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Principles of 21st Century Governance

Les Wallace, Ph.D.November 3, 2015

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“The Future Isn’t What it Used to Be” Yogi Berra

Today’s Business Environment

Volatility Uncertainty Complexity Ambiguity

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U.S. Army War College 1990’s3

21C…It’s Different“Permanent Whitewater” “The New Normal”

Speed: blinding, touching every aspect of life.

Complexity: quantum leap in mix of related forces.

Risk: upheaval raises threats and risks of “new ideas.”

Change: radical, drastic, sudden.

Surprise: unimaginable—challenging sensibility & logic.

Size: enterprise complexity, geographical spread, enterprise culture, governance competency, speed of decision making are all impacted.

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21st Century Governance Boards as Committees (‘50s-’60s)

CEO Driven

Boards as Managers (’60s-’70s)

Operational / Fiduciary

Boards as Trustees (‘80s-90’s)Policy and Strategy (John Carver)

21st Century Boards Transformational Leaders Governance as Leadership, (Richard Chait)

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Who is this guy?

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300+ Boards1,000+ Board Meetings

Over 100 Board Assessments

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The BAD, the frustrated, the disengaged.

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A Board Governance Puzzle: The Big Pieces

Board Talent Strategy

Performance& Risk

GovernanceProcess

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Applying Competency Theory

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Keeping the right “KPIs” in Sight

Financial Performance

Member ValueStrategyCommunity

BrandOrganizational

Culture

Innovation / Quality Improvement

ERMSustainability /

community citizenship

Governance Excellence

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http://www.cues.org/article/view/id/Good-governance-key-performance-indicator-tracking

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Governance Process

Board Competency &Recruitment

Governance Practices:MeetingsCommittees

StrategicFocus / Innovation

PerformanceTracking

Exec Team /BoardPartnership

Assessment& Development

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Where is Your Board?Dysfunctional: characterized by a lack of trust, information

hording and resistance between CEO and board.Imperial: long board and CEO tenure gives way to CEO

guiding the agenda, board appointments and what the board gets as information, quite traditional meetings.

Entrenched: minimal strategic dialogue with executive team, solid board policies and satisfactory performance yet can’t seem to break into high performance gear.

Strategic: high commitment to learning about / following best governance practices, heavily invested in strategic and system thinking, independent board appointment processes assure competent members, strong committee processes, regular self assessments.

© Signature Resources 2015 13“Know Your Rubber Band”Deedee Myers, Cues Skybox

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Our Journey Tonight Based on the Governance Literature

Some key questions boards should ask with regularity.

CEO / Board partnershipEvaluating and Providing Feedback to the

CEO

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10 QuestionsThat Make Boards Better

Regarding Strategy and Direction

① How well are we meeting our mission?

Outcome measures? Benchmarks with others?

② What opportunities or threats are being presented in our changing business environment?

“Sensing” the environment and having regular dialogue.

CEO “thinks out loud” about our future?

③ What is our three year plan to become better and stronger?

Annual planning retreat?Audacious goals?70% of meeting discussing strategy?

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10 QuestionsThat Make Boards Better

Regarding Performance

④ How strong and well managed are our finances?

Key performance indicators?

Operating reserve?

Diversified sources of revenue?

⑤ How would our customers, constituents like to see us change?

“Value” survey?

Population needs assessment by lifecycle?

⑥ Are our employees satisfied and fully engaged in our work?

Measures of engagement?Investment in employee development?

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10 QuestionsThat Make Boards Better

Regarding Governance

⑦ Are we governing, managing or rubber-stamping?

Board sets it’s agenda.

⑧ How can we become more informed and effective?Annual self-assessment and development plan?

⑨ Who have we identified and begun grooming to replace departing board members?

Desired board profile for 2020?

Succession plan?

⑩ Does the board revisit, clarify and provide feedback on the CEO’s performance at least twice a year?

Questions?

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Leading the CEOThe Board’s job is to help the CEO be as

successful as possible.Does the CEO have an executive

leadership development budget?Does the board conduct annual goal

setting for the CEO?Does the board provide evaluative

feedback to the CEO TWICE a year!Expect the CEO to “think out loud” about

the future of the organization—without judgment.

Partnership: What CEOs Ask Me to Remind You!

A professional relationship: not bowling, golfing, or skiing buddies.

Feedback / direction / inquiry should be conducted in an executive manner not @ church or on the golf course.

