Why boards should use HBR’s list of Best-Performing CEOs in the World 2017 with caution

Sports podium

Harvard Business Review has recently published its annual Best-Performing CEOs in the World rankings.

Pablo Isla, Martin Sorrell and Jensen Huang are in first, second and third place respectively. Sean Boyd, Jean-Laurent Bonnafé and Ian Cook are placed 98th, 99th, and 100th.

Does this mean that your board should favour the first three over the last three as benchmarks for your CEO? The rankings suggest that you should. I disagree.

HBR has ranked CEOs using a weighting system, which favours financial performance over the other factors using an 80/20 ratio. “To calculate the final ranking, we combined the overall financial ranking (weighted at 80%) and the two ESG rankings (weighted at 10% each), omitting CEOs who left office before June 30, 2017”.

By two ESG rankings, they mean environmental, social and governance analytics as reflected in two scores: Sustainanalytics and CSRHUB. Directors who are shareholder-value merchants, red in tooth and claw, might wince at the inclusion of such wet factors. I argue the opposite: the weighting for the ESG factors is not high enough.

For example, Pablo Isla, CEO of Inditex, headquartered in Spain, is in first place while Ian Cook, CEO of USA based consumer goods company Colgate-Palmolive is in 100th place.

Let’s look at their comparative rankings: Isla scored 18, 76 and 142 for FINANCIAL, Sustainanalytics and CSRHUB respectively, whereas Cook scored 186, 167 and 89.

These suggest that while Pablo Isla outperformed Ian Cook in FINANCIAL and Sustainanalytics scores, Cook outperformed Isla in CSRHUB scores significantly. So what?

Let’s look closer at the providers of the ESG scores: “Sustainanalytics is a leading provider of environmental, social and governance (ESG) research and analytics that works primarily with financial institutions and asset managers and with CSRHUB which collects, aggregates and normalizes ESG data from nine research firms and works mainly with companies that want to improve their own ESG performance”.

CSRHUB is obviously the “softer” of the two ESG scores. Why has it the same weighting as the other ESG score? Why is governance, a crucial internal board matter conflated with environmental and social matters, both external issues?

Who decided on the 70/10/10 ratio? Why not 60/10/20? Or why not split out governance and give it a score of its own? Surely any board would link good corporate governance with risk reduction and maximizing opportunities?

Would you not be a tad miffed if you were Paul Polman, CEO of Unilever, ranked 82nd with a 177/168/17 score? His CSRHUB ranking of 17 comes as no surprise. He is famous if not infamous for his focus on non-financial performance factors. It was he who refused to report to the market on a quarterly basis.

Should he not be further up the “performance” rankings? He is, by all accounts in the financial press, trying to balance performance with developing capability and with ensuring sustainability in all its forms. But did his financial score suffer because of his CSRHUB score?

And what are we to make of his Sustainanalytics ranking of 168 against Pablo Isla’s score of 76? On which environment, social or governance (ESG) factors did he underperform his betters in the rankings?

Isn’t it the case that these rankings should be taken with a large pinch of sodium chloride? Should HBR not use just one crude financial performance score and not attempt to take account of the ESG factors at all or look again at how it addresses non-financial performance?

I have sympathy with HBR’s dilemma. Society is increasingly vocal on behavioural matters. It’s right that HBR should reflect this. But their rankings will continue to be flawed unless and until boards catch up with society and incentivise their people on behaviour as much as performance. This shift would be reflected in the rankings since these merely mirror back what boards value. What’s measured gets delivered.

In work I do with boards, I find that those whose financial performance is strong, often suffer from hubris. Perhaps HBR should include a hubris score in their next rankings. It would be useful, if not amusing, to see what that would do to the current list.

 

 

7 Small Changes to Achieve Better Board Effectiveness, Conduct & Leadership

ChangeThese are the seven steps I use to facilitate better board effectiveness, conduct and leadership on main and operating boards, executive committees and senior function teams:

Step 1: Acknowledge uniqueness

You and your colleagues are unique individuals. No two board members are the same. If you behave as if they are you cannot expect to get the outcomes you want. If each board member is unique it follows that your board is unique. Why would you use generic processes for a unique situation?

