2015 JGM Managing Up - How to Control Your Board
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This document provides guidance on how boards of directors can effectively govern organizations. It discusses key responsibilities of boards, including setting strategy, overseeing risk management, and hiring and evaluating the CEO. The document also outlines common complaints CEOs have about boards being too operational or focusing on the wrong issues. It emphasizes the importance of having the right people on the board and ensuring boards maintain a strategic focus. Boards are advised to carefully consider who they recruit, how new members are onboarded, and what behaviors are rewarded to keep the board effective over time.
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2015 JGM Managing Up - How to Control Your Board
- 1. 11 September 2015 Managing up How to Control Your Board
- 2. Planned items • What boards do and how • Common complaints • The ‘right’ people • Strategy • Risk
- 3. Bob Garratt’s fundamentals • A director’s primary loyalty is to the company as a separate legal entity • Respecting the board’s collegiality and collective responsibility • The chairman is the ‘boss of the board’ and the CEO is the ‘boss of the daily operations of the company’ • The board must develop effective annual selection, induction, evaluation, development and renewal processes to keep itself healthy and sufficiently diverse • The board must ensure its connectedness to the rest of the organisation to test quickly the effectiveness of its policies and strategies, and have the flexibility to learn from them 9/30/2015 3
- 4. How boards operate • Joint and several liability • Personal liability even when no personal culpability • Only have power as a group • Can delegate to a member or executive • Balance independence and collegiality
- 5. Carver Model; limiting roles Strategic Plan Relationship with CEO Delegations to CEO Governance Processes
- 6. What is governance? Set strategy Obtain resources Ensure risk is managed Provide accounta- bility Hire (and fire) the CEO BALANCE COMPLIANCE AND PERFORMANCE
- 7. 9/30/2015 Julie Garland McLellan 2009 7 CEO’s Complaints • The wrong board members! • Board too operational / not strategic • Excessive emphasis on the wrong things • Board don’t recognise risks • Nominee directors • Conflicts of interest • Ineffective chairmanship • Bad behaviour outside boardroom
- 8. RIGHT PEOPLE
- 9. Get the right people Careful: • Who you recruit • How you induct • What they experience • What you reward as ‘good’ performance • Rules around removal of directors WRITE the rules down and enforce them! © Julie Garland McLellan 2010
- 10. STRATEGIC FOCUS
- 11. Congruence • If you want strategic focus give strategic information • Make the board decide • Set the right time horizons
- 12. What is ‘Good’ Information? • Relevant • Integrated • In perspective • Timely • Frequent • Reliable • Comparable • Clear Brief !
- 13. Skill v. Challenge Csikszentmihalyi (1990) and Wikipdia
- 14. Planning roles Strategic risk planning: Addresses the long term direction of the organisation — what it is going to do and how Operational risk planning: Addresses the activities and resources required to implement the Risk plan - eg production plans Business risk planning: Addresses the risks in the Strategic Plan - eg forecasts, financial plans, marketing plans and personnel plans Board CEO Senior management Staff Middle management
- 15. Plan time horizons Strategic planning Operational planning Business planning Reviewed… Annually Monthly / weekly / daily Quarterly Planning horizon Next 3–5 yrs Next month, week, day Next 12–18 months Board CEO Senior management Staff Middle management
- 16. RISK FOCUS
- 17. What boards worry about Issue 0 10 20 30 40 50 60 70 Noofmentions 17
- 18. Worries – by sector 0% 5% 10% 15% 20% 25% 30% 35% 40% Percentageofrespondents Government Commercial Not for profit 18
- 19. Worries – by experience 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Novice Experienced More experienced 19
- 20. Risk awareness When anyone asks me how I can best describe my experience of nearly forty years at sea, I merely say ‘uneventful’. Of course there have been winter gales and storms and fog and the like, but in all my experience, I have never been in an accident of any sort worth speaking about. I have seen but one vessel in distress in all my years at sea… I never saw a wreck and have never been wrecked, nor was I ever in any predicament that threatened to end in disaster of any sort. E J Smith, 1907
- 23. Risk matrix almost certain likely possible rare unlikely catastrophicmajormoderateinsignificant minor Likelihood Consequence low medium high
- 25. Simple • What gets measured gets done • What gets rewarded gets done first
- 26. Presentations are always too long for the time available! 26
- 28. M: +61 4 11 262 470 T: +61 2 9499 8700 F: +61 2 9499 8711 PO BOX 97 Killara, NSW 2071 julie@mclellan.com.au www.mclellan.com.au
Editor's Notes
- Directors Essentials Introduction to the Strategic Role of the Director
- Directors Essentials Introduction to the Strategic Role of the Director
- Foundations of Directorship Strategy and Risk for New Directors