Boardroom decision-making under stress: the impact on hard and “soft” contracts. My speech @IACCM Europe Conference 2019 in Madrid, 14 May 2019.

 

Ciarán Fenton

Leadership consultant

Facilitating high EQ & ESG focused executive & main boards

 

A speech to delegates attending

The IACCM Europe Conference 2019

14 May 2019, Madrid, Spain

 

Boardroom decision-making under stress: the impact on hard and “soft” contracts

 

Good morning!

 

My thanks to the IACCM conference organisers

for inviting me to speak at your conference here in Madrid.

 

 

I’ve never been to an IACCM conference before,

and I’m delighted to be here.

 

 

The invitation came about because the organisers

had read a speech I gave last year

on how lawyers can become enablers of better decisions

by building better relationships.

 

 

In that speech, I also reminded lawyers that,

at a time of extreme right and left wing politics,

and a vacant centre ground,

they are the closest thing, believe it or not,

society has to morality

and society needs them to protect our hard-won democracies,

by people who died in trenches,

in how they facilitate ethical behaviour in business.

 

Lawyers need their own Greta Thunberg.

Unless there is a fundamental change

in the context in which legal services are delivered

the problems will get worse, not better.

 

You can imagine how well that went down!

 

And so with that as background,

I will address that part of the

Foreword to your conference

in which the organisers state that

 

“Businesses today face not only growing regulatory demands,

but also increased social expectations

regarding corporate behaviour and values.

 

Contracts – and those responsible for them –

play a major role in maintaining ethical standards…

new approaches, new ideas, new forms of relationship and commitment

are increasingly key to business survival.”

 

My remarks will also hopefully chime

with IACCMs vision of a “world where all trading relationships

deliver social and economic benefit.”

 

I should make clear from the outset

that I’m neither a lawyer, a contracts manager

nor a commercial manager.

I’m a leadership consultant

who facilitates behavioural change on boards.

 

But my interest in contracts started at a young age.

I’m often teasingly reminded by my Family that

in 1969 when I was nine years old

I insisted that my then six-year-old little brother

sign a contract which I bashed out

on a manual Brother typewriter

as to the terms,

and conditions,

under which my bike could be used!

 

I’m not necessarily proud of this story

but I tell it only because it’s true.

It was about survival in a large family –

I was the sixth of seven;

he was the seventh!

 

Some might suggest that the contract was driven

from deep envy of the doted upon newcomer.

I couldn’t possibly comment.

 

I majored in Law in my business degree,

and spent most of my corporate career

negotiating commercial – mainly intellectual property contracts –

and as a consultant,

I have over 15 years’ experience

advising senior leaders and boards,

much of it regarding their relationships,

internal and external.

 

At university, I remember liking Contract Law the best.

I found that the elements of a contract appealed greatly

as a system which might create order from chaos.

 

Of the elements which I recall –

Offer, Acceptance, Consideration,

and Intention to create legal relations –

the last captured my imagination most.

 

I liked the notion of a declaration of intent very much.

 

And it’s in relation to boardroom decision-making under stress

which impacts their collective EQ

or emotional intelligence

and therefore their contracts

I want to address my specific remarks.

 

There are many reasons for stress on boards

but they frequently include

 

1. Stress relating to short-term financial results

 

2. Stress caused by a risk event, as the lawyers like to call it

 

3. And stress caused by the behaviour of board members

 

Now stress relating to short-term financial results

is the single biggest driver of stress on boards.

 

And the stress is not necessarily

at its worst when the results are poor.

 

The focus on growth at all costs

causes deep anxiety on executive boards,

even when results are good and often

unconsciously

because growth at all costs is seen as BAU

or business as usual – the norm.

 

So why would anyone stress openly about it?

 

And risk events on the other hand,

are highly visible

and so the stress on boards is highly visible.

 

But stress caused by the behaviour of board members

is often collateral damage from the first two –

financial and risk event stress.

 

Therefore my focus in this talk is on boardroom behaviour or,

more accurately,

boardroom conduct

which is defined as behaviour over time.

 

There are three types of board-room behaviour

which impact negatively

on decision-making on internal and third-party contracts.

1. Bullying

 

2. Silence

 

3. and Agenda control

 

Bullying is about coercion. Obviously.

 

Silence can be about two things:

fear of calling out behaviour which directors know is unacceptable

or it can be happy collusion with the status quo.

Both are deadly.

 

Agenda control is about board members ensuring that

matters which should be discussed

don’t even reach the agenda.

 

By way of a useful, if shocking, case study example

of stress and behaviour on boards,

in May 2018 a joint committee of the United Kingdom’s Parliament

published a report into its inquiry

into the tragic and now notorious collapse of Carillion,

a construction and facilities business

with 43000 employees.

 

The report, which is available online,

sets out, as you might expect,

all of the appalling failings

not just of the board –

with the notable exception of one NED

who demonstrated that it is possible to call stuff out –

but of external parties

whose behaviour also led to the collapse.

