not through the PR agencies, newspapers, retail stores. The growth channel is viral referral-based adoption of your product. Zynga, Pinterest, Dropbox and Instagram grew to millions because they figured out the growth hacks.

Hotmail was probably the first product to benefit from a growth hacker mindset. They were a small web mail company growing slowly but steadily until one of their investors suggested that they add a “get your free email at www.hotmail.com” link to the bottom of all messages. This created viral growth, each new user leading to multiple follow-on users. One email sent to India generated 300 new sign-ups that day, and 300,000 within a month.

What is a growth hacker?

A growth hacker is 100% focused on growth. This means solving 2 challenges 1) get relevant traffic to your site, and 2) maximize conversion once a potential customer lands on your site. Growth hackers are disciplined in prioritizing ideas and brutally testing every assumption with customers. They are analytical and want hard, clear data to drive their decisions. They love google analytics, A/B testing of conversion pages, trial and error of call to action messages. They don’t fall in love with ideas, but are brutal in ongoing testing of all market and product assumptions. They don’t ever say “that should work better”; they say “let’s test that!” on real and potential customers.

Growth Hacker is the new VP Marketing

Sean Ellis, the first Marketer at Dropbox says: “After product-market fit and an efficient conversion process, the next critical step is finding scalable, repeatable and sustainable ways to grow the business. If you can’t do this, nothing else really matters. So rather than hiring a VP Marketing with all of the previously mentioned prerequisites, I recommend hiring or appointing a growth hacker.”

Further Reading on Growth Hackers

Global Entrepreneurship Week 2012 Events

Past Entrepreneurship Posts