News and Views
October 22, 2019
Discussed will be “The Evolution of Family Business Governance – Navigating a Different Pace of Change”.
Liz Watson and John Jennings of WATSON Advisors share stories that capture each of these shifts – a case of slow, deliberate governance change to respond to business evolution and a case of a board stepping up in a time of crisis. Each story, emblematic of family business governance, speaks to a different path to good governance and shares real-life lessons to bring back to the boardroom.
October 21, 2019
Posted in: WATSON Views
DEMYSTIFYING DEBRIEFS — Part 2
The meeting is booked, invites are sent, and the CEO evaluation report is in the CEO’s hands. It’s time to draft the agenda and figure out how to meaningfully fill an hour…
Part 1 of the Demystifying Debriefs series answered your burning questions on how to set up the conversation. Now we turn to conversation design – the anatomy of the conversation itself and some tips and questions to guide the way.
Every conversation is different. The flow will vary depending on comfort and familiarity with these kinds of conversations, the CEO’s point in their tenure and career, the organization’s context, and the nature of the feedback itself. Regardless of the situation, thoughtful preparation and intentional design are key to a constructive conversation. The conversation flow set out below can act as a starting point – to be tailored to your situation and context.
- Ensure you have enough time to do it properly
- Bring a calm, measured demeanor – if you are uncomfortable with the task, they will be too
- Make sure not to just dive into the critical feedback – speaking about how their strengths can be used more is a powerful conversation
- When discussing quantitative ratings, focus on the story the data tells – it’s not about the numbers, it’s about the highs and lows and how they align with the CEO’s own perceptions of their performance
- You don’t have to have all the answers
- Be open to another perspective, and to receiving feedback
- Ask curious, open-ended questions – start early in the conversation, to set the tone that this is a dialogue
- Be conscious of the “judgement rut” – magic question is “what can you (we) learn from this?
Thought Starter Questions
- What feedback are you most proud of?
- What feedback was tricky for you to see?
- Are there any immediate steps, including any communications, that you envision?
- What are your initial thoughts on how you move forward beyond the immediate?
- Would you like some of the board’s observations around the key takeaways?
- Here are the themes of the feedback that show the board what unique value you bring to the organization…
- Here are some of the areas the board would like you to focus on in the year ahead…
- Here are a couple of things you might want to do to play to your strengths and develop some of your weaker areas…
- Do you have any feedback for us or the board?
Get good data though a professional evaluation process, then put it to work with a powerful conversation that deepens the relationship and sets the stage for the year ahead. Stay tuned for Part 3 of the Demystifying Debriefs series.
October 10, 2019
Posted in: WATSON Views
DEMYSTIFYING DEBRIEFS — Part 1
It’s that time of year again – the annual CEO performance review – and the board is stepping up! They engineered a robust CEO evaluation tool with great metrics, KPIs, and consideration of the characteristics and attributes that drive effective CEO performance. They engaged in a thoughtful feedback gathering process and prepared a comprehensive report. They got it right up until the very last moment, when the 15-minute “debrief call” left the CEO wanting so much more…
One of the most critical parts of the CEO evaluation process is the conversation with the CEO. Done well, it helps the CEO focus on the most important feedback, clearly articulates the board’s key messages, and sets up a meaningful conversation between the board and CEO on priorities for the year ahead. Done poorly, it can leave a CEO confused, unsure, or demotivated, regardless of the feedback itself.
Many chairs find themselves leading this critical conversation with no experience or training in facilitating feedback conversations and unsure of where to start. We’re here to help. In WATSON’s three-part Demystifying Debriefs series we share tips and guidance to help set up a meaningful dialogue between the board and CEO and get the most from your CEO evaluation process.
First, the basics – who, what, where, when, why, how. We answer your burning questions on how to structure the conversation.
Common Questions and Answers
- Who should be in the meeting? We find it is best to have two people who have been involved in the CEO evaluation process. One should ideally be the chair and the other should be someone with high emotional intelligence who has experience delivering feedback – it might be the vice chair, human resources committee chair, or another director who helped lead the CEO evaluation process.
- When should we meet? The meeting should take place as soon as possible after the board meets to debrief the CEO evaluation report (with enough time to make any changes to the report). A week or so after is about right.
- Where should the meeting take place? The meeting should be somewhere the CEO is comfortable and where you can have a private, confidential conversation. While some CEOs might like to meet at their office, others would prefer to be away from their team to have the conversation.
- How long should the meeting be? A lot of time and thought has been put into the process leading up to this point – don’t rush the most critical conversation. Schedule 60 to 90 minutes depending on the nature of the feedback and the relationship and take the time to explore the feedback and the CEO’s reactions.
- When should the CEO receive the CEO evaluation report? This will depend on the nature of the feedback. The CEO needs time to reflect on the feedback but not too much that they stew on the feedback without context or conversation. Always let the CEO know when to expect the report and send a day or so before if the feedback is positive, the night before or morning of the conversation if there is tricky feedback in the report.