 

But nowhere does it say that the board was under stress!

 

That would be tantamount to an excuse,

would it not?

 

However, in the last of the 52 recommendations

and lessons in the report

there is a hint at the deeper malaise in business

which is permitted by society:

 

“Carillion was the most spectacular corporate collapse for some time.

 

The price will be high, in jobs, businesses, trust and reputation.

 

Most companies are not run with Carillion’s reckless short-termism, and most company directors are far more concerned by the wider consequences of their actions than the Carillion board.

 

But that should not obscure the fact that Carillion became a giant and unsustainable corporate time bomb in a regulatory and legal environment still in existence today.

 

The individuals who failed in their responsibilities, in running Carillion and in

challenging, advising or regulating it, were often acting entirely in line with their

personal incentives.

 

Carillion could happen again, and soon. Rather than a source

of despair, that can be an opportunity. The Government can grasp the initiative with

an ambitious and wide-ranging set of reforms that reset our systems of corporate accountability in the long-term public interest. It would have our support in doing so.”

 

Don’t hold your breath.

 

The regulatory reform can occur only by the will of the people

and the will of the people isn’t yet sufficiently consensual

to demand the regulatory change required.

 

But the most interesting line in the paragraph is:

 

“The individuals who failed in their responsibilities,

in running Carillion and in

challenging, advising or regulating it,

were often acting entirely in line with their

personal incentives.”

 

And of course, these incentives were perfectly legal.

Indeed they were contracts.

 

Which demonstrates that contractual context is key.

The intent is all.

 

But we will be waiting a while for good intent

to become core to

post-contractual behaviour.

 

Meanwhile, however, if you are interested

in understanding how a high EQ/ESG focus

might mitigate some of the risks

associated with stressed boards and

their poor decision-making behaviour

a good start is to refresh your memory

on behaviour which indicates high EQ.

This includes:

1. Empathy
2. Self-awareness
3. And an ability to negotiate needs productively

 

And it’s the process of negotiating needs productively

that suffers most

when boards are under stress

and it is that very factor that impacts

on contractual negotiations most negatively.

 

Marshall Rosenberg

in his bestselling book Non-vViolent Communication

amongst other writers

has an antidote to this needs negotiation problem:

 

He recommended that in negotiations

we first ask what we FEEL – “The F Word”!

then ask ourselves

what we NEED in relation to that feeling

and finally what range of action options

do we have to meet the need

to address the feeling – DO

 

The problem for many board members

and contract negotiators

is that they act, knee-jerk fashion,

before connecting with their FEELINGS and NEEDS.

 

Rosenberg gives the example of the busy business executive

who said he absolutely needed a divorce from his wife

who, he asserted, never appreciated his hard work.

 

Rosenberg pointed out to him

that while a divorce was one option,

the heart of the matter was that

he FELT unappreciated,

he NEEDED appreciation

and not necessarily divorce.

 

This was confirmed by his wife who FELT lonely,

and NEEDED to see more of him

and, given the chance,

he might have heard more appreciation from her

and she more intimacy from him

 

Society and therefore the market

is increasingly saying YES

to high EQ in decision-making.

 

Witness the 20% weighting given to ESG factors –

environment society and governance –

in the ranking of the TOP 100 CEOs

by Harvard Business Review.

 

Over time this weighting will increase.

 

Or witness the massive increase

in so-called ethical investments

which require

nuanced emotionally intelligent decisions

 

Of course, the growth in ethical stocks

is becoming embarrassing

as it logically implies

that all other shares are unethical.

 

The problem is that

despite all the huffing and puffing

by those who are desperately

trying to make a business case for ESG,

there isn’t one.

 

If there was money in ethics, we would all be at it.

 

The fact is that doing the right thing costs dosh!

Carillion would have paid fewer dividends

had it made more prudent decisions.

 

When society decides

that business should be about

making as much money as it can

because profit and ROI is essential

because we need people

to take risks with their capital

not least because we need jobs

and we need to fund our hospitals,

schools

and police forces

but that in future we will not do so

at the cost of damaging the environment,

unequal pay for women, for example,

and unethical governance.

 

There is NO business case for

paying women the same as men,

because it costs more.

 

But society only RECENTLY decided

that you cannot have a license to trade

without paying women the same as men and

in future that will be the cost base t

on which to run a business.

 

Let’s be honest here –

women would have been treated fairly forever

if there had been a business incentive for doing so.

 

There wasn’t.

Now society is saying :

suck up the cost or else!

And quite right too!

 

In my work with executive and main boards,

I help them mitigate behavioural risks

in their decision-making and

therefore in their contracting

by focusing on three situational components:

purpose, strategy and behaviour ;

PSB for short.

 

First, I facilitate board members

in agreeing on the PSB of their organisation.

