Developing directors

H

ow do directors see the challenges and opportunities facing their companies today? What role do they feel they themselves should play in facilitating a response? And how should directors be prepared for boardroom appointments? These and other questions have been asked in a number of organizational and competency surveys which have either been undertaken by Adaptation Ltd, or with which the company has been associated. The results show that facilitating competencies are assuming greater importance and that new routes to the boardroom are emerging. The work upon which the surveys are based was carried out over a two-year period from June 1988May 1990.

replies. A response rate of over 34% was achieved. Of the respondents 44 were chairmen, chief executives or managing directors. Participants again represented predominantly large organizations. Overall the survey covered more than 2 million employees. The turnover of 60% of the respondents organizations exceeded f500 million. The turnover of about a half of the organizations exceeded fl billion, while the turnover of 17 of the 100 organizations participating in the survey exceeded f10 billion.

Competency Organizational

Surveys

The “Responsive Organization”* questionnaire was sent to some 300 individuals at the head of large organizations in the UK. The 136 written replies included 102 completed questionnaires of which 100 received prior to the cut-off date were used. The returned questionnaires covered in excess of 2.97 million employees. Approaching two-thirds of the responses were from organizations with a turnover in excess of f500 million, while 38% of responses were from organizations with a turnover in excess of fl billion.

Surveys

The “Exeter” study3 for the Training Agency is based upon a survey of members of the Institute of Directors (IOD) and non-members. Over 3,266 questionnaires were distributed and 373 of 390 responses were analyzed. Approaching two-thirds of the respondents held the job titles of Chairman or Managing Director. The most common turnover of the respondents’ companies was represented by the band of fl-10 million, and this covered over four out of ten respondents.

Some 38% of the respondents were chairmen and over 60% held the job titles of either chairman, chief executive or managing director.

A parallel and “initial” survey undertaken by Adaptation for the IOD” involved a questionnaire and follow-up interview programme. 2,700 copies of the questionnaire were distributed to chairmen of the boards of companies. The most common company size was again represented by a turnover in the range of fl-10 million.

The “Beyond Quality”’ survey questionnaire was sent to those most likely to have an overview of the relationships between an organization and its customers. Sufficient questionnaires were distributed to obtain 100

218 completed questionnaires were received. Threequarters of the responses were from those holding the job titles of Chairman or Chairman & Managing Director.

COULSON-THOMAS:

DEVELOPING

DIRECTORS

Exeter

Prof. Dev of

Study

and for the

(3)

Board

489

(4)

22% 42%

Manager

I

Other

I

Figure

1

The job titles of the survey respondents Figure 1.

is given in

The turnover of the organizations covered by the “Responsive Organization”’ and “Beyond Quality”2 surveys are given in Figure 2.

Issues

In the “Responsive Organization” survey* participants identified a number of challenges facing their

Turnover of Respondent Organisations (f)

Beyond Quality

The Responsive Organisation

lOB+

17%

38%

32%

l-108 501m-1B

26%

11%

lOl-500m

23%

21%

51-100m

5%

7%

1 l-50m

0%

7%

1

(O-10m

Figure 2

36%

9%

14%

I

25%

0%

0%

0%

1

0%

0%

4%

Job titles of survey participants

In order to relate the findings of the “Exeter” survey to the role and purpose of the board, a “follow-on” surveys of the views of chairmen and CEOs was carried out with Adaptation Ltd. 122 questionnaires were distributed and 56 replies received which covered 60 boards.

Management

87%

Turnover of respondent

8% organizations

1

organizations (Figure 3). The challenges are so numerous and of such a magnitude that the overriding management issue was seen to be the creation of more flexible and adaptable organizations. The top management issues in the “Beyond Quality” with the relationsurvey,2 which was concerned ship with customers, in terms of “very important” replies are “building longer term relationships with a more customer customers” and “introducing oriented culture”. The later issue was the only management issue that was considered by 100% of respondents to be either “very important” or “important”. In the initial Adaptation survey for the IOD,4 the top two “business” issues both concern customers, namely “satisfying customers” and “delivering quality”. Over nine out of ten respondents thought “satisfying customers” and “delivering quality” to be “very important”.

