News and Views
December 2, 2019
Posted in: WATSON Views
Step inside a boardroom in 2019 and you’re likely to hear the diversity buzz – we don’t have it, we need it, how will it help us achieve our strategy, and how do we do it. Beyond the odd diversity and inclusion policy, you’re less likely to hear about inclusion on its own.
Diversity is about who is around the table. Inclusion is what you do to bring out the many benefits of a diverse board. It’s the critical next step that isn’t always obvious or clear, and it’s the key to harnessing the power of a diverse board.
We know that board diversity is important. We also know it’s difficult to achieve (we’ll leave this for another day). But once you have it, how do you create a space that encourages and embraces diverse perspectives?
Ask and learn
- If you are inviting a director onto the board because they bring a valuable point of view, ask them what would help them (and others) contribute most effectively. Ask this up front and check in for feedback after a few board meetings.
- If you value diverse perspectives, make sure you seek out and listen to what those perspectives offer — i.e., don’t simply invite people to the table and then unconsciously push them to conform.
- When someone brings a different view to the table, thank them and acknowledge the value it brings regardless of whether or not you agree.
Set the stage for inclusive meetings
- Hold meetings at a time and place that works for all. Consider things like accessibility, travel time, religious considerations, and childcare. Think about who on the board is likely to be able to take time off work to attend meetings and who isn’t. Don’t make assumptions – ask for and consider directors’ needs.
- Consider seating arrangements that make everyone comfortable. If assigning seats, mix it up – mix genders, sit tenured directors with new directors, younger and older directors, directors from different areas. If not assigning seats, make sure people aren’t clumped together in groups.
- Make space for inclusive conversations. Time pressures drive efficiency but can also detract less vocal directors from participating. Ensure there is ample time set aside for all voices to be heard on key issues.
Develop inclusive meeting materials
- Consider language barriers and cultural differences when drafting meeting materials – use clear simple language and avoid idioms and expressions. Use the same logic for “business language” and avoid jargon, acronyms, and terms that would not be obvious to all. When possible, use a mix of graphs, tables, graphics, and numbers to tell stories and complement narrative reports.
- Ensure directors have ample time to review meeting materials at their own pace, reflect, and prepare their thoughts. This can be particularly helpful for younger directors or those who do not speak English as their first language.
- Send a detailed agenda out far in advance so everyone knows what to expect and can prepare for discussions. Don’t bury important topics under a generic heading (e.g., “Other Business”) – spell out what they are and identify if there is a decision to be made, or what they key discussion questions are going to be. Use agendas and briefing notes to clearly show whether an item is for information, discussion, or decision-making and be sure to reiterate this before each item is discussed.
Foster inclusion as chair
- Set an explicit expectation that all contributions are equally important and that different opinions are welcome and encouraged.
- Start each meeting with an informal check-in to get people comfortable.
- Watch for directors who might be less willing to jump in and create space for them in the conversation. On remote calls, check in regularly with remote participants or have them share their views first.
- If you believe that someone might have trouble following some quick-fire conversation, recap or paraphrase for clarity.
- Create pauses. For example, if you want to ask someone for a comment and they don’t speak right away, wait – and keep others from interrupting – in order to give them time to compose their words or to speak with timing that fits with how their culture approaches conversations.
- For important strategic conversations, go around the room and ask everyone to share their views. Set the expectation that this will happen so no one is caught off guard. Be cognizant of who speaks first – a respected and experienced director speaking first can pre-emptively stifle different views, while a new director can feel put on the spot.
- Be mindful of what is said and what isn’t. Be aware of body language and follow up with directors if you get the sense they had a challenging or uncomfortable moment.
Weave inclusion into your board’s practices
- Ensure there is time set aside as part of the orientation process for new directors to ask questions that might seem obvious or simple in a safe, comfortable space.
- Educate the board on what inclusion means and looks like in practice. Get aligned on what inclusion means to the board and how the board will practice inclusion.
- Check in on how you’re doing. Ask questions around diversity and inclusion as part of an annual board evaluation to get candid feedback on what the board is doing well to embed inclusion and what it could do differently.
- Introduce a board mentorship program to build connections and ensure new directors have a safe space and sounding board to discuss board matters.
- Use clear, simple, gender-neutral language in your governance policies.
- Consider the time and commitment expected of certain roles. For example, if the chair role is so cumbersome that parents, young professionals, or executives can’t reasonably take it on, consider creating roles that are more accessible to all (this applies to management as well).
- Spend time together outside of board meetings to get to know other directors and where they come from.
- Use humour to overcome tension and build relationships but be sensitive to cultural undertones or subject matter that may not resonate.
- Tailor your small talk – talk of vacations, politics, renovations, and sports may not engage all audiences.
You can have inclusion with or without diversity. So while you push the diversity dial and seek diverse board candidates, start to build the foundation for a more inclusive board. Make your mistakes, reflect and adjust, and draw on inclusion to harness the power of diversity.
November 25, 2019
Posted in: WATSON Views
The relationship between business purpose and social purpose is getting serious. The traditional focus on shareholder profit is broadening to include a more complex stakeholder landscape – from employees, consumers, and communities, to the planet itself.
