Oct 2, 2023
Introduction: Brendan Lenihan is a professional non-executive director, a management consultant, a chartered accountant, and an accredited mediator. Previously he was a Partner with Andersen (with whom he worked in Dublin and New York)
Through his consultancy, Navigo Consulting, he provides strategic, financial and governance advice to clients in Ireland and the UK as well as having a non-executive director portfolio in private companies, public bodies and charities. His is currently;
Podcast episode Summary: This podcast explores the nature of Boards, our understanding of the role of Boards, and whether we can consider boards are Teams. In addition, Brendan illuminates the constraints on boards and the potential that exists to support boards be more effective.
Points made throughout the Episode:
o Brendan has led a portfolio career to date. An accountant by nature but he is more than that. His eclectic portfolio and experience has meant that he has learnt how to sell, navigate & supervise professional service bodies.
o Brendan doesn’t rush towards fires but he has noticed that he ends up in the thick of things. Around the time of the crash in 2008 in NYC he was involved in the Enron Scandal and as Finance Director for a Property Company he was instrumental in supporting them through the crash. Similarly he was involved with the HSE for 4 years through Covid 19- where he put his consultancy experience where it was most needed.
o 10 years ago as the President of the Chartered Institute of Ireland it became clear to Brendan that accountants do 3 things, they measure, communicate and decide. Brendan observed that if someone like him, even with his vast experience, were to survive he needed to move up the value chain to where decision making and governance happened. Decision making is the business Brendan is now in.
o The Myths of Boards: The great man myth and the myth of omnipotence of boards is very much alive. The myth that the CEO is the eternal fountain of all knowledge and the organisation pivots around him/her is similarly active. The truth is that the health and direction of a company cannot revolve around one person, especially as CEOs come and go. There is also a great myth that board work is easy, you turn up, listen and go away. That is not the case.
o There is a grain of truth in the idea that the smartest group of people are the executives and the wise comprise the board. The smart and wise sit down together and generally the wise people approve everything the smart people have to say, although it is not always the case. The smartest and wisest is the relationship between the Chair and the CEO. There is some grain of truth to all of this but it should not be how people think for a heathy, dynamic and growing organisation to operate.
o A lot of people end up on boards because of their success in role and the because of their functional expertise but often they do not know what the role of a board member is.
o A healthy board is one that has a very clear sense of its role & its purpose. Many boards have an impoverished view of what their role is as a Board. Often they encapsulate their role as their function to support management. That definition is too simplistic and too narrow a definition.
o A healthy Board is one you cannot assess on paper. As well as a board appreciating their role & purpose it is also crucial that Board members understand each other as people. A healthy board is one where the relationships are really strong, where people can deal with conflict and differences of style etc.
o What defines Governance? This is the starting conversation with new boards or new board members. Two central elements to Governance (based off an OECD definition) The first element is the notion that Governance is a network of relationships. The relations within the entity such as staff, the board and the executive management team as well as the relations outside of the entity such as shareholders, funders, regulators, customer as well as suppliers. The first role of a Board is to understand and add to the strength and functioning of these relationships. The second element is about the setting of objectives. What objectives is the entitiy trying to achieve, how are the objectives set and then how are they managed and monitored.
o The degree to which this network of relations is worked governs the degree to which the entity achieves its objectives. That is the role of Governance.
o Two further dimensions have to be considered. One, the compliance perspective to understand and appreciate the rules of the road with respect to this network of relations and two, a performance dimension to understand what travels over and between the network of relations. Brendan makes the point that too often people assume governance is simply about compliance and not about the management of ideas & the performance of objectives across this network of relations.
o Management has a governance role as well but this podcast is focused on the top level of the organisation, the Board.
o If you are sitting on a board you should be focused on the strength and productivity of the network of relations described above. In addition a Board needs to question what objectives are being set and whether they are being achieved.
o For the person in the street the subject of Governance comes down to the simple question, who is in charge?
o The interrelation between the work of the board and management is often confused and ambiguous. The biggest problem Brendan sees in his work is that folks on boards devolve everything to management.