Step 2: Understand uniqueness

At work, the components of your, and each of your colleagues’ uniqueness are their skills and experience, reputation and emotional intelligence. Whilst many share aspects of these, no two board members share the precise mix. Why, therefore, would you treat yourself and your colleagues as human capital assets?

Step 3: Understand emotional intelligence (EI)

The most important components of emotional intelligence are empathy, self-awareness and the ability to negotiate needs productively. All three are important. While organisations may perform well for a while without these in harmony in each director, research suggests that organisations that fail to foster these, often struggle to develop long-term capability. In which case, why would your board ignore individual EI problems, even if those colleagues with issues are delivering good results in the short-term?

Step 4: Understand the negotiation of needs

Experts tell us that if your ability to negotiate your needs productively and safely was frustrated in your formative years then you will have taken a decision to deal with that frustration in a manner that was appropriate at that time. However they also tell us that humans have a tendency to extend formative years decisions into adult life. Even those people who experienced little or no frustration in having their needs reasonably met in their formative years suffer when they encounter those that did or when they experience significant stress in later life. The productive negotiation of needs as between members of boards and teams is key to success. Why would your board not pay attention to creating an environment in which members’ needs can be negotiated productively, even if this involves painful confrontation of personal issues?

Step 5: Reveal hidden potential through small changes

Experts also tell us that no one escapes emotional pain. Everyone carries one outstanding emotional painful experience. By outstanding I mean more than all other painful experiences. We compensate for these in different ways but these strategies invariably hide our potential. If this is true, it means that your board’s hidden potential is more than the sum of the hidden potential of you and each of your colleagues. The route to revealing the hidden potential of each director is for each to negotiate small changes in behaviour with each other. In aggregate the sum of the small changes is greater that each in terms of their impact on board effectiveness and conduct. Conduct is observed behaviour over time. Why would your board not seek to reveal the hidden potential of each member over time?

Step 6: Share your personal purpose, strategy and behaviour plan

You and your board colleagues each have, or should have, a personal purpose or objective at work, a strategy to achieve it and a personal behaviour plan to implement that strategy. Some do this process intuitively; others plan it whilst others drift. The more these issues are shared openly between board members, the more likely it is that business purpose, and strategy and behaviour will be successful.

 Step 7: Make personal and business purpose interdependent

The tension between the personal purpose of each of your board members and the purpose of the business negatively impacts performance and the development of long-term capability. It follows that these are interdependent and if so it further follows that it is worthwhile paying attention to the interdependence of personal and organisational purpose. It also follows that not doing so increases organisational risk and reduces opportunities.

I use three well-known emotional intelligence tools to help directors implement these steps:

Tool 1: Feel/Need/Do?

Regarding specific issues or behaviour or exchanges at board meetings what do you feel?; what do you need in relation to that feeling?; what are you going to do to meet that need?

Tool 2: Are you selling or buying?

In almost every board interaction you are either selling or buying. Know which and know how.

Tool 3: Are you in Parent, Adult or Child mode?

In almost every boardroom interaction you and your colleagues will, at various times, be in Parent, Adult or Child mode. Do you know which you frequently occupy and when? Do you know how to get yourself and your colleagues into Adult-Adult mode?

The steps and tools above together constitute The Fenton Model® which is a registered trademark of Ciarán Fenton Limited.

Ciarán Fenton

October 2017

How Leadership 101 could win the next election for the Lib Dems

Screen Shot 2017-10-02 at 11.12.56

It is the party conference season and the political weather is dominated by fog. Political fog swirls as both main parties offer different solutions but neither explain precisely how they will execute them. Opaque is the new clarity.

Cynics might suggest they do not know. A kinder interpretation is that politics in the UK has divorced itself from the meaning of the word leadership and, instead, aligned itself with the word personality, which is a different matter altogether.

Leadership is about helping people to perform at their very best, even to their surprise. Personality is about individual qualities. The latter is about being, the former is about doing.

And so Mrs May and Mr Corbyn, described as the leaders of their respective parties, have advanced their positions on the key issue of the day: Brexit.

But neither has set out how they are going to create an environment in which their ministers will be able to deliver on the solutions they espouse.

This should worry us all, irrespective of which side you support. What are you going to say in five years time if the people you voted for fail to deliver on what they promised?

That is politics, you might reasonably respond. Whoever, you might add, expects a politician to deliver what they said they would?