Global Market Place Liberalisation & Competition 1992 Information Technology Transitioning Organisations More Demanding Customers Delivering Quality Differentiation & Focus Scarcity of Human Resource Quality of Management Facilitation of Teamwork/Learning/Change

4% Figure 3

Organizational

challenges

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EMJ VOL. 8 NO. 4: December

1990

The Burden of Size The “Beyond Quality” survey2 revealed a growing awareness of the vulnerability of size where it is not accompanied by responsiveness and flexibility. The larger the bureaucracy the greater the danger of being sucked into the internal operations of the company, the endless round of asset and head count reduction programmes as smaller and more nimble competitors secure flexible access to information, skill and funding, and “cream” off the more lucrative business. For many survey participants the “bureaucratic organization” was emerging as a major problem, and one that is absorbing an increasing amount of boardroom time.

The Responsive and Network Organization The overall findings of both the organizational surveys are similar. A number of trends have been identified (Figure 4). Organizations need to be flexible, adaptable and responsive to the changing requirements of both customers and employees.

Slimmer, Flatter and Tighter Processes for Learning and Adaptation Non-core Activities Hived Off Delegation & Devolution Assessment on Output Human Skill Limiting Factor Access to Skill Becoming More Important than “Ownership” J

Figure 5

The solution:

the responsive

organization

For many organizations incremental adjustment to change is no longer enough. Organizations are becoming more fluid, facilitating networks rather than bureaucracies (Figure 6). Interest in rules and procedures is waning, but a desire for the identification of tasks, the establishment of teams, and new processes for achieving adaptation and change is growing. Key skills being demanded in the boardroom are those related to the transition from the bureaucratic to the more responsive network organization.

The Function of the Board

The findings also confirm the extent to which the company is becoming a network and “electronic” links are developed with customers. There is some consensus concerning the shape of the “emerging organization”. The solution that is sought is a move from the bureaucratic to a more responsive organization (Figure 5). A high priority is being given to creating an organization that is adaptable and responsive to the changing needs of its customers. Processes for continuing learning, adaptation and change are required. Directors need to become facilitators, harnessing relevant expertise by all available means in such a way that it can be applied to add value for customers. In some cases companies are becoming in effect portfolios of projects.

Before considering the question of boardroom competencies and qualities one must first determine the function of the board. “Follow-on” survey’ questionnaire recipients were asked, not about the functions of the boards in general but, about how they saw the function of theiv board. The “top ten” functions of the board as described by respondents are listed in Figure 7. The largest single number of responses could be summarized as setting strategy or vision of the the policy, objectives, company. If one includes the direction of policy and strategy then seven out of ten respondents described the function of their boards in pro-active terms of establishing policy, objectives, strategy or vision. The next largest number of replies could be grouped

Need for flexibility and adaptability Facilitating networks, rather than bureaucracy Processes, rather than procedures Delegation, devolution & decentralization Flatter, leaner, tighter Growth of teamwork Integration of individuals into teams Processes for continuous change Continuous development & updating Remuneration related to value added Use of facilitating technology Blurred boundary with customers, suppliers & partners Greater accountability & responsibility

Figure 4

The emerging

organization

,_,’

i Figure 6

The network organization

COULSON-THOMAS:

DEVELOPING

0

I

DIRECTORS

491

40

Setting

Policy/objectives/strategy/vision

Control/monitor/review

Monitoring

I Financial

I

(re: strategies/objectives/shareholders/staff)

top executive

management’s

performance

matters

I Directing/support/improve Selection

of top executive

the performance

of the company

management

1 Legal requirements

f D

Review/responding

to short-term

opportunities

Ij 3 .:..

