How to turnaround an unhappy board of directors in three steps

With apologies to Tolstoy, all happy boards are alike; each unhappy board is unhappy in its own way.

Unhappy boards consist of unhappy directors. This is obvious. But since people speak of boards as if they are people – anthropomorphism, to give this behaviour its technical term – they need reminding that they’re not. It’s the directors who are unhappy, not the board.

Happy boards outperform unhappy boards because unhappy, stressed and frustrated directors don’t perform as well as those who are content, energised and empowered.

The reasons for unhappiness will vary from director to director. But directors share one systemic grievance, also shared by their workforce, which is that work in the 21st Century is often not very fulfilling, at all. The happiness at work surveys, which make for grim reading, bear out this assertion.

If directors can address the systemic issues between themselves on the board, can you imagine what they can do for the rest of their workforce?

I believe the world of work can be fulfilling. Not 100% of the time of course, but I believe in the 75% rule that three-quarters of the time you should be able to say: I’m happy at work. But the world of work is still not what it could be especially for those who sit on boards.

We have only ourselves to blame. In the 20th century we permitted a framework for work to develop which created three components that ensured people became and continue to be trapped on a treadmill:

  • The maximisation of shareholder return as a primary purpose
  • Human capital management designed to serve that purpose
  • Exploitation of human and other resources as the main focus of boards

But the movement towards a new model has been building for some time. Everyone knows that the shareholder framework is no longer fit for purpose but have struggled to break its grip.

As far back as 1994 Charles Handy published The Empty Raincoat to set out a “…philosophy beyond the impersonal mechanics of business organisations…if economic progress means that we become anonymous cogs in some great machine, then progress is an empty promise”.

Even mainstream human capital writers like Jon Ingham were trying to humanise thinking in the early part of this Century in his book Strategic Human Capital Management – Creating Value through People, recognising that value can’t be created through any other means.

In what has been considered a “ground-breaking book”, Frederic Laloux’s Reinventing Organisations (2014) set out a thesis that “a new shift in consciousness” is underway which could help us invent “a more soulful and purposeful” way to run our businesses.

He sets out what he calls a “Teal” approach to this new way. This includes self-management rather than cumbersome management structures, bringing the whole person to work and what he calls ‘evolutionary purpose” focusing on what society wants from the business and not on the bottom line.

These are just three of many writers addressing these issues. Their work has been augmented by the growth of “not just profit” movements, which sprung up after the Global Financial Crash in 2008. These include Blueprint for Better Business (of which I am one of several advisers); B Corporations and Tomorrow’s Company.

Many of these use “top down” approaches that have strengths and weaknesses. My contribution to this canon is to take an individual rather than a corporate approach. I believe in individual change as an agent of, so called, organisational change, using the following steps:

First, while I agree with others that the purpose of organisations should be to make all stakeholders equally happy – shareholders/other risk takers, workers, suppliers, their families, their communities and future generations through the proper use of the physical environment involved in the business – I nevertheless believe that they will do so only if directors unilaterally grant themselves permission to do so.

The block so far is that directors are afraid of the investor. But if investors are educated to understand that they are not getting as good a return on investment without conceding to equal stakeholder happiness, then they are likely to give it. The first step, therefore, is to take responsibility for enlightening them.

Second, It has always struck me as odd that companies motivated – red in tooth and claw as it were – by profit, continue to allow their workers, especially their highly paid directors, to leave large chunks of their value at reception because boards have failed to create an environment which encourages them to bring their whole selves to work not just the part circumscribed by their job description or, more often, by the culture of the organisation.

The reason of course for this is linked with the first step, but also because they may not know how, precisely, to deal with the whole person. As one delegate quipped rhetorically at a people conference: “Do we really want people to bring their “whole selves” to work? Really?”

Third, is what I call the “paradox of small change” which is that small changes lead to big outcomes. Changing just ten interactions out of every hundred is just 10% change.

That’s small change. But it’s hard to do. You must start with yourself if you want others and your world of work to change; then you must accept that organisations don’t exist, except in law and in the minds of people who work in them, save that they are groups of individuals who are struggling to be who they should be.

If your board is unhappy and you’re serious about doing something about it, start by demanding equality of return for every stakeholder in the business; then find out what each director needs to be happy, 75% of the time and, finally, negotiate the behavioural small changes required to create an environment in which these are met. That’s it. Simple.

Directors: Why your conduct should go to the top of your Risk Register

Conduct risk is now a familiar term in the financial services sector, not by choice, but because the Regulator has regulated conduct heavily since the Global Financial Crash. Not that regulation seems to have made a huge difference.

At least the Regulator has put the term “conduct” on the business road map albeit the effect is like a speed camera which slows us down in high risk areas but after those tell tale markings on the road, we all put the boot down.

However, the regulators of the conduct of those in the financial services sector do not own exclusive intellectual property rights to the term nor would they want to claim such rights. You are free to use it in your business and especially on your board without fear (save that some on your board may fear it).

This raises an issue regarding a related term that has achieved widespread currency in all sectors and that is behaviour or, rant alert, “behaviours”.

