entrepreneurship 101 - exchange magazine · march/april 2008 | 29 a re you one or are you not? to...

M A R C H / A P R I L 2 0 0 8 | 29

Are you one or are you not? To active entrepre-neurs, the act of entrepreneurship might be

defined as “the complex task of making a living foryourself and co-dependents”. For some it’s a strug-gle; for others, it’s stress-free.

History is filled with tales of a peasant’s path toprosperity. Most entrepreneurs originate far from aprivileged blood line.

There are some “privileged” entrepreneurs whostart ahead of the pack; it could be argued that theyaren’t driven by a hunger to catch up or to getahead; privileged entrepreneurs perhaps are morefocused on staying ahead and looking for the nextopportunity. They may experience the anxiety thatcomes with “more to lose”. As an entrepreneuryou’ll find the greatest risk – the risk of looking fool-ish – is a major motivator. Starting from a place ofprivilege, I dare say, is not the norm. I’ve inter-viewed many entrepreneurs and the majority,

carved out their independence with the unbridledability to carry out decisions at any moment, to takeresponsibility and accept the consequences.

Successful entrepreneurship also requires theability to be reflective – to listen and to break apartinformation.

Let’s admit - defining “entrepreneur” is in the endan impossible task. While each entrepreneur sharessome common traits, the reality is that each entre-preneur is as unique, independent, and individualis-tic in their own right. Their personal vision and per-sonal drive are all key to what makes each entrepre-neur successful – it’s very personal, it’s very com-plex. In many ways an entrepreneur’s uniquenessdefies definition or scientific measurement.

Yes, some people claiming entrepreneurship sta-tus have not a shred, while others are only happywhen they are building equity on a solid foundation.

In 2008, entrepreneurs can still be found focused on

ENTREPRENEURSHIP 101Are entrepreneurs born or made... or both?

FEATURE STORY

BY JON ROHR

Howard Armitage, Executive Director of the Centre for Business, Entrepreneurship and Technology (CBET)

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three key disciplines: generating revenue,thrashing out opportunities and ensuringgood decisions move forward. It’s innate, itmay suggest that true entrepreneurs areborn, not made. That maxim has been gener-ally accepted, but while it may contain sometruth, a new breed of academics, focused onentrepreneurship, would argue that at theleast, entrepreneurship can be taught, direct-ed, and nurtured.In fact, at The Centre for Business, Entre-

preneurship and Technology (CBET) locatedin the Accelerator Centre on the Universityof Waterloo Research and Technology Parkfor the last five years, it’s exactly whatthey’re trying to do.Historically, not much thought has gone

into entrepreneurship, academically speak-ing. This may be because post secondaryeducators, over the last 60 years, havefocused narrowly on big business. The big-ger the organization, the easier to collectinformation.Enter the entrepreneur, small and agile,

defying measurement and comparison, justby their nature - too many variables.Entrepreneurs have almost entirely

escaped academic examination. In 1947,Joseph Schumpeter, an Austrian economistargued that “entrepreneurs were agents ofhistorical change.” In 1948, American eco-nomic historian Arthur Cole organized theCentre for Research on EntrepreneurshipHistory which subsequently closed itsdoors 10 years later. In 1959, Cole postulat-ed, “There are four types of entrepreneur:the innovator, the calculating inventor, theover-optimistic promoter, and the organiza-tion builder.” He further stated thatalthough these seem to be personalitytraits, he argued that these types are notrelated to the personality of the individualat all, but to the type of opportunity theentrepreneur faces, thus making the entre-preneur flexible and flowing, willing andable, an agent of change.However, Schumpeter and Cole were not

the norm. The real study of entrepreneurshipin the second half of the 20th century tookplace on the job, within the families whoseentrepreneurial vocation was passed downthrough generations for perhaps centuries.Entrepreneurs have always had a tough

go. Their knowledge transfer is hand on; atthe very least entrepreneurs are required toshare one of their many intangible skills –togrow and prosper. On the job entrepreneursbecome trainers and teachers, mentoringapprentices who learn soft skills and hardones. They build organization and people inorganizations build communities.Entrepreneurial enterprises are a com-

munities” engine. But even in today’s

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deserve to drive entrepreneurship – theyare misunderstood.

