Today's prescription for board leadership is a recipe of talented directors, led by an independent chair who creates the right chemistry between them.
But teamwork, talent and chairmanship are not enough to guarantee top performance. For a board to lead, each director must ground themselves in the right mechanics.
The idea of mechanics is familiar to any football fan. They're called the team rules.
Who's on the field, their individual roles, the tasks at hand and each players approach to the game depends on mechanics. Mechanics are the building blocks of team rules. They describe how the players purposefully interact to win.
But break a team rule and watch what happens. The play breaks down, the coach swears and the players try to hide their disappointment in their team mate. And, after the game, when the team gathers, they're not reviewing the score but where the mechanics broke down.
On the football field and in the boardroom, great talent, teamwork and leadership can only take you so far. If the team understands and executes on the right mechanics they can go all the way.
The Mechanics of Directorship
The boardroom has its own offense and defense.
Traditional governance is like defense. The focus is on protecting value through corporate control, oversight of management, monitoring for risk and regulatory compliance. The mechanics can be simple - question, challenge and monitor.
Directorship is more like offense. The focus is on creating value by making strategic decisions, motivating management, helping out and learning how to become better at directing.
Most directors will have little trouble identifying the team rules when they're governing. But what are the mechanics when they're directing for value creation?
To understand the mechanics of directorship, it helps to understand the idea of a mode: According to renowned psychologist Daniel Goleman:
Modes’ are a new concept that lets us understand how and why we actually are diverse people at various times. A mode orchestrates our entire way of being: how we perceive and interpret the world, how we react – our thoughts, feelings, actions and interactions.
Modes provide the clue of how to act, behave and what to do.
Even the most contemporary approaches to better board performance ignore the concept of modes in favor of personality types. The idea being that if you get the right personality types with the right skills, board leadership inevitably follows.
But in the spirit of the best governance solutions, the pill creates the next disease:
- The personality approach to board performance can be inflexible. The challenger tends to challenge all the time and fails to notice that their relentless behavior is demotivating the CEO and undermining value. They think they're doing their job. And they are, but only sometimes. At other times they're undermining their own work.
- The personality approach recruits "governance" type directors. Whose thoughts, feelings, actions and interactions are dominated by a control and monitoring ethos. Great in defense when the board is protecting value. But as many now recognize, boards must not only defend value - they must actively create it.
The liberating effect of thinking about modes rather than “personality types” is that modes come and go. We can learn what triggers our modes, what makes some self-defeating ones so sticky, and what can help us loosen their grip and get into the best modes for top performance.
Governance has become sticky and self defeating. An all consuming mode that creates many of the problems it has been designed to solve. They're is a time for monitoring and questioning, just not all the time.
If the goal is top performance, the board needs to look beyond corporate governance and the usual suspects of talent, teamwork and chairmanship. They also need to design the mechanics - their own team rules for creating value from the boardroom.
The Four Modes of Value Creation
At the core of directorship are four different modes of operating. These modes are the basic building blocks of the board's team rules when it comes to creating value.
To be clear, these are not governance mechanics. Governance has its own mechanics and a single dominant mode. But if you think that scrutinizing management is the best way to create value, you're kicking an own goal.
Each of these modes represents a different way a company director can go about building business critical value in the boardroom. Some are obvious. Boards make decisions like appointing a CEO and choosing the right strategy and this is a distinct mode of operating. But equally, having made a decision to delegate a role to the CEO, the board can continue to create value by guiding and motivating. Each mode has its own goal that contributes to overall success of the firm in its own unique way.
The challenge is to create a plan that ensures that everyone in the boardroom matches their behavior and actions to the right mode at the right time.
To design the right team rules for your board focus on each mode and ask yourself these logical questions:
- What do we need to do ?
- What's our role ?
- What are our dominant actions ?
- What are our dominant behaviors ?
Then start putting them into practice.
But to do this, you must first know when its time to govern and when its time to direct. Then, when the board has decided its time to direct, how to transition between modes to produce the greatest value as things change. In the beginning, that can be as easy as color coding board papers to telegraph the primary mode through which the board should interpret the information.
To get you started thinking about the mechanics, here's my breakdown of the dominant or primary actions that match the objective of each directorship mode.
The first step in mastering the mechanics of directorship is to recognize that governing and directing are different and that governing for value protection requires a fundamentally different approach to directing for value creation. Read Governing and Directing - Are They Different to make up your own mind.
If you accept that like managing and leading, governing and directing are different, the next step is to design, learn and follow team rules.
Designing is the easy part. Over the past decade I've done much of that work for you. The hard part is learning and following the rules. It takes a special board to recognize that they need more than talent, teamwork and a great chair. It takes an exceptional board to embrace the discipline of directorship.
But as every footballer knows, the memory of the hard work and pain of training is the strength needed to succeed.