Although the law still places the best interests of the company as paramount for public companies, that doesn’t mean that other complementary interests cannot be considered. While shareholder value is still critical, profit versus purpose is not a zero-sum game. Strategies that maximize revenue can also benefit employees. Prudent business decisions can also minimize environmental harm. Clear signals that businesses are using their resources and influence to help solve social problems can drastically widen their consumer base.
With the marriage of purpose and profit, comes a fundamental shift in how organizations talk about and connect their work with their broader social purpose. From the frontlines to the boardroom, purpose drives practice.
Enter the purpose-driven director. The purpose-driven director understands the organization’s purpose and keep this purpose front and centre in boardroom conversations and decision-making. The purpose-driven director:
- Is motivated by their organization’s purpose and brings focus and commitment to their director role
- Sees the marriage of purpose and profit as a strategic opportunity
- Applies a broad, long-term view to their work and decision-making
- Asks the right questions, grounded in purpose, to guide what the organization does and what it doesn’t do
- Understands the relationship between purpose and profit and considers the broader context when making decisions
- Broadens board conversations to look at both intended and unintended impacts of decisions and consider the long-term consequences on the environment, the economy, and society
- Challenges self, board, and management to make the right decisions with purpose in mind when the organization is truly tested and the stakes are high
- Helps ensure the organization’s work contributes to its social purpose in the intended way
- Keeps up to date on issues related to their organization’s purpose and shares their insights with the board
- Helps sharpen the board’s focus on purpose and helps management articulate purpose in a way that flows through the organization
These qualities and perspectives are layered on top of what we already look for in a strong director – they raise the bar. As a result, the purpose-driven director needs to bring the following:
- Some existing alignment, even if somewhat unformed or unspecific, to the purpose and impact the organization wishes to achieve
- A readiness to internalize the purpose and commit to it; a heartfelt interest in seeing the purpose achieved
- A track record of credibility and integrity; a sense that their commitment to purpose will be genuine and that they will follow through
- Openness to progressive practices; a readiness to evolve governance as the playing field changes
- A long-term lens focused on a broad range of outcomes, and an understanding of how to monitor short-term progress without creating short-term mindsets
Purpose-driven directors benefit from a strong sense of achievement, impact, and legacy – beyond traditional stewardship. Many in the governance field say that the era of directors serving primarily for status or compensation is ending due to the increased complexity, effort, and risk of serving; we believe it is also because there is a more rewarding opportunity for skilled directors. Purpose-driven directors have a unique opportunity to make our boardrooms and our communities stronger, with lasting impact.
November 18, 2019
Posted in: WATSON Views
In 2019, purpose is paramount. The tug of war between purpose and profit has evolved into a co-operative game. Companies are adopting environment, social, and governance (ESG) practices at the board and organizational level and finding unique ways to measure purpose and impact. Boards are considering a broader web of stakeholders to understand the complex outcomes of important strategic decisions. Leaders are talking about what they do and why they do it in very different ways. Purpose is on the governance radar and it is shifting the dialogue in the boardroom.
Boards have always talked about purpose in an implicit way. By setting mission, vision, values, and strategy, they partner with management to determine the organization’s north star – where are we going and how we will get there. What is unique about the way boards and organizations talk about purpose now is that these conversations often go beyond the business to weave in social purpose. It isn’t just about making widgets, providing services, or selling goods. It’s about making communities stronger, addressing social problems, and contributing positively to society.
We are seeing business purpose layered within broader social purpose that together guide what organizations do and why they do it. Patagonia recently changed their mission statement to “We’re in business to save our home planet.” Warby Parker exists “To offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses.” Asana’s raison d’être is “To help humanity thrive by enabling all teams to work together effortlessly.” These companies still sell clothing, glasses, and applications, respectively, but do so within the context of their broader social purpose.
Just as organizations are considering and reframing their social purpose, leaders are increasingly calling on the private sector to help solve public problems. BlackRock Chair, Larry Fink’s 2019 letter to CEOs calls for the private sector to respond to societal issues – “unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues.”  Similarly, Senator Elizabeth Warren’s Accountable Capitalism Act has proposed a requirement that large US corporations create a public benefit; it “obligates company directors to consider the interests of all corporate stakeholders – including employees, customers, shareholders, and the communities in which the company operates.” While law and policy tend to lag behind societal change, these significant signals demonstrate the closing gap between profit and purpose.
The idea of businesses purpose aligning with social purpose is also deeply connected to the idea of long-term business sustainability (financial, social, environmental, etc.) and therefore long-term financial results. Strong, clear purpose and values go hand in hand with long-term strategies that support sustained organizational health and management of long-term risks. At times, this demands boards and management teams accept short-term losses, in order to achieve long-term strategies and maximize impact.