o The Board should in fact be setting objectives, be providing Leadership and operating with an amount of oversight where the board asks whether the organisation is on plan, getting close to its objectives etc.
o Many board members especially new board members do not realise the many functions of boards and the many mindsets involved. 3 different mindsets prevail on Boards. The first deals with Leadership the second the entity strategy and the third oversight & compliance. Compliance for example requires an evidential focus. Strategy involves a creative process, a heavily laden communication process and psychological process. Oversight is where you are asked to form an opinion and decision based on the question “are we there yet?”
o Boards mix those 3 roles into one combined headset.
o Too often too, a board may be comprised of formerly successful executives you end up Micro Managing senior executives and end up squashing capability.
o In the absence of understanding of the many headsets required of boards duplication, frustration and missed opportunities are inevitable.
o The same is true of teams where there is lack of resources and lack of role clarity. This absence drives conflict and dissent and is especially evident at the interface between senior executives and the board.
o Board members end up on Boards because of their industry expertise, functional expertise and not because they know much about Governance & especially corporate governance.
o The rise of concern about Culture and the question about who is responsible for Culture in an organisation has contributed to the confusion that abounds. The idea that the Board is in fact responsible has really stretched and challenged boards.
o It is not clear what the headset needs to be with respect to the role of Culture setting but it is clear from Corporate Governance that the responsibility lies with the Board.
o Making the interventions that shape Culture is the honours question that boards are struggling with today.
o The board is responsible for there being a well-defined strategy and it is also responsible for the culture of the organisation that is appropriate for its environment and strategic objectives.
o Boards are decision factories with very limited opening hours
o Consider for example the Public Broadcaster here in Ireland which has just faced a critical Corporate Governance crisis this year. Its board would have met about 9 times in the year which is incredibly limited opening hours to get through an enormous remit.
o There is a real paucity of time that drives a lot of the dynamics of boards.
o Brendan works with boards to become as efficient as is possible with oversight and monitoring as a role to free up time to spend on Strategy, Culture and Leadership conversations.
o There are ways at releasing time and working smartly as a board but a week Chair and a board that does not appreciate its full role will fudge and burn time ineffectively leading to frustration and embarrassment as likely possible negative outcomes.
o Brendan works with Boards by sharing simple ideas to support the various roles they play. Leadership for example is about two simple ideas, having a plan and doing the right things. So Leadership from the Board perspective is about making sure there is a plan and challenging the board and executive to be curious about the right things to discuss.
o Too often the senior management team is preoccupied with being busy 60-70 hours a week and they do not often get the opportunity to see the big things on the fringe about which they need to discuss.
o There is so much value a board can bring in terms of ideas, opportunities and even concerns that the executive team might miss. To be a good leader you have to be in the dance of the work but you also need to be on the balcony & able to scan the horizon and outside world.
o Boards can disempower themselves by not understanding their role, similarly they can also disempower their role by handing all power over to management and they can be disenfranchised by the lack of time, ability to meet and the resources at their disposal such as a budget to support Board training.
o Brendan gets asked to assist boards where Governance has gone off the rails and the criticism is made that the board was asleep at the wheel. Often the board has chosen a minimum level of participation or hibernation, which often surprises people.
o The lack of opening hours or time a Board spends together often means that the requisite reflection and quality control of their work is missing. The simple and evocative questions like “what worked” “what could we do differently next time” often do not happen.
o The Titular Monarchy Position is often witnessed on Boards. Every week the Prime Minister of the UK visits the Monarch. The Monarch has 3 rights, the right to be consulted, the right to be supportive of the Government and the right to warn if necessary. That is it. Many Boards operate the same way as a Titular Monarchy where they expect to be consulted, offer support to the executive team and are a bit avuncular when they are concerned about something. This is a recipe for disaster for a Board, because all power has been handed to management
o A contemporary example here in Ireland includes the FAI (Football association of Ireland) who became a puppet board to management. The CEO had all power.
o The list of matters reserved is the list of decisions that only the board can make. Brendan will often ask boards whether they know these decision rights and he knows a weak board will not know what is on this list whereas a strong board will.
o A lot of basic structures that comprise sound principles and conditions for success for Boards are missing.