 

It’s surprising the number of organisations

that struggle to articulate its purpose,

other than making money

which is like saying a person has to breathe

to stay alive.

 

Maximising profit is a collateral benefit

of becoming the best

at whatever product or service you sell.

 

Once directors have permission

from society via regulation

to talk about an organisational purpose beyond profit

then they can take decisions in a new way.

 

But that PERMISSION is key.

 

You would also think

that most organisations have a fully thought through strategy –

one of the most abused words in the business lexicon –

but often this is not the case

because frequently they have a strategy only

for short term profitability which is not sustainable.

 

Therefore the decision-making

and contracting behaviour, or B in PSB,

usually matches a short-term profit-only-Purpose,

and a short-term strategy.

 

Second, I encourage individual board members

to articulate their personal purpose

strategy

and behaviour

or Personal PSB.

 

Organisations are merely

a coalition of individuals

for a brief period.

It follows that their

personal purpose

and their organisational purpose

are interdependent.

 

So why not bring that out into the open?

 

Finally, I facilitate board members

to negotiate with each other soft contracts

in what, I call, small behavioural change

that’s just changing ten interactions in every 100.

That’s only ten per cent or small change.

 

I also help them legislate

for the breach of their soft contracts with each other.

 

For example one client

whose CEO was a notorious micro-manager

agreed to reduce his micro-managing behaviour

by 10% in return for one of his directors,

a notorious denier of mistakes

agreeing to own up to errors more often by 10%

and to legislate for when they failed each other.

 

The micro-managing CEO was so competitive

that he reported a 20% reduction in micro-managing

an increase in morale – Quelle surprise!

He had more time – no kidding!

Micro-managing is a time-consuming monster

 

But I suspect the greatest change was an

appreciation that he could trust people more

and take more risks

 

The CEO acknowledged

– a mark of his high EQ-

that his micro-managing

was a result of his formative years’ experiences

during which he was absolutely NOT allowed

to fail

 

If we don’t allow our children to fail,

we will create micro-managing CEOs

 

One of the best ways to reduce

decision-making and contract risks

and increase decision-making and contract opportunities

is appoint an Executive Devil’s Advocate

by rotation

at each executive and main board meeting

with permission to say out loud

what everyone is thinking but not saying.

 

In time I predict

that Executive Devil’s Advocates

will be commonplace

 

Had Carillion had one

It would almost certainly be alive today.

 

And surely, if that’s the lesson from that saga,

it can’t be a bad one.

Thank you.

 

 

 

 

7 First 100 Days suggestions to Facebook’s new GC, and all new GCs…

1. Remind her board that she is an officer of the court and lawyer first and a business person second

2. Waive any long-term incentive or bonus scheme which might possibly be construed as compromising her independence, no matter how remotely

3. Tell the board that if they put her under any ethical pressure whatsoever she will publish the fact widely including on her Facebook page

4. Tell the board that her role and purpose, and that of her legal function, is to enable better decision-making and legal process which honours the environment, society, governance and profit, equally

5. Tell the board, not ask it, what legal counsel and process it needs to achieve its objectives and manage its SWOT; tell it how much all of that will cost and deliver only what is funded; no ”more for less” BS.

6. Help create a culture where ”calling out” unacceptable behaviour is the norm

7. Strive for a legacy which reads: ”She helped Facebook move fast and break things, but never the law” because people died in trenches so that democracies could survive through lawful behaviour and trade.

Ciarán

NEDs have power, not just influence: they should use it or lose it.

There’s no “NED box” to tick on the registration form for Directors required by Companies House.

Neither is there a distinction made between executive and non-executive directors in the Companies Acts.

Each NED has the same legal duties, responsibilities and potential liabilities as their executive counterparts.

Even insurance companies, the ultimate arbiters of reality, don’t offer cheaper premiums for NEDs.

Yet we all know that in practice many – although thankfully not all – NEDs behave, and are expected to behave, as if they are observers, influencers or, in the parlance of school governors – “critical friends”.

In my experience working with otherwise not-to-be-messed-with CEOs who become NEDs, there is a tendency among some towards timidity, fear of rocking the boat, and a hyper-gratitude for having a NED role at all in a competitive market.

Some NEDs place their “calling stuff out” setting on “Low” on the basis that they believe that “operational” matters constitute the bulk of a board’s deliberations and they are petrified of “interfering in operational matters”.

High on the list of some NEDs’ fears is a horror of developing a reputation of “being a pain the arse NED”. This widely used term, unsurprisingly, does not appear anywhere in the Acts.

To be fair to NEDs it’s not their fault that legislation has not yet caught up with the developments in ESG reporting, the trend towards “impact” investing and increasing calls by high profile business leaders for business to serve society.

The recently updated FRC Corporate Governance Code and the other “lighter” codes offer a clue to NEDs as to the regulatory direction of travel.

And the direction of travel is, without doubt, towards board decision-making which balances environment, society, governance and profit issues equally (ESGP).