My rant is not about semantics, although there is a grammatical point to be made here: behaviour is a mass noun with no plural. The more important reason the accurate use of the word matters is because: how someone behaves is unique to them. This means how we behave as a group, for example a board, is also unique. It is why we should resist the seemingly “codifying” trend of using the word “behaviours” as if they can be policed like a charge sheet from afar.

The word behaviour reflects the complexity of human nature. “Behaviours”, on the other hand, suggests uniformity. For example, the precise nature of Mr Trump’s bullying behaviour is different that of Kim Jong-un’s although you might rightly argue that both could result in a nuclear holocaust.

But what is the difference between conduct and behaviour? It depends on the context. Conduct refers to the result of continual observation as in “Lucy received a Good Conduct Award last year” or “The conduct of all parties in the election campaign was shocking” or “The conduct of the Banks has improved/not improved since the crash”. Delete to taste.

Behaviour is about immediate interactions as in “Billy’s behaviour in school yesterday was unacceptable” or “The CEO’s behaviour when challenged at the last board meeting was outrageously bullying, to say the least” or “The Chairman was quick to call out unacceptable behaviour by some directors at the AGM”.

If a company’s Risk Register is a list of top and emerging business, legal and reputation risks which could affect outcomes, it follows that conduct by directors should go right to the top of that list because most risks and opportunities are forged in the crucible of boardroom relationships.

So what language might directors use to describe these risks? I feel just one entry at the top of the Risk Register would capture most issues:

Conduct Risk: The risk of systemic weaknesses in board decision making and governance due to the failure of each director to change their worst behaviour and exploit their best.

And how can this risk be mitigated, realistically? It’s simple: each director should trade a change in their behaviour for a change in another’s.

The problem with traditional change programmes is that they lack the right soft incentives to attract directors who value only hard returns.

The feeling that the person who winds you up most on your board might change their behaviour if you change yours is often enough.

This approach might have prevented defeat software being included in cars; false accounts being created in banks or a myriad mis-selling scandals avoided.

But these are the big stories. What about the thousands of board meetings going on up and down the country today where poor conduct prevails because of unchecked behaviour? And what of the cost: real and opportunity cost?

These are the stories which lead to creating that great Yorkshire understatement: “trouble at t’mill”.

And how stressful, and damaging and awful to the individual director a troubled board can be. And worst are those who say: “That’s not us”. When I say, “How do you know?”

I propose every board appoints one director as official “Devil’s Advocate” at the beginning of every board meeting. Each director would get a turn. Their job at that board meeting with the agreement and full mandate of their colleagues would be to challenge everything, bar nothing.

This step would help reduce conduct risk and might even surface some opportunities which otherwise would have remained buried.

There’s nothing more positively cathartic on a board than the removal of fear.

Why non-banking CEOs and boards should bother reading The Banking Standards Board second annual review

Last week The Banking Standards Board published its second annual review which received page two coverage in The Financial Times with the strange headline: “Bankers battle with ethics versus career quandary”.

The headline was strange not only because it implied that there are circumstances in which career considerations could trump ethics but also because, given that the 2008 crash resulted from unethical behaviour, these shocking results should have been the headline, not the quandary they seemed to present.

As reported by the FT, some of the results of the Review based on a survey of 28,000 employees at banks and building societies are jaw-dropping: “more than a third fear negative consequences of voicing concerns…one in eight had seen instances where unethical behaviour had been rewarded…[a large number saw] a conflict between their organisation’s values and how it did business”.

The impact of this environment on ethical decision-making must be grave, making another crash a certainty, if not highly possible. Certain because the results were not front page news; certain because we have become immune to such behaviour and, above all, certain because permission to behave well in banking is still not ubiquitous.

If the banks are heading towards another crash – so be it. But you and your board can avoid risks just as grim by giving your directors and their team’s permission to behave ethically. How can this be achieved?

You could start simply, by announcing that there will be zero tolerance on your board for the three behaviour examples below:

– the rewarding of unethical behaviour

– experiencing negative consequences for voicing concerns

– failing to confront conflict between our values and how we do business

The first of these might seem obvious, but if as much as one in eight has seen instances of such behaviour in the banking sector, the chances are that some of that behaviour is happening in your business and without challenge.

And this will persist if you do not support the second rule by encouraging people to speak the truth to the powerful. Of course, the best way to ensure an ethical culture is to create an environment in which people feel that they can speak up on normal issues i.e. those which have nothing to do with ethics or the law.

If your people feel comfortable challenging you on normal business issues, then they are more likely to feel comfortable calling you out on bad behaviour.

My guess is that those banks where people are afraid to voice concerns are also afraid to voice just about anything else which might not meet with approval from on high. Where this becomes seriously mad is when people start assuming what will and won’t be approved and are wrong. Then you have a truly sick organisation of your own making.

Emotionally intelligent boards can create emotionally intelligent businesses that are more likely to make ethical decisions which are right in themselves and also reduce risks and increase opportunities.

One way of creating emotionally intelligent businesses is to have zero tolerance for shaming language. Shame is a great mental killer in business, especially amongst men. Guilt means I’ve done something bad. Shame means I’m bad.