In March, 2006, The Economist pub-lished an article about New York Universityeconomist William Baumol, and his life-long work to develop a place in economictheory for the entrepreneur. The magazinenoted that Baumol raised the awareness ofthe impact entrepreneurs play ineconomies, that traditional microeconomictheory holds a place for prices and firmsbut not for that (seemingly) importantengine of innovation, the entrepreneur.

“Thanks to Mr. Baumol’s own painstak-ing efforts, economists now have a bit moreroom for entrepreneurs in their theories.”Baumol is by no means alone in a resurgentacademic interest in entrepreneurship. Con-sider again the Centre for Business, Entre-preneurship and Technology (CBET) at theUniversity of Waterloo and of course theSchlegel Centre for Entrepreneurship (est.2002) at WLU (see Exchange June 2004).

CBET officially launched in 2003. It wascreated through the combined efforts ofmany UW departments but key to it foun-dation is CBET Director Howard Armitage.Armitage speaks fondly of his entrepre-neurial “academic unit that’s beginning tonurture all this next generation”. Armitage

came to the University of Waterloo in 1981,attracted here because Waterloo was doingthings differently than other universities.Graduating from Michigan, Armitage wasfinishing up his PhD and deciding if hewanted to stay in the States, come back toCanada or go overseas. Specifically,Armitage was attracted by UW’s new workin accounting. “If you look across Canadayou’ll find that many universities have pro-fessional schools that train lawyers, manyhave professional schools to train engi-neers, architects, and other disciplines.There was no school in North America,particularly in Canada, that trained profes-sional accountants. And Waterloo waswilling to do that. It was something brandnew.” If we fast forward from 1981 to thepresent, University of Waterloo graduatesmore accountants, in professionalaccounting disciplines like accountancy,certified management accountancy, thananywhere else in Canada. It’s the singlebiggest school of accountancy. The MAccdegree is extremely well known.

Howard Armitage is looking to repeatthe university’s success in Accountancy inthe new field of Entrepreneurship, and witha corps of entrepreneurs and big businesssupport, he wants to drive the entrepre-

neurial engine for the next generation.CBET focuses of four key areas, he says.

“Area one: We wanted to create a flagshipacademic program that is uniquely differentthan anything else in Canada. That’s theMBEt program. Area Two: To have an activeoutreach program where we could providesome of the skills that we have here, withsome of our partners, developing programsfor the community, for companies and soon. That’s underway right now. Area Three:To manage a lot of the entrepreneurialdevelopment that is taking place on thecampus of University of Waterloo, to sup-port different types of student groups, andperhaps integrate what students do, roughlycalled entrepreneurship. That’s now largelyunder the CBET umbrella. Area Four: To bea respected unit on campus at the Universi-ty of Waterloo. To have research output.We’re going to have individuals involved init – that’s why Waterloo is such an effectivecluster... we have a research component aswell.” In short, CBET is seeking to answerthe question, “What does it mean to be anentrepreneurial university?” Does it meanthat entrepreneurs can be made, not simplyborn? At CBET, it certainly means entrepre-neurs can be taught, mentored andinspired. X

FEATURE STORY

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EXPORTING BLACKBERRIES,BANKS AND HOPEMaking connections a hemisphere from home

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by SUNSHINE CHEN

FROM THE GROUND UP

Pacific Ocean, fruits picked off trees, and of course, agreat deal of Chile’s renowned wines, accompanied thegenerous hospitality of our hosts who shared thevery best of all that they had – even when they hadvery little themselves.

There was no place for me, however, that was asshockingly beautiful, pleasantly delightful and thatembodied the paradoxes and contradictions of life inChile, as the southern town of Puerto Varas. One of ahandful of small towns nestled alongside Lake Llanqui-hue, Chile’s largest lake, sitting at the foot of fourmajestic volcanoes, Puerto Varas was settled byGermans, has a population of almost 30,000, andwas voted Chile’s best place to live. Incidentally, itcelebrated its first Oktoberfest last year. It’s almost likea little Kitchener in South America – but with waybetter scenery, better seafood, better wine and“Latinized Germans”.

Our purpose for going to Puerto Varas was to visit theAcademia de Musica located there. This is a school ofmusic with over 300 students, five orchestras, notenough instruments to go around, a run down old build-ing with six class rooms, no heat, no plumbing, and oneporta-potty sitting alongside a mountain of left-overconstruction garbage. We had been invited to come and

see a Kids’ Swing Band and be treated to a private con-cert for just me and Isabel Cisterna, the artistic directorof Neruda Productions. And what a treat it was. Seven-teen kids ranging in age from 12 to 17 played theirhearts out, swinging to the tunes of Duke Ellington,Charlie Parker, Benny Goodman and other jazz greats.