My advice to NEDs, therefore, is to do three things: use to the full the powers granted to them by the Acts; build close, supportive relationships with GCs and thoughtful lawyers and become a complete pain in the arse in support of ESGP.

Why? Because society is demanding it. If you need convincing, watch the short video on social media of JP Morgan CEO Jamie Dimon squirming under the calm but razor-like interrogation of Rep. Katie Porter at a recent congressional hearing.

He failed to explain to her how he could help one of his low-paid employees make ends meet while he trousered $31m. As CEO his ESG settings seem to be set at “Very Low/Almost Off” in respect of costs.

I’m afraid the revolution is a ‘comin. And it won’t be about socialism. Or about reformed capitalism. Or about CSR. Capitalism is just fine. What will change will be the nature of the mandate society will grant organisations to make a fair return on capital employed. That’s all.

The harsh reality is that for Mr Dimon’s employee to make ends meet, his company will have to spend more on her and less on himself or others. It’s that simple. That means boards taking decisions that reduce profits. Slightly goes against the grain, doesn’t it?

I don’t buy the view that “ethics are good for business”. If you could make money from ethics, everyone would be at it. This is where NEDs come in. Their job will be to restrain the executives from unbalanced ESGP decisions.

They will feel the heat more acutely soon. And if they don’t measure up, society won’t allow them their much sought after “portfolio” careers. This will hurt them because many NEDs genuinely believe they are doing a good job and protest that they are “allowed” to say what they like.

The bar is about to become much higher. What passes currently for calling out poor conduct on the board by NEDs will in future be seen as merely benign nagging. NEDs will, in future, have to threaten serious consequences if their reasonable challenges remain unheard.

Do you think this is far fetched? If so, think again. NEDs will use or lose their power. Society has had enough of the Carillions & Persimmons, the dodgy auditors and poorly behaved bankers, unfair pay and male-dominated boardrooms. Listen to the mood music getting louder in the vacuum created by the extreme left, and right. Centrists are pro-capitalism on fair terms.

And lawyers will be the first to be told to change their behaviour by regulators. In turn, they will kick “the business” hard, because they will have the regulatory power and professional backing to do so.

Some lawyers will resist and end up in orange jumpsuits if not sidelined by a giant of a profession stung into action by society’s demands after years of complacent slumber.

NEDs will be next in line to worry about the consequences of their behaviour. My advice to them is not to wait for the tumbrels to roll, but at your next board meeting to ask this simple question:

“How does this decision impact the environment, our responsibilities to society, our requirement to meet the highest standards of governance and at the same time our need to make as much money as we can? Is this decision ESGP compliant?”.

Like Rep. Katie Porter, use your power to ask hard questions, repeatedly and without fear or favour. Otherwise, sooner than you think, you’ll be the one under cross-examination.

Ciarán Fenton

Is the partnership model a busted flush? My speech to The Managing Partners’ Forum…

Ciarán Fenton

Leadership Consultant

Facilitating Emotionally Intelligent Boards

A speech to members of The Managing Partners’ Forum’s

Debate on The Future of Partnerships

Is the partnership model a busted flush?

London, Thursday, 4th. April 2019

 

Fellow providers of professional,

advisory and consultancy services to clients,

Good morning!

My thanks to The Managing Partners’ Forum

for inviting me to speak on the motion

this morning which is:

The Future of Partnerships

Is the partnership model a busted flush?

 

I will argue that the partnership model

is suffering from boiling frog syndrome

 

The water around it is tepid

the temperature rising by the day

it’ll be dead before it realizes what’s happening

 

I will focus my remarks on legal services partnerships

because I know them best

However, my comments apply

to almost all professional services partnerships

and contexts

 

In respect of lawyers, I must start by

unburdening my conscience

I have a sort of

“love-hate.”

relationship with them.

Sometimes,

 

I find them VERY frustrating

and sometimes

They are the most engaging people in business I know

 

Frustrating because often their

Emotional intelligence or EQ

is in inverse proportion to their IQ

Engaging because, when they access their EQ,

there are few more engaged

 

And in matters of leadership

EQ, for the avoidance of doubt

as lawyers like to say,

is what the partnership debate is about.

 

Since EQ outstrips IQ in importance

in leadership, therefore

in partnerships, it really matters

 

I should make clear

at the outset

that I am not a lawyer.

 

Note I didn’t say I’m a “non-lawyer.”

– that embarrassing ubiquitous misnomer

as if there’s such a thing as a non-doctor –

 

But I did major in Law

in my business degree

and then I spent most of the next 35 years

working with lawyers

 

First as an accountant –

and later as a director

in various organisations

 

And when I set up my leadership consultancy,

over 15 years ago,

I ended up spending

more than HALF my time

working with lawyers of all kinds

because they were experiencing

leadership “issues” at work

 

In-house, private practice,

public and private sector,

B2C and B2B.