In normal times this cynicism might be justified but we are not in normal times.

Not in my lifetime – I’m 57 – have I witnessed a political event so profound as Brexit. I was too young for the Cuban missile crisis, the next nearest in my view. You may argue that there were other more profound events but you cannot argue that Brexit is not a game changer.

For example as I write, Monarch Airlines has gone into administration partly because of the brutal competition in the short haul market but also because of the fall of the sterling. The latter was a direct consequence of the Brexit vote.

According to the Office for National Statistics the UK economy is now the worst performing economy in the G7. On the eve of the referendum it was the fastest growing.

Moreover, the polarisation in UK society has become much more pronounced since the vote. Of this fact there seems to be no disagreement.

But even if you feel that a certain amount of pain is inevitable and you are still convinced that Brexit is the right thing to do, surely you must care that the policies you support are executed properly?

Are you sure that this will happen? Just because you believe the Leavers, whether hard or soft, are right does not mean that you can be confident that they are capable of implementing those policies.

This presents an opportunity for the Liberal Democrats because they are neither burdened with the cult of personality nor the weight of excessive ideology. But they are a force in UK politics, no matter how weak.

My advice therefore to Sir Vince Cable is the same advice I give to all CEOs who are in a potential turnaround situation and that is to focus on Leadership 101.

I acknowledge that politics is not a business and Sir Vince is not a CEO, but the principles of Leadership 101 apply in all organisations and they are ignored at peril. Sir Vince should take three turnaround steps:

Step 1: Announce that he will not be the next PM but that he is launching a nationwide search for the most talented team of new Lib Dem MPs, one of whose number will be the Liberal Democrat Prime Minister in 2022. Sir Vince will act as interim caretaker.

Step 2: The new leader of the Liberal Democrats will focus on leading its Members of Parliament in parliament and not on attempting to lead anything or anyone outside of the House of Commons.

Step 3: The new leader will create an environment in which new and as yet unknown MPs will be supported to lead public service departments, excellently, and will communicate to the electorate how, precisely, that will be achieved.

That’s it. If Sir Vince carries out those steps his party will win, unless of course someone in the other two parties wakes up to the fact that they are ignoring Leadership 101 and beats him to it.

Leadership: why directors should not imitate Mr Mourhino and Mr Ferguson

Soccer players in action on sunset stadium background panorama

Jose Mourhino is the current manager at Manchester United Football Club and Alex Ferguson is a former manager of the same club. Both are famous. To some, that’s an embarrassing understatement.

But not everyone knows and loves football. I don’t love it. But that doesn’t mean I don’t like it or understand it.

A client recently sent me a link to an article about these two managers because he felt that I would be interested in the story from a leadership perspective. He was also clearly assuming that I had no interest in it from a football perspective.

To be fair, he has grounds for this assumption: he knows from our sharing of respective life stories that I was not sporty at school, was always last pick in playground footie and my nick name was “four eyes”. You get the picture.

But in my advancing old age I’m now getting tired of the assumption by friends, colleagues and clients that I know nothing whatsoever about football, rugby and cricket. The reverse is the case.

I’m a veritable walking-encyclopaedia of sporting trivia. Why? Because I get invited to major sporting events where, because I’m not deaf, I have to listen to endless punditry and I pick things up.

I’ve also spent a lifetime in pubs with blokes, quietly nursing my pint, whilst they willy waggle about their sporting knowledge as in: “ …no mate, you’re wrong..t’was the Forwards wot won it”. Occasionally I would get a sideways pitying glance but never asked for my views.

I would quietly think things but not say them: a) t’was hardly the Backs that won it for them b) why the necessity to collapse into Estuary English? The speaker was posh and had a First from Oxford and c) the Forwards, er, need the Backs.

I know lots about sport, actually: I could bore for England on “the slope” at Lords; I know, because I’ve been told a million times, exactly why England won the Triple Crown a million years ago – t’was because they were made to watch dots move on a laptop.

And, because I’m a closet Arsenal fan – I can’t come out because you have to be following a club ”man and boy” to have any street cred – I know and indeed agree that their forwards have an irritating tendency to “fanny around” the goalmouth.