Rules of engagement should exist: Commit to face-to-face meetings outside of Board meetings. Have an advanced agenda for the conversation. Effective communication is specific not general. Good feedback is timely!“What CEOs Really Think of Their Boards.” HBR (4/2=2-13)

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Managing partnershipCEO Work Priorities Summary should be available to

the board:CEO key strategic priorities and quarterly metrics.CEO key operational oversight/initiatives and

quarterly metrics.Amount of CEO time (e.g.15%) devoted to board

communication and liaison.CEO’s personal development plan.And please—expect all CEO and Executive team

reports in “executive summary” / dashboard formats!

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Evaluating the CEO① CEO completes a self-assessment for board.

Beneficial for CEOs to have 360 Feedback every couple of years to help this process.

② The board surveys members for feedback regarding the CEOs performance for the prior year and suggested goals for next year.

③ Executive or Governance Committee reviews the input and creates a draft evaluation including salary and bonus recommendations.

④ Full board reviews and approves final evaluation and salary considerations.

⑤ Executive or Governance committee holds feedback session with CEO.

⑥ Board finalizes evaluation and any salary or bonus actions.

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Evaluating the CEO50% demonstration of leadership competencies…

Strategy

Transformation

Enterprise management

Client focus

Board relations

Integrity / Credibility

40% achievement of goals set by the board…

10% Special accomplishments / contributions.

What are the “leadership development goals?”

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Evaluating the CEO

Partnership Clarity: Managing the Dilemma

Thorough CEO review, evaluation and goal setting annually.

Board mid-year feedback to the CEO regarding performance.

Annual facilitated retreat to align vision and strategy.

Clear Board direction on where the CEO should stretch their thinking: “Where do you want me to scare you?”

Clear direction from the Board on where the CEO needs to provide more information, updates, and “think out loud” about the future.

Outside assessment of governance.

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CEO Leadership and Board Partnership

If the CEO’s not scaring the Board regularly, It’s not a robust partnership!

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“But Les Wallace said to scare them!” 26

Flipped Presentationsand Board Dialogue

All background reading including “frequently asked questions” and answers prior to the meeting.

An executive summary prior to the meeting scopes any recommendations.

The “agenda item” therefore begins in “discussion” mode rather than background mode—thus saving precious face to face time for dialogue.

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http://www.cues.org/article/view/id/Flip-That-Meeting

21st Century Meetings: Using Executive Summaries

One pageBegin with the Bottom line:

The Recommendation, or The current status, or The seriousness of the dilemma

Then work backward to scope a “brief” context: High Level Data ($, surveys, history, trends) Strategic Implications Answer some “FAQs”

Further elaboration: see “Executive Briefings to Managers and Boards” in articles on www.signatureresources.com

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Board Makeup

Diversity will be more closely scrutinized.

Generational mixes will be important and a strategic issue for credit union boards.

A pipeline of future board members will be created by boards to assure ample sources of competent individuals meeting the desired profile.

Associate board members will become commonplace—fully integrated in everything except voting.

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Governance Youth Movement(As seen by some)

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Questions

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Les Wallace, Ph.D.President, Signature Resources Inc.Les@signatureresources.com

Dr. Wallace is recognized for tracking business environment and workplace trends and their impact upon business and government. His publications have appeared in Leadership Excellence, Personnel Journal, Credit Union Management, Public Management, and Nation's Business as well as numerous research and conference proceedings. His book, co-authored with Dr. Jim Trinka, A Legacy of 21st Century Leadership, outlines the leadership organizations need in a global, fast moving business environment. His book, Principles of 21st Century Governance (2013) is already being used by many boards to design governance development approaches. His newest book Personal Success in a Team Environment helps you become CEO of your own career.

Les is a frequent consultant and speaker on issues of organizational transformation and leadership, employee engagement, strategic thinking and board of directors development and governance. His clients include Fortune 100 businesses, Government agencies, and not-for-profit organizations world-wide. Dr. Wallace is also the host resource on the 9Minute Mentor, a series short video tutorials governance.

Les has served on the Board of Security First Bank and currently serves on the international Boards of the World Future Society and Counterpart International. He is a member of the National Association of Corporate Directors. Les writes an on-line column for CUES Center for Credit Union Board Education.

Preview his video series on governance: www.signatureresources “Dr. Wallace on Camera.”

https://twitter.com/9MinuteMentor

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