 

Lots of in-house lawyers

– a key source of partnership fees –

were becoming leaders

because companies twigged that the cheapest

legal services were best provided in-house

and they needed their legal teams led

so in-house lawyers had to learn to lead

in a corporate environment

 

 

And because private practice firms

started to realise that the old ways weren’t working,

if not sure why exactly,

they too began to look at leadership issues

 

 

So I facilitated leadership programmes

with General Counsel

and their in-house teams

and with private practice managing partners

and their teams and boards

 

Consequently, I became immersed

in all the key partnership issues

and I also came to know

and understand lawyers as people

human beings

with good days and bad

in one of the few remaining

unreconstructed sectors on the planet

 

I warmed to the people

and to the subject

gave many talks,

facilitated workshops and off-sites

wrote blogs and articles

 

However, where I gained the most profound insight

was in the scores of 1-1 sessions

that I facilitated

with lawyers,

young, old and middle-aged

 

 

These were often deeply moving

as the person behind the professional mask emerged

 

So I must know hundreds of lawyers

– which makes me feel like a kind of

David Attenborough of the sector.

 

Fascinated –

even a bit obsessed

in the fascinated sense

perhaps a bit envious

but not one of them.

 

And In the main,

most lawyers I’ve met are

usually “nice” people.

and they’re invariably bright –

sometimes, awesomely bright.

 

And they’re incredibly hardworking.

and they’re interesting

and good company

because they tend to be

readers and thinkers –

and have opinions on everything –

from politics to sport.

 

But there’s one thing

I’ve come to notice

Over the years with all lawyers,

is that they feel

they have to know

ABSOLUTELY EVERYTHING!

 

 

Now,

I don’t BLAME them for this.

Society grabbed very bright

young people from university,

put them through law school –

where they force-fed them

an adversarial model,

and more often than not

made them value thinking

over feeling.

 

After that,

They worked them to death in law firms

Where they had to knuckle down

under the partnership system

where billable hours

were measured to the minute

 

And, of course, we know that

people tend to deliver only what’s measured

 

The system required lawyers to be tough,

analytical, unemotional

and fees oriented

 

And the partnership model was the best Model to support that system. So it thrived.

and to a large extent, it still does

and there was and is, currently

no incentive to change it,

proactively

 

But the problem is that many

lawyers ended up in leadership roles

as Managing Partners

and they design organisational models

and they lead people

in a modern organisational context

 

And these essential activities

can’t be billed by the hour

yet must be done

 

And this reality is resisted by some partnerships

which insists that their managing partners bill hours

when they should be on zero hours

because leading is a full-time job

 

And even those firms which allow their

managing partners zero hours

some experience passive aggressive

carping from some partners

who feel they are feeding freeloaders

and sometimes it’s not so passive aggressive

 

And these managing partners sit on boards

and take strategic decisions

or contribute to decisions

but when they do so

most do so with the mindset of lawyers

 

 

Even they admit

they were not trained to lead

and some I have spoken with

frankly, don’t value leadership skills

as much they value legal skills

 

 

So how can we trust their leadership?

 

 

The partnership model assumed

that there was NO case to answer in respect

of lawyers’ ability to run their own businesses

in-house or out

 

 

Notwithstanding the fact that their legal training

contained little or no leadership training

and the fact that great lawyers are not necessarily great leaders

Tho’ often the best lawyers become leaders.

 

And of course, lawyers do attend

Management and leadership courses

But they approach these

with a legal mindset, also,

forged in the crucible

of their legal training.

 

And their training

usually excluded the F-word –

Feelings

Lawyers are trained

to distance themselves,

to some extent,

from their feelings.

 

 

That’s OK

when it comes to black letter law –

Or in court –

Or when they want to win a deal point

 

But leading people

And designing models and organisational structures

requires a DIFFERENT skillset

 

It’s more problematic

it’s can’t be reduced

to an analytical problem to solve

 

It’s a bit

well, ‘touchy-feely”

 

And the problem is,

leaders can’t lead

and can’t design or redesign

sustainable organisational and leadership models

unless they engage with their feelings

and with other people’s feelings

 

I’m afraid there’s no way around it.

 

I know this to be true because of the work

I do with boards

 

My leadership programme

for main and operating boards

and executive committees

including the work I do with

partnership management boards

 

is called The Emotionally Intelligent Board

 

An emotionally intelligent board

applies EQ principles in its decision making

by understanding the inter-dependence

between the personal purpose of board members

AND the purpose of the organisation

AND the purpose of the board in achieving

the objectives of the organisation

 

As a reminder the core principles

of emotional intelligence are

 

 

1. Empathy

 

2. Self-awareness

 

3. And an ability to negotiate needs productively

 

And it’s in the area of negotiating needs productively

that lawyers and managing partners sometimes struggle        

 

In my view an emotionally intelligent board in a law firm

or any professional services firm

should start planning, if not already,

for the demise of the partnership model

because:

 

 

Society and therefore the market

is increasingly saying YES to high EQ in decision-making

 

Witness the 20% weighting given to ESG factors

in the ranking of the TOP 100 CEOs by Harvard Business Review. And over time this weighting will increase

 

Or witness the massive increase in impact investment assets

which require nuanced emotionally intelligent decisions

not crude ROI analysis.

