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New breed of chair creates growth opportunities

Nov 03, 2014

By Lester Levy and David Clarke

If you aspire to be the chairman of a board of a New Zealand business or organisation perhaps you shouldn’t be relying on your social networks, or the colour of your old boys’ school tie. Times have changed.

Nor will following the traditional route of being a lawyer or an accountant necessarily get you on to the hot seat. While these skills are valuable, a wider range of business expertise and diversity is now being sought for the board table.

No matter your skill set, man or woman, you should be able to demonstrate that you have performed as a director, or in business, and that you have met and conquered some complex challenges.

Another thing to get your head around is very likely you will be interviewed and tested - as just one of several candidates for the job.

Other traditions are dissipating too, such as the chairman helping nourish a culture that is all about mitigating risk and meeting compliance demands. New Zealand businesses and organisations wanting to grow should have their chairman vitally engaged in the business. Post the GFC, Sarbanes-Oxley, the introduction of new accounting standards, recent amendments to the Companies’ Act and tougher rules around work place safety, an asymmetrical fixation on the dangers is a real concern.

That creates the risk of missing opportunity.

A chairman that demands total focus on fiduciary matters undoubtedly provides oversight of the business. One that similarly embraces strategy encourages foresight. But a modern chairman should also be a generative – driving creativity beyond strategic direction and thereby providing insight.

A generative chairman tracks trends around the industry or organisation and asks the questions: “what is the probable future”, as well as “what is today’s risk”?

The modern chairman should do a couple of things. The first is to ensure as many directors as possible are on as many subcommittees as possible (yes, to work) – and are given the chance to chair those committees as part of their own development. While very few subcommittees have decision making powers, by the time the board makes a decision it should have had as much input from all directors as possible.

Nor should the CEO necessarily be the management representative on all the subcommittees. Create ‘brain trusts’. The staff rep(s) should be the best fit for the purpose of the subcommittee. Diversity of experience is critical and staff should be given every opportunity to share their knowledge.

This formula frequently delivers innovative ideas that can recalibrate the direction of the company or organisation.

The second is don’t be afraid to “walk the front line”, concerned that this may be seen as interference. As chairmen we walk the floor of some big organisations and listen to what people have to say, how they say it and how they act when they are talking, working and how they handle matter such as workplace safety. It gives you real insight into the culture and prevents your perceptions being directed by any one player.

Furthermore, rules are changing in the relationship of the chief executive, senior and even line management with the board. While these new relationships need to be negotiated and the rules of engagement clearly established, in our view the days of the CEO acting as the sole interface or filter between the directors and his or her management team should be gone.

Neither should a chairman be unsettled by being subjected to scrutiny – and his or her directors to comprehensive performance appraisals. If we expect staff to live up to KPIs, why shouldn’t we expect the same from the board? Some directors do not perform. Should they stay just because they have a term of appointment?

One of the biggest fears of directors is that they are not listened to, or valued. A good chair helps people develop, picks them up when they stumble and to learn from their mistakes.

Finally, a good chairman needs to balance politically driven incentives with reality. He or she needs to be flexible and adaptive and to be adept at handling the “grey stuff”.

The risks of being a director are high and financial compensation for that often too low. But for us while the challenges are frequently big ones, the opportunity to be part of making a difference still remains both appealing and compelling.

Category: Community