Contrary to popular opinion, directing is not concerned with ensuring investment returns to investors. That is the domain of corporate governance.
Good directing is concerned with the actions that a board and each director can take to ensure a corporation realizes its objective and purpose.
I propose a model of directing based on the idea that the objective of the corporation is the realization of its own strength, resilience and endurance (SRE). Regardless of a corporation’s unique purpose, whether selling advertising or educating children, all corporations share the same basic objective.
Not to be confused with managerialism or board primacy, SRE places the interests of the corporation in the center of the model. This decision is primarily commercial. Though there are both legal and philosophical arguments in favor of corporate sovereignty, the best argument is commercial pragmatism.
A corporation run for its own interests seeks to optimize, individually and collectively, the relationship with each of its shareholders, directors, managers, customers and all other trading partners with the goal of SRE in mind. A corporation run for its own interests will also countermand un-commercial rent seeking by any trading partner that undermines SRE. Pragmatism demands that trading partners interests be prioritized according to their contribution to SRE. This spirit of commercialism runs through my model.
I also propose that the purpose of directing is to directly and indirectly assist corporations to realize this objective?
How then does directing lead to SRE?
To explain, I use the same model used for centuries to organize the conduct of war.
Waris perhaps the most complex of all team work. Whilst the boardroom isnot a battlefield it does share a common feature. The work can be divided into "forms" or "Modes" based on actions. For example, attacking and defending are formsof war. This may seem obvious but it's genius. By separating war into its forms it became possible to develop the mechanics of waging war:
- form is determined by the situation and the objective; and
- form then determines the personnel, their roles, their tasks, the required information and the types of behavior aligned to that form.
If the equivalent of attacking and defending could be identified in the boardroom it would be possible to build a new model of directing based on a similar framework. My ambition is to develop the mechanics of directing:
- a strategic model to help directors identify the right form of directing at the right time given the objective of SRE; and
- a tactical model that helps both directors and management to align their roles, tasks, inputs and behaviors with the right form of directing.
Unfortunately, you won't find the concept of forms or modes of directing in governance literature or codes of best practice. Most models of directing are input based ie. structure, process, composition etc. Others amount to little more than thematic lists - a shopping list with no recipe. Others abandon mechanics all together. Seemingly arguing that provided a board member has the right psychological profile it will all work out for shareholders.
My model is based on the actions a board can take to realize SRE. I focus not on inputs/inferences but on actions/outcomes to come up with four forms of directing:
- TRADING - Directors directly influence SRE through the commitments (promises) made on behalf of the corporation. Hiring a CEO is a commitment that only the board can make. Likewise, a board makes commitments to a corporation’s members. In both cases the wrong commitment will enhance or undermine the SRE of the Corporation. Similarly the optimization all trading partner relationships falls within the Trading Form of directing.
- GUIDING - Directors influence SRE by guiding the CEO and other delegates in the way they lead and manage the corporation. By guiding, motivating and developing the CEO and other delegates the directors take indirect action to ensure SRE.
- HELPING - Directors also influence SRE through their help and support to the corporation. For example, directors can provide access to their networks and personal brands in support of SRE.
- BUILDING - Finally, directors influence SRE through building boardroom talent, teamwork and leadership to work in each of the other three other forms of directing. Concepts such as composition, process and structure fall within the Build form of directing.
Progressive directing pivots on these four forms of directing and makes it possible to begin to build a model to help directors:
- Match the form of directing to the corporations circumstances to ensure the board becomes strategically aligned with the corporation's SRE.
- Match the board and management's roles, tasks, inputs and behaviors to the right choice of form to ensure they are tactically aligned with the corporation's SRE.
To illustrate the process I've created a simplified model that matches the roles of directing to the forms of directing outlined above.
You'll notice I don't mention monitoring. A staple of most governance models, monitoring has come to define the modern boardroom. But it is neither a form or role of directing. Directors direct through information in much the same way as Mintzberg argued that managers manage through information. Information encircles all forms of directing and all roles of directing. To argue that the board should be "monitoring" for agency costs misses the point of directing.
Forms of Directing
Roles of Directing
- Designing/Optimizing Organizational Strategy
- Deeming KPI’s
- Defending the organization
- Recruiting CEO
- Communicating (primarily with members)
- Communicating with CEO and other employees
- Guiding (with expectation)
- Coaching and Motivating delegates
- Developing delegates
- Strengthening culture
- Defending Delegates
- Advising (without expectation)
- Designing Board Strategy
- Prioritizing Tasks/Trading Partners
- Recruiting directors