 

And society is saying YES to emotionally intelligent leadership

 

Witness the hugely positive reaction

to Prime Minister Ardens’ high EQ response

to the atrocity in Christchurch last month

 

 

And if society is saying says to high EQ leadership

it’s, therefore, saying yes to high EQ boards

 

Witness the emphasis on soft issues in

the recently updated corporate governance codes

e.g. FRC and Wates Principles

 

But the partnership model tends,

more often than not to say

NO to high EQ generally

NO to high EQ leadership specifically

AND NO to high EQ boards consequently

 

There can be only one logical explanation for this

Lemming-like behaviour

Lawyers suffer from what my Dad used to call

“compound ignorance”

They don’t know what they don’t know

 

And they don’t know enough about EQ

because it isn’t valued

and the reason it isn’t valued

is because it isn’t measured

 

Just Google emotional intelligence

or mindfulness or empathy at work

 

And you will get thousandths of hits

The EQ focus is not a fad

EQ is here to stay

And it embraces #metoo

and gender pay equality

 

The fads have gone.

They were blown away

By the last corporate scandal.

 

And the link between corporate scandals

and the demise of the partnership model

is that trust in business is at all time low

 

And law firm partnerships and their in-house clients

are in danger of being perceived

to be standing by

while that trust is lost,

the partnership model

is seen as part of the problem

not part of the solution

 

And part of the boiling frog syndrome

is that society will punish lawyers

and all professional service providers

especially auditors

 

For not protecting them better

against the excesses of the market

and of course, there’s a particular injustice to this

because in-house counsel are frequently bullied by their

employers, put under “elevated ethical pressure”

–   a term used in a 2016 UCL Moral Compass Survey into in-house counsel –

 

And sadly, the profession

appears not to be creating

an environment in which lawyers can

have each other’s backs

 

Private practice partnerships are not rushing

To the aid of their in-house comrades

whilst taking their cheques

and The Law Society and SRA

are not geared to help either

 

Prof. Stephen Mayson in his

current review of the provision

of legal services appears

to be putting the role and purpose of in-house counsel

under the microscope

For good reason

 

“The Review”, he says “provides an opportunity

to reflect on whether the regulatory provisions that

apply to in-house counsel could be better crafted”

 

He’s right because sometimes they are forced to play down their responsibility as Officers of the Court

and to “do more for less”

a mad principle if I ever heard one

 

And yet in-house counsel and out of house lawyers

don’t confront “the business” which feeds them

 

And in-house counsel don’t have

as I believe they should have their

Office of The Court title

written into their contracts

 

Their independence is sometimes compromised by

their LTIP and bonus schemes

 

In-house lawyers have trained the business to get “more for less from them” yet also have trained “the business” to expect high fees from private practice

 

And this situation is held in place by all

concerned

It keeps the partnership model

alive and kicking

 

Why would anyone do anything

to rock this lovely boat?

Why would plump partnership turkeys

Vote for a new brand of “touchy-feely” Christmas?

 

It’s, like, market forces,

Innit?

 

But ironically, market forces

will make the water boil faster

because the market i.e. society

is getting very fed up

with this mess

 

 

 

they want their lawyers

standing up for the law

they want fewer corporate scandals

and avoidable business collapses

 

 

 

they want business employers to treat lawyers better

and private practice lawyers, especially the younger ones,

to be less stressed

 

In the current political context

with a vacant political centre

and an extreme left

and extreme right

we need our lawyers

to stand for up

for what people died in trenches for

 

None died for the billable hour

although, ironically, some lawyers

have died from stress,

alcohol or drug addiction in its service

 

So those who provide value to society

through organisational models which value

shared purpose above personal wealth

will thrive and those that don’t, including typical legal partnerships, will, ultimately, collapse

 

 

I acknowledge that many will disagree with my point of view

However, I take heart from the fact that even academics and

commentators can’t agree

 

 

In her book, Leading Professionals, Power, Politics, and Prima Donnas,

Professor Laura Empson

writes that ineffective leadership in partnerships

can be ineffective in three ways

 

First, they may be a failure “to contain organisational conflict”…

 

Second “they may avoid conflict

and fail to resolve inherent tension.”

 

And Third, if some within the partnership live

“within a harmonious cocoon, they may become disconnected from the anxieties of others.”

 

Yet she writes that “partnership works

in professional organisations because

it is the optimal

method of reconciling

the competing interests

of three sets of stakeholders:

professionals,

owners, and their clients

thus bringing together and reconciling questions of power, benefit and accountability.”