With this sharpened focus on the role of the organization as a driver of social good, what role do boards play in shaping and stewarding their organization’s broader social purpose? Serving both profit and public good requires boards to broaden their view of the interconnected consequences of decisions – both intended and unintended – that go beyond the balance sheet. The board also has an important role to play in making sure ESG factors are appropriately considered and embedded in the organization’s strategy, risk management, investment framework, HR practices, and culture. Now that organizations are more explicit and intentional about the why, directors are expected to steward this purpose with diligence and care.
Boards can play an important role in signaling and articulating how purpose meets practice. Boards that ground their work in purpose intentionally link governance structures and practices to specific ESG issues. They help bring stakeholders and shareholders along by clearly articulating the link between ESG principles and board practices. Instead of simply asking questions around sustainability practices, they develop a formal board mandate on sustainability to signal the importance of this key area. Instead of striving for gender parity because “it’s the right thing to do”, they articulate how it relates to ESG and contributes to the organization’s purpose.
Often an increase in focus on purpose happens in parallel with other forms of transformation, whether in business model, culture, leadership, or structure – often intended to orient the organization to long-term value creation, where value is measured financially as well as in terms of broader impact. This creates another set of challenges for boards, as it might mean a short-term decline in financial results, a change in the type of investor who is interested in the business, changes in leadership, or other disruptions. To play their role in navigating change and keeping the organization aligned on purpose, directors will need to have a high sense of personal alignment and commitment to the organization’s purpose. It must be authentic, compelling, and achievable in their eyes, which raises the bar for both the quality of the purpose and the quality and fit of great directors.
Stay tuned for our next article in the series to meet The Purpose-Driven Director.
November 14, 2019
Posted in: WATSON Views
Unlike corporate boards, advisory boards have no fiduciary responsibility and their advice is non-binding. Some are hands-on, meeting monthly or more, even getting involved in the daily grind. Others meet quarterly, with an eye to the big picture. Many consist solely of interested outsiders, but a good number include investors as well. What all such boards share is this: They advise, evaluate and play devil’s advocate. Here are ten rules of thumb to follow when building an effective advisory board.
1. Determine the Objective of Your Advisory Board:
Advisory boards can be general in scope or targeted to specific markets, industries or issues such as adopting new technology or going global. They provide timely knowledge about trends and competitors, as well as identifying upcoming political, legislative and regulatory developments. They can help you enter new businesses and look at your own operations with an open mind. Advisory boards can also be made up of customers and prospects who provide insights into product development and marketing issues.
2. Choose the Right People:
Of course, when forming a board you need to understand its purpose, but you also need to know what specific skills to seek. In general, look for diverse skills, expertise and experience. You want members to be problem solvers who are quick studies, have strong communication skills and are open minded.
Big names can be a bonus … but not always: Getting a heavyweight on your board of advisers can give you credibility, but it’s also important to have members who are going to spend the time to give you thoughtful advice or are well connected and willing to make introductions.
3. Set Expectations:
When inviting a prospective member to join your advisory board, you should establish the rules of engagement – what is expected in terms of time, responsibilities and term of office. Specify the areas in which you’re seeking help. If the advisory board is going to discuss issues that include private information, ensure members sign a confidentiality agreement.
4. Compensate Your Advisory Board:
Depending on whom you are asking and how involved you need them to be, compensation can vary from just providing food to covering expenses to stock options to cash payments to a combination of the four. Keep in mind that your members will likely benefit themselves in a variety of ways. Being on your board will expose them to ideas and perspectives they may have otherwise missed. It will also expand their own networks and provide them with a way of giving back.
5. Get the Most Out of Advisory Board Meetings:
Prepare for meetings well in advance. Choose a site that is comfortable and free of distractions. Careful thought should be given to developing the agenda and managing the meeting. Solicit input for the agenda, and distribute important information ahead of time. Run the session as you would any professional meeting, and follow it with an action plan. The minutes should be written up and circulated to top management. The notes should include recommendations on key issues.
6. Ask for Honesty:
An advisory board must be open and frank, so don’t be offended if you hear things you don’t like. Your board will also suggest ways of correcting the problems they identify.
If appropriate, encourage members to tell you about their mistakes so you can avoid making the same ones. You can learn a lot by finding out what other people did wrong.
7. Consider Alternative Feedback Methods:
Getting the entire board together on a regular basis may not be possible. Instead, meet or have conference calls with specific members about topics relevant to their expertise as needed. E-mail is a great way to reach everyone and have them respond to you at their convenience.
8. Respect your Board’s Contributions:
Don’t abuse or waste their time. Listen to what the board says. Sometimes, a business executive is so close to an issue, you can’t see the forest for the trees. But remember: This isn’t a corporate board, so you don’t have to do everything they suggest. Ask yourself, “Does this work for my company? Am I comfortable with that?” Then make a decision.
9. Keep your Board Members Informed:
Once they’re on the board, keep members excited about your business by giving them updates at times when you aren’t soliciting their advice. The fact that they’ve agreed to be on your board means they care about your company, so keeping up-to-date will help them be of greater value to you. Remember that these people are evangelists for the company.
10. Transition Underperforming Board Members:
If you realize you’ve made a bad choice, get rid of him or her. Unlike a board of directors, advisers can be replaced without a lot of legal headaches.
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