1 Shareholder

accountability

Mergers/acquisitions

Source: Figure 7

‘Developing

Directors’

The “Top Ten” functions

(5) of the board

as a reactive or monitoring function of controlling or reviewing strategies, objectives, shareholders or staff. If one added those who referred to monitoring the performance of top executive management, then over

seven out of ten of the respondents referred to a reviewing, monitoring and controlling role. Establishing and reviewing objectives and strategy are clearly related.

492

EMJ VOL. 8 NO. 4: December

The Effective

7990

Board

It might once have been possible for all significant decisions to have been taken by the board. In an increasingly complex business environment and with customers increasingly requiring tailored products and services, it is becoming necessary for decision making discretion to be pushed down the organization.’ In future more boards will spend less time establishing and monitoring procedures, and will devote more time to initiating and facilitating change processes. Network organizations have electronic links forward into customers, backwards to suppliers and sideways to business partners (Figure 6). As a result, directors will need to monitor a more varied set of relationships. There will also be, in the case of many boards, responsibilities towards a greater number of “external” business partners to consider. Increasingly is to: (i) (ii) (iii)

the directorial

challenge

facing the board

define the opportunities in the external business environment; ensure that the company has access to adequate people, technology and organization; and that it has effective management processes for ensuring that these resources are applied to the profitable exploitation of those opportunities (Figure 8).

Figure 8

Directorial

challenge

I

Ranking in Terms of “Very Important” O/O

Strategic awareness Objectivity Communication skills Individual responsibility Customer focus Self-discipline Team player Creativity Perspective Breadth

A key priority of the board should be to ensure a company is able to learn and adapt in order to survive. This requires processes for ongoing learning and adaptation.‘,’

Note: Some respondents to be “very important”.

Directorial Qualities The qualities sought in new appointments to the boards of “initial survey”4 respondents’ companies are summarized in Figure 9 which ranks the qualities in terms of “very important” responses. “Strategic awareness”, “objectivity” and “communication skills” rank highest in importance. Approaching a half of the respondents gave them a “very important” ranking. The qualities which respondents feel distinguish “direction”, or the distinct role of the director, from “management” are listed in Figure 10. For some two out of three respondents the distinction between “direction” and “management” lies in a broad, longer term or strategic awareness and perspective, the quality to see a situation as a whole and look ahead. The perspective of directors is that of the company as a whole, whereas the perspective of most managers will be that of a particular function or business unit.

considered

48 47 46 45 42 38 37 33 33 19 more than one quality

Source: Professional Development of and for the Board, IOD 1990 Figure 9

Qualities

sought in new appointments

to board

Strategic Awareness & Planning Objectivity - ability to see company as a whole Long Term Vision Ultimate Responsibility of Company Commanding Respect/Leadership Decision/Policy Making Anticipate Changing Trends Delegation Lateral Thinking Responsibility to Shareholders

Source: Professional Development of and for the Board, IOD, 1990 Figure 70 Top Ten qualities from “Management”

that distinguish

“Direction”

COULSON-THOMAS: These findings suggest that efforts to define and build management competencies will not of themselves lead to the competencies considered desirable in company directors. Experienced derived from a track record in moving between functions will not necessarily lead to what is sought in new appointees to a board. Possession of such qualities as “strategic awareness” or “objectivity” may be the key question, not the means or route by which these qualities are acquired.

DEVELOPING

493

Articulation of Vnon & M~sr~on ‘I have a dream’

1 Roles & Rerpons\b\lner Exerc~e ldennflcatmn of tasks to be performed

New Approach

1 SkIIt audn ldentlflcatlon

Directors require knowledge of the role of the board, the legal duties and responsibilities of directors together with an understanding of financial and other requirements. Skill requirements include formulating and achieving objectives, organizing and motivating people, decision making in a boardroom context and the monitoring of performance. Directors also need an awareness of developments in the business environment such as ethical and environmental considerations. There are also boardroom matters to consider such as the succession, assessment and remuneration of directors, the structure and operation of the board itself and effective boardroom practice.