After the performance, we learned that some of thekids walk two hours each way, once a week, from thesurrounding hills and countryside, to come to the

Eight thousand kilometers from home, a continentapart and seemingly a world away from everything I

knew, I was surprised to be reminded of Waterloo andCanada the very moment we arrived in Chile. Thefamiliar sight of a Blackberry ad, as soon as westepped off our plane and onto the shopping con-course in Arturo Merino Benitez International Airport,was both novel and reassuring. Now, like us, Chileanscan get a Blackberry Pearl or Curve. Even more inter-esting, however, was the sight of red and whiteawnings with the Scotiabank logo on many of thestreet corners in Santiago. With the acquisition ofBanco del Desarrollo, Scotiabank sud Americano isnow the sixth largest bank in Chile. Familiar sights and

reminders of home in what is otherwise an exotic LatinAmerican landscape.

But away from the bright lights of big city Santiago,in the countryside and along the coastline, the breath-taking beauty of nature and geography, and the rich-ness of Chilean cultural life came to the forefront ofour experience in the towns and villages we visited,and Kitchener-Waterloo had become a happy distantmemory. Amazing meals of fresh seafood from the

Some of the kids walk two hours each way, once a week, from the surrounding hills andcountryside, to come to the school and learn how to play this music.


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school and learn how to play this music.For a great number of these students, thismusic and this school was all that theyhad outside a life of extreme poverty andlittle hope beyond farming, or fishing, orsome kind of physical labour. But whenthey played, they soared. They embodiedthe double paradox of Puerto Varas: thatamongst such natural and cultural beautythere could be such a disparity betweenrich and poor, and that despite all theodds, the challenges of poverty, preju-dice, classism, and lack of opportunity,this little group of students and teacherscould create such remarkable beauty.

It was moving. It was inspiring. Somuch so, that we committed to bringingthe entire band – all the kids and theirteachers – to come to Canada as part ofNeruda Production’s Canadian-ChileanMusic Exchange Program (CCME – or SeeMe Play!) later this year. Neruda Produc-tions had brought five kids to Canada acouple of years ago, and we had a chanceto meet with them again at the school. Itwas a transformative experience forthem, and now they are all pursuing high-er education, and planning for a better lifefor themselves. Their parents met with usas well and attested to their kids’ newfound sense of possibility. Other parentsmade the case for us to do this again.

So we are. We are bringing the Kids’Swing Band of the Academia de Musica ofPuerto Varas to Canada later this year. Inour minds, it’s not about importing thesetalented kids to Kitchener-Waterloo just toentertain us – it’s about inviting them tocome experience that which we take forgranted – a privileged and comfortable lifein a safe and prosperous community.

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And in the process, perhaps we mighteven send them back with a bit of hope –the kind of hope that we take for grantedliving in the most Intelligent city in theworld in one of the wealthiest and mostdeveloped countries on the planet. Thekind of hope that dares to dream of mak-

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But only when the business owner sells the shares ofhis business does the sale qualify for a capital gainsexemption. Alternatively, if the sale is structured as anasset sale the business owner misses out on the capi-tal gains exemption altogether. While you as the sellershould be open to the idea of an asset sale, be awarethat you will need to earn a large premium on an assetsale in order to compensate for the additional taxesyou will need to pay. A purchaser may be willing topay the needed premium for an asset purchasebecause it is more tax advantageous from his stand-point and eliminates the risk of incurring undisclosedliabilities. But be sure to involve your tax professionalwhen evaluating a purchaser’s offer to buy assets asopposed to shares.

While knowing the difference between a share saleand an asset sale is critical at the time of the sale, cer-tain steps need to be taken well in advance of the saleto position the company for a tax-efficient transaction.“People will get the best possible outcome in the sale of

their business if they plan years in advance,” says JohnDurland of Collins Barrow. “In my experience, it is theclients that come to me well in advance of the sale thatare left with the most money in their pockets.” To a


SELLING YOUR COMPANYNEED NOT BE TAXINGEffective tax planning, in advance, is the key

LOU DIETRICH (MBA) is alocal VP of RegionalCommercial, an M&A firmhelping business ownerssell or position theircompany for eventual sale.email:[email protected].