But I will never be taken seriously on sporting matters. Indeed one mate was so outraged with envy when he heard that I was invited to a major rugby international he said that “I had no right to be there; that I know nothing about the game and that I simply do not understand that sport is tribal”. Yeah, tribal. I let it pass.

I enjoyed the game but didn’t lie awake reliving each phase.

I also know a bit about leaders in sport. Enough to know that they are poor models for leadership in business.

I read Alex Ferguson’s first book and concluded that he was a genius at understanding and nurturing world-class football talent. But for me he was not a leader business people should emulate and for three reasons.

First, his context was exceptional. Most leaders are not dealing with uniformly world-class talent and in the public eye.

Second, and to state the obvious, managing a football team is not the same as running a business and Mr Ferguson did not run the business side of the club.

Third, and I may be wrong, but I got the impression that he used persuasion techniques that would not entitle him to membership of The World’s Top 20 Emotionally Intelligent Leaders.

I also know a few facts about Mr Mourinho. He too is a talented football manager but I won’t be sending any of my leadership clients to sit at his feet and learn how to lead. A resolutely unsmiling persona works well on the touchline, but not in the boardroom.

The link that my client sent to me was to reported comments by Jose Mourinho saying that the Club had not evolved since Alex Ferguson’s departure and was stuck in time. My client was making the point that organisations need to evolve too.

I agree with this and also agree that one personality can dominate an entire organisation, even after they leave. Culture is reflected in conduct which is observed behaviour over time. And it takes time for behaviour to change. And in that, football and business are alike.

But just as the rules of football don’t apply to business, neither do the rules of business apply to football. And this applies to the timings of the departure of leaders. In business they should serve short terms, develop and then make room for others.

Sport is different. And in this regard I believe that Arsene Wenger has been right to hang in there. He is the Obama of The Premiership. He believes in the supremacy of people being the best they can be over winning. And, despite what my mates say, winning isn’t everything. But what do I know?

http://www.ciaranfenton.com

 

 

 

 

 

 

 

Business or personal strategy: which dominates your board?

What is it with our obsession with strategy? We are respectful of words like profit and loss but somehow treat strategy differently.

After 15 years consulting and nearly 20 years in corporate life, it is the word which stands out for me as the most abused because it appears to mean wholly different things to different people.

Conversations, which tend to be liberally peppered with it, bear this out: “I’m hiring someone to do the day to day stuff, so that I can concentrate on strategic stuff” or “We have just hired an awesome Head of Strategy” or “Frankly, and strictly between you and me, the problem with Joe Bloggs is that he’s not very strategic”.

Worse is when strategy is confused with purpose and execution as in “we intend to be the best in the world by hiring good people”.

Being the best in the world, if you mean it, is a business objective and is not a strategy. Hiring good people is as basic a leadership behaviour as breathing. Strategy, it ain’t.

But why the confusion? Strategy means how your board achieves its purpose. That’s it.

It should be decided once and, while it may change, it should stay fixed for a reasonable period to allow for its implementation.

Therefore there should be no need to use the word strategy in any context other than “since our agreed strategy is X then we are doing y or we should do z”. Or not, if those actions are not congruent with your strategy.

For example, Ryanair’s objective was, it appears, to be the best and most profitable no frills airline in the world – or words to that effect.

Its strategy appears to have been to train the market  to expect nothing but a safe and cheap flight. Its execution behaviour – love it or loath it – was to do everything to lower market expectations of airline service which had been raised over a generation which believed  flying was for a certain “class” of person. Ryanair broke that myth.

Proof that its poor treatment of customers was “strategic” is the manner in which it reacted almost overnight to the introduction of a business class product by rival Easyjet. Suddenly, Ryanair became user friendly, introduced its own business class product and sales went up by c 20%.

That’s a story of a simple purpose, sophisticated strategy and clean execution behaviour in action. There was no confusion whatsoever about the meaning of those words. The results bear this out.

The problem on many boards however is that there isn’t a shared business purpose nor, in addition, are the directors upfront about their personal purpose.

If your business purpose is not shared by your colleagues on your board and if your and their personal purpose is also not clear then it’s not surprising that your business strategy will be weak, at best.

Some clients “push back” on this by saying that “our purpose is to make money, everything else is strategy”. To which I reply “it’s no wonder you all have a different spin on strategy since making money is, again, as essential as breathing. It is a collateral benefit, not a purpose.”