 

I’m not so sure this is still the case as much as it was

in the past.

 

Professor Stephen Mayson

in his review of her book

in Modern Legal Practice

challenges the stability of her four “characteristics of partnerships

“career-long tenure,

close personal relationships,

shared values and mutual trust…”

 

Given “generational differences and expectations.”

– what some call the millennial problem

a term they hate

as if none of that cohort is unique –

 

“changing promotion, retention

and reward structures

and increasing geographical

and social diversity are eroding all four of them”.

 

He adds that “there’s an increasing shift

from the individual to the organisational

and “these challenge autonomy, control,

power, security and performance assessment.”

 

For “challenge” read

increased temperature around

the frog

 

But the part of his Review that stuck

the biggest chord with me was

where he writes that

“Increasingly firms are not only

abandoning Partnership as a legal form

but also at best paying lip service

to a partnership culture and

ethos in their structural

and governance arrangements.”

 

Many factors will contribute to

The destabilization of partnerships

 

And these are well rehearsed by

commentators like Richard Susskind,

Jordan Furlong and Mitch Kowalski

to mention just three

 

But it will, in my view, be social factors

that will bring them down.

 

Indeed Professor Empson

in a very moving BBC Radio 4 Documentary

entitled “Insecure Overachievers”

set out in various interviews the shocking

impact of stress in professional services firms.

 

And Philip Wood QC,

visiting Professor of Law at Oxford,

wrote in the January 2918 Edition of Modern Legal Practice:

“legal systems are, in all their aspects,

the most fundamental source of morality…

the world may be able to do

without its various philosophies

and religion…it cannot do without its laws”

But it can do without its partnerships.

 

And, in time, it will.

 

Thank you

 

Mrs May, like many CEOs, does not follow the three golden rules of selling…

You can’t pretend that you don’t know CEOs like Mrs May: hard-working, autocratic and not for turning.

They’re everywhere. In part, the reason they get to the top is that they are much more unreasonable than others.

But being unreasonable might get you to the top, but it won’t keep you there. Or at least in the second decade of the 21st Century, it won’t.

Business and society now demand a more emotionally intelligent style of leadership which includes a respect for the basic rules of influencing, persuading or, more colloquially, selling.

Selling Rule 1 There’s no sale without acknowledgement of a need

Unless there’s agreement about ”the pain”, explicit or latent, you can’t sell anything to anyone.

So the first task in selling is to get the buyer to acknowledge their need or, if they don’t, the seller must persuade them to acknowledge a need of which they were previously unaware.

But implicit in Rule 1 is an acknowledgement by the seller that it is their responsibility to sell and not the responsibility of the buyer to buy.

This was where Mrs May got it wrong, from ”the get-go”. She didn’t accept that she had to take responsibility for the sale. Mrs Thatcher, in her final days in office, made the same error. She rarely visited the tea rooms.

And, Prime Minister, if you’re not going ”own the sale”, you can’t close it. You didn’t and you won’t.

Even if MV3 is magically voted in, it won’t be because of you, it will be in spite of you. And given the effort you’ve put in, that’s a sad outcome for you. But this is not about you. It’s about us.

Mrs May ignored the fact, as many CEOs you know also do, that the pain relief you are selling must meet the needs of the buyer, as they see them.

Selling Rule 2 Demonstrate, rather than assert, that your pain relief addresses the pain

Mrs May didn’t follow this rule either. Instead, she kept repeating, ad nauseam the features of her deal – our money blah, our laws blah and our borders blah.

As every rookie seller knows “it’s always benefits before features”. You must have enough emotional intelligence to empathise with the tricky and nuanced needs of the buyer and then the nous to sell in the real benefits first, not the features, of your pain relief to those needs as the buyer sees them.

Empathy is not one of Mrs May’s selling points. Nor that of many of the CEOs you know.

For example, In a sophisticated, complex, expensive B2B sale, “the buyer” may be a multi-headed hydra comprising different factions in the target boardroom as well political ”activists” in departments outside it. A bit like Cabinet and Parliament.

Empathy is needed to understand the perspectives of all sides. CEOs won’t close big sustainable deals if they lack empathy.

Rule 3 Mind the gap

The key to closing a sale is respect for ”the gap”.

If I’m selling to you, I will say at a key point in the process: ”If, on a scale of 0-10, and ten means you’re going ahead and zero means you’re not – where are we now on that scale?”

Any salesperson worth their salt should get the answer ”seven”, almost always to this question.

Next you say: what’s does the gap of three represent for you? how can I persuade you to give me a 10? What’s missing for you, today?

If you can’t or won’t close the gap, you can’t close the sale.

In Mrs May’s case, the gap was much wider than three. More like seven. That’s should have persuaded her to rethink her pain relief, at the design stage of her selling strategy.

There was never going to be a deal without a backstop, unless it were a deal that didn’t need one, like a customs union, or a reopening of The Good Friday Agreement.