Over the years I’ve observed shaming language at its worst in many contexts. Once I worked in an organisation where the “D word” was the shaming weapon of choice at meetings, as in: “Joe Blogg’s quarterly results were very disappointing, indeed.”

This would be said as if Joe was not in the room. He was of course and would die a thousand deaths in that boardroom and had nowhere to go because of kids, mortgage and all of that.

Another example of shaming language is when a powerful person is reasonably challenged on a strategy or routine issue by a less powerful person as in: “Joe Bloggs, I think we need a bit more light than heat on this issue”. Withering.

Have you ever been that Joe Bloggs? I have. And I can tell you that there’s nothing more certain to discourage someone from voicing concerns about ethical or legal matters if they are shamed for voicing concerns about issues that are perfectly legal and ethical and, please, remember where you first heard about the next banking crash and its causes, if you read it here first.

CEOs and boards: how tension between directors can be put to good use to improve performance

Frustration in the boardroom

I constantly hear stories of tension between board members causing exhaustion, frustration and even depression. The bullied feel humiliated, the eager unheard and the anxious unsupported. Slights, real and imagined, are harboured; baseless assumptions inform action, or worse, inaction. Unconscious behaviour abounds.

My clients tell me that the most significant barrier to working productively together are “personality issues”. They feel hopeless that the conflicts, which frequently simmer under the surface, can’t be fixed.

Unacknowledged personality issues hurt the bottom line

Some directors I meet are blissfully unaware of these issues; others are not but shy away from these problems because they don’t know how to deal with them.

But the costs and opportunity costs to the business of not confronting behavioural issues are incalculable. I would be a very rich man if I had a pound every time a director said to me “If only we would do x, we could save y cost or avoid y risk or generate z revenue”. Why don’t you?, I ask. “He/she/they won’t wear it,” they assume. Delete as appropriate.

Behavioural issues are notoriously difficult to address. So, we avoid them. But what if there was a way to address them, incrementally, safely and with a high chance of success?

Least Likely To Say

Your business could outperform its targets, get more done and with happier employees if every director, without exception, improved their worst behaviour. Let’s call it their DWB – Director’s Worst Behaviour. No one I’ve worked with fails to understand what this means and what impact it has.

By worst, I mean that outstanding behavioural weakness that we all have and that drives everyone else on the board mad because it adversely affects them but which we struggle to acknowledge, let alone change.

I find that a good way to get an accurate list of the individual DWBs on a board is to facilitate an exercise, at a plenary session of the board, called “Least Likely To Say” preceded by a series of 1-1 sessions with each director to build trust.

In this exercise, each director tells each colleague what they are least likely to say. For example, the micro-manager is least like to say “Just get on with it, no need to check in with me”; the person who talks over people: “What do you think?”; and the solo player “How can I help?” And so on.

This exercise rarely fails to generate the embarrassed laughter of recognition which we are more familiar with in the company of true friends, who rarely let us get away with anything. In my experience, the degree of consensus on the DWB list surprises no one. If done with a light touch and kindly, the impact can be pleasantly cathartic.

Moreover, by avoiding the shaming language often used in board rooms directors can encourage colleagues to confront tricky behavioural issues which they otherwise would bury.

People don’t change, do they?

“This is all pie in the sky”, I hear you say. “Leopards don’t change spots. It’s dog eat dog in the boardroom. People just don’t change. This stuff won’t work on our board.”

Agreed, if you use traditional change processes. That’s because either they don’t work or if they do, they don’t last because, under pressure, everyone tends to revert to type.

But people can and do change behaviour if incentivised to do so. And what better incentive than knowing that if you change your behaviour, every other board member will do so too? It’s simple. It works. I’ve witnessed it.

Small Change

In my Small Change Programme, I focus on helping each director to acknowledge to their board colleagues their worst behaviour – i.e., their DWB. Then I support each to agree and implement, over a period of six to nine months, an unwritten behaviour contract undertaking to change just ten interactions in every hundred about that behaviour. That’s just 10% change, hence small change. But even small change is hard to do, and so my programme is designed to help CEOs and boards do it.

For example, one micro-manager I worked with undertook to micro-manage ten times less out of every hundred interactions.

The micro-manager, who proceeded to change his behaviour as agreed, courageously acknowledged that never being allowed to fail in his early years was probably the cause of his behaviour, and was pleasantly surprised at how more motivated his team was, how much more time he had and what new things he could do with the time released from his micro-managing. No wonder he did, given how much time he had wasted micro-managing.

Free Offer

I’m offering a free one-hour telephone or video workshop on my Small Change Toolkit to help you start the process yourself. The toolkit is a set of concepts and models which you can take away from the one hour workshop and use with your colleagues. I offer this as an incentive for you to engage in a conversation with me with a view to persuading your board to sign up for my Small Change Programme, but if you don’t, that‘s fine too, you still get your free workshop.

If you would like to arrange a free one-hour telephone or video Skype workshop with me, please email me on cfenton@ciaranfenton.com or call me on 07966168874. You can read more about me and my model on http://www.ciaranfenton.com