DlRECTORS

& assessment of needed skills

1 Sklll Sourcing ‘Internal’ and ‘external’

1 Determlnatmn of Patternsof Work. lo meet needs ot Sk!11ruppl~err

Evolutmn

1

of Form of Organlratvx Old Approach

Source BIM Repor, ‘TOOOld df 407’(6)

Figure

11

Skill management

strategy

The “Beyond Quality” survey2 suggests that values are becoming more important as a source of corporate differentiation. Customers and employees may look “beyond quality” and, where they have a choice, associate with the companies whose values they share. This suggests that an ability to understand and empathize with values may become of increasing importance in the boardroom.

approach, organization is less of a constraint as it “follows” people decisions, and can be tailored to their needs and interests. The role of the board is to facilitate as well as determine the contribution of the various resources needed to confront external challenges and opportunities.

Facilitating Boardroom Competencies

As a greater number of boards focus on the need to create more flexible and adaptable organizations one may see further appointments of facilitating directors to supplement or replace “traditional” functional directors in order to enhance the ability of boards to cope with change. Facilitating directors with longer term responsibilities relating to reshaping the organization to meet strategic business development opportunities, and establishing and supporting its business systems requirements, may assist a company to achieve longer term change without losing a grip on the need to deliver current business objectives.

Boardroom competencies related to the facilitation of learning and change will become increasingly important. In the past too many boards have felt constrained by the history and organization of their company. In many cases when deciding a strategy such as, for example, human resources or skills, the existing organization has been regarded as a point of departure. In the new more flexible approach that is emerging every effort needs to be made to leave open the question of the nature of organization required until the board has first determined, or caused a determination of, what needs to be done, by whom, and how their contribution might best be facilitated (Figure 11). Very often, in the case of the “old” patibilities would arise between “organization”. Such incompatibility itself in complaints regarding the conflicts brought into the boardroom.

approach, incompeople and the would manifest bureaucracy and Under the “new”

Facilitating

Directors

Directors should be catalysts in the establishment of change processes. The board will also need to monitor the effective operation of processes to ensure that balance is maintained, inconsistencies do not arise, and growth and development can be sustained. In the case of Rank Xerox (UK) three complementary processes, all initiated in the boardroom, were cascaded through the organization (Figure 12):

494

EMJ VOL. 8 NO. 4: December

1990

Professional Development 1

1Direction

1 Busmess

Development

Plannlng

blanagement nputs + I

4 Business

Management

Quality

Requlrements

Improvement

Process

The priorities placed in the “initial survey”‘i upon the training and development of directors in various areas are shown in Figure 13 which ranks the areas in terms of “very important” responses. Top of the list by a significant margin, and given a “very important” rating by approaching six out of ten respondents, is “strategic business understanding“. This emerges clearly as the area of greatest priority for the training and development of directors. Next in the list of priorities for the training and development of directors comes “people skills”, “management skills” and “financial understanding”. Around four out of ten respondents gave these areas a “very important” rating.

Preparation

I Figure

(i)

(ii)

(iii)

Management

12

Actlwty

Rank Xerox (UK) processes

The first, Business Development Planning, asked the question “what are we going to do?“. The output of this process consisted of a mission, goals and strategy, roles and responsibilities, objectives and an organizational framework. The second process concerning Business Management Requirements asked the question “what do we need to do it?“. Outputs from this process consisted of the management process, rules and policies, business processes and systems, and skill and resource requirements. The third and final process, the Quality Improvement Process, asked the question “how are we going to do it?“. The outputs of this process include business process changes, team commitment and issues requiring direction or resource re-evaluation.

Significantly, while the operation of these processes results in significant delegation of responsibility in respect of a range of individual decisions, the role, contribution and focus of the board in the areas of mission, goal, strategy and objectives is enhanced. Refining mission, improving understanding of a goal, clarifying strategy or amending an objective in the light of the results of management activities becomes a significantly more important part of the ongoing work of the board.

