Board Effectiveness and the Company Secretary

John Deffenbaugh Director, Frontline

2 February 2016

Who is the most important person at

the board table?

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Houston, we’ve had a problem here

• Level of understanding among board members about their business

• Type and level of information and intelligence available for decision making

• Effectiveness of non-executive director challenge

• Ability to hold executive directors to account for implementation of board decisions

1. Knowing the business

What is our business? Who is the customer? What does the customer consider

value? Peter Drucker

The Practice of Management, 1954

Financial Services Industry

The modern financial services industry is a casino attached to a utility: • The utility is the payments system, which enables

individuals and non-financial companies to manage their daily affairs. The utility allows them to borrow and lend for routine activities, and allocates finance in line with the fundamental value of business activities

• In the casino, traders make profits from arbitrage and short-term price movements. The users of the utility look to fundamental values. The occupants of the casino are preoccupied with the mind of the market

The activities of the casino have come to dominate the utility.

John Kay Sunday Herald 11 January 2009

We have to strive to alter our whole mentality about hospitals... Hospital building is not like pyramid building, the erection of memorials to endure to a remote posterity. We have to get the idea into our heads that a hospital is a shell, a framework, however complex, to contain certain processes, and when the processes change or are superseded, then the shell must most probably be scrapped and the framework dismantled.

Enoch Powell, Minister of Health, March 1961

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2. Information for decision making – From Data to Knowledge

Subjective and judgmental

Objective and analytical

Data

Information

Intelligence

Knowledge

Insight

Process Driven – ‘Black Box’

© Frontline

Joining the dots

Activity

Quality Cost

Strategy

Adapted from Kenichi Ohmae (1982)

3. Challenge function – Building trust in a system

Bedfellows Partners The Voiceless

Fence Sitters Allies Loose Cannons

Opponents Fellow Travellers Adversaries

High trust Quality of Relationship

with Proposer

Low trust

Low/ against

Level of Support

for Agenda

High/ for

Peter Block (1987)

You are entitled to your own opinions, but you are not entitled to your own facts.

Daniel Patrick Moynihan

Recognising the challenge of which ‘hat’ you wear

Personal – individual appointment and contribution

Interest – not a constituency

representative; functionally accountable

Corporate – team role of within

the board

Corporacy is uncomfortable!

© Frontline

4. Holding to account – Leadership challenge and support

Cosy club

High performance

Inertia/apathy

Stress

John Blakey and Ian Day (2012)

High challenge

Low challenge

High support

Low support

• Persecution • Anger • Stress overload • Lonely • Paranoia • Confronting • Fear • Threatening • Back-stabbing

• Exciting • Energetic • Risk taking • Fun • Collaborating • Purposeful • Creative • Learning • Stretching • High performance

• Indifferent • Cold • Drifting • Boredom • Uncommitted • Stress from underload • Frustration • Unclear

• Smothered • Vagueness • Frustrated • Caring • Cosy/comfortable • Non-confronting • Under-achieving • Not developed

Developing the capability of middle leaders

Staff

Exec team

CDs GMs

Direction from the top

Light a grass fire

“Middle out”

One either meets or one works. One cannot do both at the same time.

Peter Drucker

Essay “Know your time”, 1966

Adding value in the company secretary role

• Take a balanced perspective, eyes down to know the business, eyes up to understand the context

• Balance assurance with summary in board minutes, and consistency across committees, summarising to ensure quality of content

• Develop and provide guidance and training on writing board papers

• Understand the power dynamics on the board and work to build relationships through conversations

• Own the implementation of board decisions, providing a link across the organisation

• Work in service of not just the chair and chief executive, but the board as a whole

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Background

Frontline working with boards…

• Diagnostic • Peer Assessment • Well-led Review • Facilitation • Development • Coaching

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Frontline

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Frontline

11 Academy Street, Coatbridge, Lanarkshire, ML5 3AW T: 01236 433019 Central Court, 25 Southampton Buildings, London WC2A 1AL T: 0207 404 7005 E: consult www.frontline-consultants.com

John Deffenbaugh Director Frontline john.deffenbaugh@frontlinemc.com Mobile: 07788 746550 Twitter@DeffenbaughJohn www.frontline-consultants.com