The reason purpose and strategy are problematic is because they are difficult to get right. It is a truly challenging task in complex markets to get your purpose statement right and then to follow through with choosing the right strategy to implement it.

But, and perhaps surprisingly, this can be made much easier if your directors are upfront about their personal purposes.

After all, the purpose of any organisation is inter dependent with the purposes of each of the people working in it and, particularly, with the members of its board.

Initially I find this a hard sell. Directors  find it  difficult to accept that they constitute the business. They speak of the business in the abstract, as if it were a third party. But it isn’t.

It is the sum of their individual purposes brought to bear on a market need. But often the personal purpose of one or two individuals can dominate or skew business objectives and therefore strategy.

Once I get a board to address the matter of their shared business purpose in the light of their personal objectives, I find that business purpose and strategy can be reframed much more cogently.

Your CEO is key to the success of this reframing process. If he or she is willing to share their personal purpose and strategy honestly and openly they will be a catalyst for the others to do the same. This is called leadership.

There are three steps to harmonising business and personal strategy on your board:

First ask each director to articulate their personal financial and fulfilment needs and objectives and how these fit with their understanding of business purpose and strategy.

Second, in the light of these shared insights your board should work on the precise wording of business objectives and which all directors are happy to sign.

In my experiences this process can be difficult and can surface deep and painful disagreements. But it’s worth the pain because future disagreements will be more easily resolved by reference back to agreed objectives.

Finally when, and only when, there is absolute shared clarity on business purpose and one that fits with the articulated personal objectives of each director, can you move on to addressing strategy.

Then, often to everyone’s pleasant surprise, agreeing a good and robust strategy becomes relatively straight forward. Are you surprised?

www.ciaranfenton.com

Impostor Syndrome: anyone on your board suffering with this?

Impostor Syndrome – the ever present fear of being found out as a “fraud” – is, according to recent research, more prevalent than we thought.

But if you or anyone on your board is suffering from this how would you or they know? Why does it matter and what can be done about it? Here is my take, based on my experience with directors:

The problem with some sufferers on boards is that they hide behind a veneer of super confidence. The glass is not just always half full, it’s ever overflowing.

Part of this confidence is often grounded in their formative  years in which they were the apple of their parents’ eyes – particularly their mothers’. A mother – or father – who gives a child unconditional love throughout their formative years gives them a gift worth more than gold.

But where this can go wrong is where this love is not tempered by boundaries and especially help with developing empathy towards others.

Children of doting parents often speed to the top of organisations because they don’t “do” the self-doubt that hinders others.

Yet something happens to them along the way which can be deeply unsettling: to their shock and horror they realise that their peers, bosses and underlings don’t see them as “God’s gift”. Suddenly their confidence is dented more grievously than many an alpha male (in particular) would be willing to acknowledge out loud.

How they process this shock determines the extent to which they suffer from impostor syndrome.

Many “plateau” and underachieve in their careers,  fearful that any further stretch will mean they will be found out.

If you suffer from this syndrome you can google remedial actions. It is more tricky if you suspect that one of your colleagues on your board is a sufferer and doesn’t appear to be self-aware.

The problem is that they often behave in a manner which does not attract empathy. They drive colleagues away using behaviour which smacks of arrogance and hubris.

Yet they are often “dying a thousand deaths inside”. One way around this – and it really matters because you need your leaders to be mentally healthy – is to create an environment where, in private, board members can express their vulnerability to each other honestly.

If you feel that on your board this simply would never happen, think again.

Who would have thought that Martin McGuinness and Ian Paisley would become friends? Who would have thought that Nelson Mandela and F.W. deKlerk could do a deal on apartheid?

If they could do the unthinkable, your board can. Brené Browne in her book Daring Greatly advances empirical evidence supporting the link between showing vulnerability and personal and organisational success and fulfilment.

Every board member carries some emotional baggage. That is the nature of human existence. For boards to ignore this reality is to miss a trick in their Target Operating Model (TOM).

A TOM is defined as the processes an organisation employs to deploy its strategic resources to meet a market need.

There are few more powerful “strategic resources” than the relationship between members of your board. After all, nothing gets done without them.

It follows therefore that it is in your personal interests and in the interests of your organisation to maximise the effectiveness, conduct and behaviour of your board members.