Priorities

for the Board

In an “open ended” section of the “initial” survey,’ questionnaire respondents were asked a series of questions about preparation for the board. Over nine out of ten respondents had either not received any preparation for the board or had been prepared by such informal means as “experience”. Only 8% cited “training” in the context of preparation for the board, while under a quarter referred to the possession of professional or management qualifications. According to the Exeter study,3 approaching nine out of ten directors did not receive any preparation for their role as a company director before their appointment. Over two-thirds did not receive any formal help after their appointment. There does not appear to have been a generally accepted and practised route to the boardroom. If it occurs at all, preparation appears to have been

Training & Development in Following Areas Ranking in Terms of “Very Important” 010 Strategic/business understanding People skills Management skills Financial understanding Negotiating skills Knowledge of legal duties and responsibilities Technical understanding

Note: Some respondents to be “very

considered

57 42 39 37 28 18 15

more than one area

important”.

Professional Development of and for the Board, IOD, 7990 Source:

Figure

13

Professional

development

priorities

COULSON-THOMAS:

“informal” and unstructured in the sense that individuals “pick things up” as a result of other activities. Little evidence emerges of systematic and thorough preparation for the role of company director.

DEVELOPING

DIRECTORS

It is clear from the responses that “experience” on its own, picking it up as one goes along, is thought not to be sufficient preparation by those (mainly chairmen) surveyed. Three-quarters of respondents believe that

21

0

Ability

to contribute

Vision/Strategic

Breadth

thinking

of external

knowledge

1 Loyalty/commitment

Team spirit

Source. Figure 14

‘Developing

Directors’

(5)

The Top Ten criteria used in selecting

495

members

of the board

496

EMJ VOL. 8 NO. 4: December

7990

there are particular boardroom roles for which specific preparation is required.

Criteria Used in Selecting Members

Board

The “top ten” criterias used in selecting members of the board are set out in Figure 14. Personal qualities emerge as easily the most significant criteria for selecting members of a board. Specialist knowledge or expertise or ability in a functional role was cited by only one in five of respondents. In the larger companies, even when there is a feeling that a certain function ought to be represented at board level, the choice of individual from among available candidates is largely a question of personal qualities. Four out of ten “follow-on” survey5 respondents mentioned age or the track record and experience that may take some time to acquire as a criterion in selecting board members. In interviews it emerged that in the absence of any means of formally assessing boardroom qualities and competencies it was necessary for these to be demonstrated over the course of a career.

+

Directorial

---b

Management

Figure

15

Senior

Management

Middle

Management

Election Route

Traditional

Development

Route

route to the board

Not a single respondent mentioned the possession of academic or professional qualifications as a criterion for selecting members of a board. One respondent only referred to “formal business school courses” as a criterion. The possession of a working knowledge of, or fluency in, a foreign language was also not mentioned by any of the respondents as a criterion used in selecting members for a board. Over a third of the initial survey respondents had a working knowledge of a foreign language.

Routes to the Boardroom A possible reason for the perceived “supplyconstraint” of potential directors could be the traditional practice of limiting recruitment to the board to those holding senior management positions (Figure 15). A more open approach would be to recognize that some individuals with “direction” qualities might well be found within the ranks of middle, and junior and supervisory management (Figure 16). As greater numbers of managers, as a result of quality focus on external customer and other programmes, requirements, acquire general facilitating competenties, and become involved in company-wide taskforces and projects, more of them may have an opportunity

Figure 16 Suggested

recruitment

to the board

to acquire a sense of the “company as a whole”. In contrast a senior manager in a “head office” environment may have little direct customer contact, and could well be immersed in the relatively narrow concerns of a particular functional department. A disadvantage of in-company programmes and some part-time programmes is that students are not subjected to the broadening effect of interaction with participants from other organizations. Survey participants expressed a preference for development paths which put increased emphasis upon the development of an “external” perspective (Figure 17).

COULSON-THOMAS:

The Internal/External

DEVELOPING

DIRECTORS

497

Balance

‘Traditional’

External

The Board

Senior Management

0 Source: Figure

17

‘Developing Management

Internal Directors’ education

(5) and development

The route to the boardroom in network organizations is likely to consist, in part, of movement around a number of elements or “partners” in the network (Figure 18) rather than the climbing of vertical functional ladders.