Selling your company need not be a taxing experienceif you play your cards right. As an example, a busi-

ness owner who sells his or her company for $2 millioncan immediately pocket 95% of the proceeds after taxbetween the owner and his or her spouse. But such afavorable tax outcome doesn’t just happen automati-cally. It is the result of a properly structured sale thathas been preceded by effective tax planning. And at theroot of it all is the capital gains exemption.

The concept of the capital gains exemption is sim-ple – if you sell shares of a qualifying privately-heldcorporation for a profit, the first $750,000 of your gainon a lifetime basis can be received on a tax-free basis.

EXIT STRATEGY

“People will get the best possible outcome in the sale of their businessif they plan years in advance.”

by LOU DIETRICH


large extent, this is because sufficient leadtime is needed in order to properly lever-age the capital gains exemption.

In some cases, certain steps need to betaken to ensure the company is even eli-gible for the capital gains exemption. Inorder for the shares to qualify, “at least90% of the assets in the company beingsold must be used for the purpose ofoperating the business at the time of sale;and at least 50% of the assets must havebeen used for that purpose in the 24months preceding the sale,” saysCameron Keller of Cameron Keller andCompany. “This means assets like excesscash and marketable securities may needto be moved into a separate sister compa-ny, and this is best done well in advanceof the sale.”

Along with ensuring your companymeets the exemption criteria, it is alsomore tax efficient to move these assetsyears in advance of a sale. “RevenueCanada stipulates that such an assettransfer cannot be performed on a taxfree basis in contemplation of a sale.While there is no stated lead-time, therule of thumb is that such a transfershould be done at least two years inadvance,” says Keller.

Along with ensuring your companyqualifies for capital gains exemption, youshould consider using the technique ofmultiplying the exemption across multiplefamily members. If you are a businessowner that holds all the shares of thecompany, then the first $750,000 of thesale value is collected tax-free. However,if you transfer shares to your spouse andtwo children, you “multiply” your exemp-tion in such a way that it becomes possi-ble for the family members to collectivelyreceive $3 million tax-free.

While the tax benefits of this strategyare obvious, there are other things to con-sider in applying this technique.“Although there are ways for you to main-tain control of the corporation following ashare transfer, when you give shares toother family members, it’s legally theirmoney,” says Paul Hemmerich of Hem-merich Flannagan Kratz & Earner LLP.“You are transferring the value of thecompany, which may mean less money isgoing to taxes; but it also means lessmoney is going to you.”

If you wish to perform a share transferto multiply the small business deduction,keep in mind that it is only effective ifthere is an increase in the company’svalue between the time of the share trans-fer and the time of the company’s sale.This is a key point. If the value of the com-

pany has already hit its peak by the time ashare transfer is performed, then there willbe no capital gain to be spread around toother family members. A share transfer’sability to generate tax savings is a functionof how much the company’s value appre-ciates following the share transfer.

If you are like most business ownerswho have already gone through a taxplanning exercise with your tax profes-sional, be sure to revisit this exercise peri-odically. “Just like your Will needs to berevisited as circumstances change, so toodoes your ownership structure,” says

Hemmerich. “Tax laws change, as do rela-tionships and the structure of the family.As all these things change, so too doesthe appropriate ownership structuring ofyour company.”

At the end of the day, selling your com-pany need not be a taxing experience ifyou can properly leverage the power ofthe capital gains exemption. But be sureto plan early, revisit your plan as circum-stances change, properly structure thetransaction at the time of sale, and workclosely with a good tax professional thatcan help you every step of the way. X

EXIT STRATEGY

M A R C H / A P R I L 2 0 0 8 | 35



SOURCING YOUR RICHESFROM WITHINThe nature of the employee-employer relationship is changing

vidualize their work experience, others are asking moreof themselves and are personalizing their work experi-ence with flextime, telecommuting and lifestyle business-es. Visionary managers and leaders need to continue toensure appropriateness of knowledge, attitude, habitsand performance within this nebulous workscape.

Having said that, the nature of the employee-employerrelationship is changing. Now “people” are “talents” look-ing to write their own ticket to the work-life balance desti-nation of their choice. Working for someone else may be atemporary vehicle to help them get there. In fact, it is nowestimated that people beginning work in 2009 will have 15different jobs in their working lifetime. There are currentlyfour generations working alongside each other, andexpectations are changing.