o There is a huge opportunity for Boards to benefit from some of the ideas housed in Team Coaching.
o It is not conclusive that a Board is a team but its performance could benefit if it thought more about teaming.
o The role of the Chair is absolutely vital.
o Boards are by their nature a collective and the Chair is first amongst equals. When boards break down it is almost always about the people and relationship issues. A good Chair is equipped to bring people insight, an understanding of styles and an ability to mediate if necessary, to support the effective running of the board.
o If the Chair is open to improvement in what Brendan calls the decision making factory then lots can happen.
o Brendan does not enter a board to discuss what he calls the plumbing or Compliance etc. His value is in helping a board get clear about the decisions they have to make, the headsets they have to be in and also the norms they have to exhibit.
o Brendan usually engages with Boards around practical decision dilemmas. He also employs a model to share 10 behaviours that he would expect every board member to display. The 10 behaviours from this model include Power, Dogmatism, Emotion, Decisiveness, Verbal Contribution, Civility, Preparedness, Knowledge, Trust & Director Tenure. With each of these behaviours there is a golden mean.
o If any of these 10 behaviours are out of whack the social system will be out of balance. For example if the Board has too much trust in the Management Team it will be gullible.
o Oftentimes these behaviours are out of balance and they remain unchallenged or unaddressed until there is a big car crash, a claim or other disaster.
o Brendan would like to see greater understanding and clarity about the role of Boards. He would like the difference that can be seen on boards between board members to be empowered. He would also like to see a greater awareness of bias & to see more professional scepticism on Boards.
o The big problem with Boards, with biases present is over confidence. Brendan recalls the Financial Crisis of 2008 where many boards, filled with good people, simply grew over confident.
o Brendan wishes that Boards would allow Professional consultants, Coaches to better serve them than they do currently, to get that team working as a Board to work better together at a human level, on a decision making level and on a structural level so that organisations can achieve their objectives more quickly and efficiently.
o There exist a lot of obstacles to these desires as Brendan sees it. Often there exists a lack of openness, to examine Board performance and to take advice or to think differently. Brendan opines the lack of diversity on boards, the range of people entering boards is still, he believes too narrow. The gender balance is better but it is still not where it could be and could be if boards had better advice, tools and more openness to improvement.
o Brendan shares two case studies, boards he worked with where governance had gone off the rails. Brendan through his work helped both to work out their roles, to define a clear strategy and to understand the interdepended nature between the board and management teams. He shared structure and processes over time to improve the decision making and relations on the Board and between the Management teams.
o Boards cover 3 things; Strategy, Finance and People. Strategy is often misunderstood, Finance is often exceedingly well covered and the people piece is the lease attended.
o Since the Global Financial Crisis a number of tools have evolved to do what is known as a cultural audit. Boards are often shocked that people like Brendan can hold up a mirror and identify what the culture is at an organisation.
o Brendan shares his definition of what comprises Culture. Visible behaviours, behaviours people will see, the group dynamic and then the mindsets that drive these behaviours. There are tools used to hold to hold up a mirror and share what Mindset ideas are being operated. Brendan shares the example of the police force here in Ireland, An Garda Siochana. Its culture was audited and it revealed the high minded ideas that were housed in the annual report with the actual mindset that actually prevailed. The gap proved to be staggering.
o You have to ask what is going on in the narrative of an organisation, the psychology of an organisation, the group dynamic to shape its culture? It is important to tap into these dimensions to shape an appropriate culture, appropriate to the market and context in which an entity lives & it has to be attuned to what the organisation says it wants to achieve in terms of its objectives and plan.
o This is the role of Boards and the value they can provide.
o Brendan makes the distinction between Boards who operate answering the Pass Questions in an Irish Leaving Certificate and a Board that addresses the Honours questions, Culture, Leadership, Strategy and Oversight.
o The Board is a team and it is also a Team with the Executive Directors & staff managing the many relations that comprise the social system in a bid to achieve its goals.
o Brendan would love to see more conversation of this nature to increase awareness & understanding of Boards and board effectiveness and to show case the many tools and techniques that have evolved to support teams and boards to overcome bias in decision making.
Resources mentioned across this podcast