The latter is impossible without war. The former is impossible unless Mrs May changes her red lines. And she won’t.

And there’s the rub. You can’t sell red lines. It’s a contradiction in terms.

Selling red lines isn’t selling. It’s bullying. And no one, neither PM nor CEO, will sustain in office over the longterm, in these times, which increasingly values emotionally intelligent leaders – Obama/Arden/O’Rourke – as a bully.

It’s the new red line.

Ciarán Fenton

How would an emotionally intelligent board, or cabinet, make decisions?

I was struck by the use of the word “bicker” in today’s FT regarding the behaviour of ministers at yesterday’s cabinet meeting to discuss the “Brexit delay”.

Bicker is a word parents use. I’m sure I must have used it with our children all those years ago when they were little. “For heavens sake! Stop bickering! I’m at the end of my tether…aaaaagh!” And if I didn’t, I should have.

Because bickering implies that no one is listening to the other. That’s what children frequently do.

And who would argue the fact that few in the cabinet or in parliament are listening to each other or that they are behaving like children? They would, I’m sure.

Bickering implies that the cabinet has no shared purpose. If it had it would have long ago agreed a shared strategy. But you can’t have a shared strategy if you haven’t negotiated a shared purpose.

And without a purpose and a shared strategy, a board or cabinet is, as we say gently in Ireland when things are broken, “fecked”.

And the cabinet is truly fecked. Just watch it implode over the next few weeks. Sadly, for all.

But even if you have a shared purpose and strategy your behaviour plan must be robust enough to execute. Or you can still fail.

As poor Joe Schmidt found last Saturday against an awesomely brilliant Welsh team. Sniff.

So the risks for a board with high EI/EQ are tough even in good times. In bad times, a board with low EI/EQ courts disaster.

And an absence of bickering on your board should not give rise to smugness as you balefully observe the behaviour of the cabinet.

One Chair told me many years ago that they had no board behaviour problems at all because they never needed to vote. “We are all team players”, they boasted. Potentially bullying words, in my view.

Their assumption made me feel queasy on behalf of their silent directors. How did the Chair know what people were really feeling unless the board voted regularly?

You should be as wary of a certain type of silence on your board as you should be of bickering on it.

Members of an emotionally intelligent board are:

a) empathetic

b) self-aware

c) know how to negotiate their needs, productively.

If any of these three is missing, decision-making processes will be flawed leading to higher risks – especially conduct risk – and missed opportunities.

Many boards are not unlike Mrs May’s and Mr Corbyn’s cabinets: stuck.

Ciarán Fenton

www.ciaranfenton.com

What can CEOs, boards and SLTs learn from Joe Schmidt?

Whatever happens on next Saturday at the Six Nations Ireland v England clash at The Aviva, Joe Schmidt will, according to many, retain the title of being one of the best rugby coaches in the world.

What, if anything, can CEOs, boards and senior leadership teams (SLTs) learn from his leadership behaviour?

The inspiration for this blog and this question comes from spending most of last week in the meeting rooms (corporate boxes) at The Aviva Stadium in Dublin, which overlook the pitch.

Over four days, I facilitated 1-1 meetings with the members of an operating board (senior leadership team) which has signed up for my #smallchange programme.

Below the meeting rooms, preparations were underway for the big game. I watched as the grass was cut, hosed and lamp treated. A labour of love.

I’m not a great fan of sporting and military models for behaviour in business. But I’m all for lessons we can learn from them.

Peter Pearson, former British Army Lieutenant General, with whom I sat on a panel on leadership at a conference last year, remarked dryly that “the bottom line in war is somewhat different from business.” Quite.

In respect of the former, while there are many lessons to be learned for example from Alex Ferguson, I would not encourage anyone to emulate his leadership style or some of his reported behaviour.

The motivating benefits of “hairdryer treatment” are greatly exaggerated. We all know CEOs who try it on and find that, ultimately, in business, it doesn’t work.

Clues as to Joe Schmidt’s leadership style emerge from the press coverage, especially a piece in The Irish Times (24 Jan).

On leadership: “We have a degree of hierarchy because we have a captain, a vice-captain, a leadership group but there’s no hierarchy in training or when it comes to people making good decisions”.

In my programme, I work with directors on unpacking their decision-making processes. How did we make that decision? Was it the best process? How can we change it for the better?

On planning: “They’ve got the firepower to be physical…we need to be ready for that” in response to Eddie Jones: “if you want to go to Ireland and get a win you’re going to have to deliver a brutality”. Note that word, “brutality”. Feck!

On a key element of success: “…integrate the new guys”.

Changes in personnel on boards and SLTs invariably change the group dynamics. I’m sure the process of “integration” on a rugby team is different than that on a board. But the need for a process remains the same. Often I see this need overlooked.

Clearly, Joe Schmidt has a fully thought through purpose, strategy and behaviour plan (PSB).

What’s not to like? 🙂

Ciarán