Professional

Development

Services

The relevance to the “development of the competencies of individual directors” initial survey4 respondents attached to services from various sources are given in Figure 19 which presents the rankings if one adds together the “very relevant” and “relevant” replies. Professional associations, whether the IOD or other functional associations, head the list.

The relevance to the development of the competencies of the board as a whole respondents attached to services from the various sources are given in Figure 20 which presents the ranking if one adds together the “very relevant” and “relevant” replies. So how is the demand for developing directional skills and competencies to be met? The perceived relative comparative advantages of the university, professional association and “in-house trainer” are set out schematically in Figure 21. Professional associations were ranked highly in the surveys.4,5 The de facto position is that most major multinationals recruit from, and make use of the services of, a number of business schools. Interview discussions suggest that

498

EMJ VOL. 8 NO. 4: December

Jrce: ‘Developing Figure

18

D/rectors’

7990

(5)

The network organization:

the route to the boardroom

CEOs are becoming more aware of the need for diversity. There is some resistance to the risks involved in putting “all of one’s eggs in one basket”. European business schools of standing are experiencing an unprecedented demand for their courses. Most are supply constrained, and a few are in the fortunate position of being able to choose those companies with whom they are prepared to work. Their faculties evaluate “customer prospects” in terms of their potential for opening new areas of research opportunity.

Leading business schools are experiencing great difficulty in attracting high quality faculty. The scope for research and consultancy required to secure and retain such staff is not always compatible with the commitment needed to develop and deliver new “directorial” programmes. Schools also have a need to secure a return upon past investments by running on existing “management” programmes. Consultancies find it difficult to establish “objectivity” when they offer a range of related products and

COULSON-THOMAS:

Ranking in Terms of “Very Relevant”

DEVELOPING

DIRECTORS

499

& “Relevant” 010 70 63 60 57 52 41 39 38 33

Functional Professional Associations Institute of Directors Specialist Consultants In-Company Trainers Postgraduate Business Schools Open/Distance Learning Management Consultants “Consortium” Participation Individual Academics Note: Some respondents service to be of relevance.

considered

more

than

Knowledge

Development

one

Source: Professional Development of and for the Board, IO0 1990 Figure 19 Professional directors’ competencies

development

& “Relevant” o/o 58 56 50 40 39 36 36 29 28

Institute of Directors Specialist Consultants Functional Professional AssociaGons In-Company Trainers Management Consultants Postgraduate Business Schools “Consortium” Participation Open/Distance Learning Individual Academics

service

respondents to be of relevance.

considered

more

than

development

Source ‘Developing D!reclorr”“

Figure 21

Knowledge

and competence

with business schools and management to offer its Diploma in Company Direction

centres able

programme. Across much of the rest of the Community there is a marked absence of suitable programmes.

one REFERENCES

Source: Professional Development of and for the Board, IO0 1990 Figure 20 Professional boards’ competencies

Application

services of individual

Ranking in Terms of “Very Relevant”

Note: Some

Competence

services of whole

services in the marketplace. Most of the leading firms are facing a high level of demand for their mainstream consultancy services and historically high rates of turnover growth are being constrained by the difficulty of attracting new staff. There is often little they can contribute to director development. In the UK the IOD is developing a growing range of courses and seminars and is building a network of links

Coulson-Thomas, Colin and Richard Brown (1989) “The Responsive Organization, People Management, the Challenge of the 199Os”, British Institute of Management Coulson-Thomas, Colin and Richard Brown (1990) “Beyond Quality, Managing the Relationship with the Customer”, British Institute of Management Wakelam, Alan (1989) “The Training and Development of Company Directors”, University of Exeter, December Coulson-Thomas, Colin (1990) “Professional Development of and for the Board”, Institute of Directors, January Coulson-Thomas, Colin and Alan Wakelam (1990) “Developing Directors, the Training and Development of Company Directors”, for Training Agency, April Coulson-Thomas, Colin (1989) “Too Old at 40?“, British Institute of Management