- How can I prepare for the conversation? Review the feedback and jot down your reactions. Craft an agenda with speaking notes to ensure you cover the board’s key messages. Anticipate the CEO’s reactions and think about how you will respond. Take the time to prepare with your counterpart to ensure you are both comfortable – if you aren’t comfortable, chances are the CEO won’t be either.
- What can I do in the meeting to make it successful? Think about things like body language and tone – how will you project your overall message and tone (e.g., confidence, support, concern, etc.) with your words and actions. Listen actively to the CEO and consider their feedback. Put yourself in the CEO’s shoes and respond with empathy and care. Engage the CEO so that it is a shared conversation, not one-way.
- What if it doesn’t go well? These conversations can be challenging and uncomfortable. They aren’t always going to go as well as you’d like. It if doesn’t go well, reflect on why it wasn’t successful and what you could have done differently. Reach out to the CEO if damage control is needed and regroup at a later date. Draw on your counterpart to debrief and strategize a go forward plan.
Build on the momentum of a well-designed CEO evaluation process with a powerful debrief conversation. Stay tuned for Part 2 of the Demystifying Debriefs series.
October 4, 2019
Posted in: WATSON Views
Good governance is always important. But add family relationships to the dynamic around the table and you might just see the need for good governance amplify. There are certain elements of a family business that inherently support good governance – foundations of trust, strong relationships, and a shared commitment to the business. At the same time, there are other elements that can lend themselves to inefficiency, power dynamics, and at their worst, total dysfunction.
How can family businesses play to the strengths of their unique family structure while avoiding the challenges that come with mixing business and family?
1. The Great Generational Divide
One thing that makes family businesses unique is the generational diversity of boards and management teams. A multi-generational leadership team can be a strategic advantage, bringing together different experiences and representing a broad cross-section of stakeholders. At the same time, societal evolution can result in shifting values and focus over generations – a tension between purpose and profit, varied commitments to sustainability and social responsibility, and a rapidly changing technological landscape. The way businesses operate is constantly shifting and different generations bring different lenses as they navigate and respond to change.
Different family generations also have different needs and motivations based on where they’re at in life. Childless family members may want to cash out early, while those looking to pass on the business to future generations may make decisions with a longer-term view. Tension between short and long-term interests can have significant consequences on an organization’s strategy and risk profile.
An advisory board with outside expertise can help family businesses craft strategy and consider risk from a more objective position, bridging different family interests, and keeping a steady focus on the best interests of the organization. A talented multi-generational board and management team, complemented by advisory board members with relevant outside experience, can leverage the strengths of diverse perspectives and experiences while diffusing different interests of family members.
2. Process Over People
Family businesses often see unrivaled levels of emotional connection by directors and management. A family name on the building and stories of multi-generational leadership drive a deep personal connection to the business that public and private companies can’t replicate. This passion and commitment are what helps family businesses thrive and maintain a competitive advantage over generations.
Passion can be a powerful motivator, but it can also be detrimental to effective decision making in the boardroom. The tension between facts and feelings is a reality in any boardroom. When directors are passionate about the business, their emotional blinders go up, making it difficult to see the data, logic, and analysis behind different perspectives. This can cause friction in relationships, slow decision making, and potentially result in bad decisions that hurt the business.
A sound governance framework puts processes and structures in place that can alleviate emotional elements of decision making. Clear roles and responsibilities, meeting protocols to guide decision making, and effective board leadership can help set up decision making processes that are focused squarely on the best interests of the business. Well-designed meeting materials can structure and inform objective decision making, diffusing emotional reactions before they occur. As well, an advisory board with external directors can shift the dynamic in the room, bringing outside experience and a focus on process, information, and logic over emotions.
3. Governance Gaps
Family business boards are unlike public and private company boards. When you look around the table, you may not see the standard lawyer, accountant, and CEO, each with industry and governance experience. Instead, you see an extended family with varying levels of skills and experience. Some family business boards are composed of skilled family members with diverse experience, inside and outside the company. Others consist largely of family members who have only ever worked for the family business, if at all. Some family members bring outside governance experience, while others have only seen the inside of the family boardroom. As a result, certain governance and oversight practices can be missing or underdeveloped in family businesses.
As family businesses become more complex and operate within a changing landscape, governance and oversight systems often lag behind. Family business leaders tailor governance and oversight to their current needs without full information. They are anchored to what they’ve seen done in the past, often unaware of the pace of change in areas such as risk management and internal controls in the broader market.
Bringing in outside directors and advisors with the right experience can help complement the skill-sets around the table and bring modern governance and oversight practices to family businesses. Skilled outside directors can bring knowledge of current governance practices, along with specific skills and experiences relevant to the business. The right outside directors and advisors understand the family, the business, and the broader industry. They bring forward new practices and structures that make sense for the business.
Family businesses are a cornerstone of our communities and contribute to a stronger Canadian economy and society. If governed well, family businesses can draw on their unique strengths while also leveraging leading governance practices, putting them in a unique strategic position.
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