One way to achieve this is to work actively to improve your relationships with each other.

And if one of your number suffers from impostor syndrome it is empathy they need, not attack. It’s “arm around” not digs in the solar plexus they need, no matter how much they push those approaches away by their faux cocky behaviour.

One motivation for you to try this is that if you  don’t suffer from impostor syndrome you are most likely to be suffering from some other emotional challenge which no human being can avoid.

Aren’t there times when you could do with some empathy, support and encouragement? Unless of course, for you, there are none. In which case this won’t make any sense to you at all.

Transformation: why you should start phasing out that word

“The problem with transformational change is that it implies ordinary change has no change in it whatsoever”. So quipped the comedienne Sandy Toksvig on this subject.

If comedians are using one of your key business terms for their material, isn’t it time to reflect?

The problem is that the word transformation is now so deeply ingrained in the grammar of business language that’s it’s scarcely conceivable to imagine its absence.

If you type the word transformation into the search box of LinkedIn the result is shocking. The word is attached to everything from job titles to programmes. It’s ubiquitous.

But why shouldn’t it be? Why shouldn’t job titles include that word? What’s wrong with a bit of tautology if it encourages improvement? Does the use of language really matter?

It’s easy for comedians to joke and business writers to pontificate but it’s people like you who have to “deliver, execute, and step up”. And if you don’t, you’re in trouble. So for you, on a daily basis, this is no joking matter.

That’s why I invite you merely to consider phasing out the word, not dump it. Because it won’t be easy.

But you should consider doing so because it will make your life so much easier in the longer term and it will improve your business faster. I say this for three reasons:

First, there’s the slightly embarrassing reason  that the use of the word is, literally, ridiculous. And why would you want to be associated with anything even remotely ridiculous?

I mean how many transformations have you actually witnessed, heard about or “delivered”?  Few, I suspect, because transformation means changing one thing into another. It’s about alteration or conversion. These are lesser spotted.

I recall a brand of  toy our kids played with called Transformers. These looked like innocent toy cars but then, with a twist here and a yank there, they could be transformed into scary monsters. They were what it said on the box: transformers.

But few transformation programmes are sufficiently well funded, supported or thought through to be worthy of the name.

What they really mean is change. And change,  I’m afraid, is part of BAU. Calling it transformation helps no one.

Ryanair is an example of transformation. Michael O’Leary and his team contributed to the transformation of the airline market. Time was that flying was for a certain class of person and cost a small fortune.

Mr O’Leary, and other similar airlines, decided that this could be transformed and they did. But Mr O’Leary was called a CEO, not a transformation director.

Some  IT transformation programmes are genuine transformation programmes but most are change management programmes where the greatest roadblock is the behaviour of users. Believe me, behavioural transformation is as rare as hens’ teeth.

Between 1995 and 2000 I worked at ITN the UK news provider. I witnessed and was a minor player in the conversion of the newsroom from analogue to digital. That was a transformation programme.

While at ITN my job was to manage and exploit its moving picture assets which were significantly large and grew daily.

It took me five years to lead change in the behaviour of how moving pictures were used on the news bulletins and how their secondary rights were exploited. While I feel proud that I facilitated significant business and behavioural change, I transformed nothing.

So why use a word that will set you and the people you lead up to fail? The reason is that most people in business are terrified of behaving normally and feel that they must use abnormal and grandiose language.

And it’s certainly not normal to say you will transform something when you know you can’t.

You wouldn’t say at home that you have transformed the family culture by persuading everyone to sit around the table for dinner and chat instead of watching the telly. You might feel like you had done so but you know that if you do, you’re  just doing your job.

The second reason is that the word undermines trust in any change process. And without trust there is no change. If people don’t believe that change is possible and desirable they won’t buy-in. So why undermine your own change process?

The third reason is that it reminds me of Original Sin. If you are a Catholic or come from that culture you will know what I mean. If you don’t suffice it to say that the word transformation carries with it an implicit dollop of shame about how things are now.

If we need to transform then we must not just be bad, we must be terribly bad. And some business leaders are pass masters at creating feelings of shame.

The problem is that many so called transformation programmes fail because of implied shame because people don’t like to be shamed and are not motivated by it.

And if you’re trying to change something but call it transformation you might fail because of shame. And that would be a shame.