Organizations that use tools to challenge individualbiases when selecting great people, entrenched mecha-nisms for investing in each person’s development andcreating clear expectations regarding performance, willbe able to power ahead, driven on the fuel of ideas, per-sonal accountability and focus. With regular reports oflayoffs and outsourcing, people recognize that they com-pete with their neighbor, fellow graduates and billions ofother people for income. Education, grit and specializa-tion of skill are ways an individual can ensure their spoton the island and increase their chance of winning.Leaders who create the infrastructure that allows these

traits to shine, will likely command top spot in their field.How do you feel about these sobering facts? Asia now

has more honours students graduating from high schoolthan the number of students we have attending highschool. Currently, university frosh are learning skills andconcepts in their first year for jobs that won’t exist in theirthird year. Additionally, some individuals ask more oftenwhat they can get from their jobs as opposed to what they

GROWING INTELLIGENTLY

In this age of democratization, disruptive technologiesand split-second advances, organizations that are har-

nessing the power of people hungry for innovation arecreating the wake in which others fall. In the long run,persuasion is the most effective way to convince peopleto put their strengths to work with you. As a companygrows to 25 people, it is the founder’s or owner’s person-ality that can most completely determine the culture ofan organization. After the 25th employee, the immediateinfluence of their personality tends to be diluted by thedegrees of separation between them and each employee.Then it is up to the leadership team to duplicate the cul-ture within each of their respective teams.

A one-size-fits-all approach to employee motivation willsoon be replaced by individualized incentive and develop-ment plans. The Ontario Ministry of Education encourages

educators to use Differentiated Instruction, which is basedon the premise that, since students differ significantly intheir interests, learning styles, abilities and prior experi-ences, the teaching strategies, materials and pace shouldvary accordingly. School serves the dual purpose of skilldevelopment and teaching many of your future employeeshow to behave andwhat to expect in large organizations.

While some people may expect their employer to indi-

A one-size-fits-all approach to employee motivation will soon bereplaced by individualized incentive and development plans.

CARLY O’BRIEN is Director andLead Facilitator, The Achieve-ment Centre – Excel (www.tac-excel.com) email: [email protected].

by CARLY O’BRIEN


M A R C H / A P R I L 2 0 0 8 | 37

THE MOOSE GUYThis kind of moose hunting is never out of season

Istarted using the Moose-on-the-Table metaphor in the mid to latenineties in my work helping management teams identify and addressthe issues that were getting in the way of higher performance. Just likedysfunctional families, many teams find it easier to avoid tough conver-sations. But rarely do problems get better when left unaddressed.Rather, the moose grow larger, breed, and increase the size of the herd.A Moose-on-the-Table section in my previous book, The Leader’s

Digest, and evolving moose-hunting workshops and executive retreatsaccelerated The Clemmer Group’s use of this metaphor and approachwith our clients. I have amassed a collection of moose memorabilia inmy office and T-shirts in my closest. Among friends, family, and associ-ates I seem to have become known as the moose guy!The strong response to this simple metaphor moved me to write my

sixth book, “Moose on the Table: A Novel Approach to Communications@ Work”. I thoroughly enjoyed using a fictional or “edutaining casestudy” approach to playfully illustrating how to identify and address dif-ficult team and organizational issues.A long-time reader of my monthly newsletter sent me an e-mail that

shows the power of the moose approach, “‘Is there a moose-on-the-table?’ is a phrase we utilize regularly to break the ice and get past theinitial ‘too polite’ stage of discussion. I have my stuffed toy moose in myoffice and frequently take it to both work- and volunteer-related meet-ings.” He uses them to emphasize the importance of discussing the realissues in the meeting, so they are accurately identified and resolved.Another reader from British Columbia reported: “when reminding

our managers how we need to deal with an issue we talk about dealingwith the salmon-on-the-table before it really starts to smell!”

Fellow Canadian Association of Professional Speakers colleague,Elaine Froese, is based in Boissevain, Manitoba where she works withfamily farms to help them with succession planning. We recently con-nected and compared similarities in our backgrounds (we both grew upon family farms) and our consulting and training businesses. Elaine

JIM CLEMMER is a Kitchener-based international speaker,workshop/retreat leader onpractical leadership. His newbook is Moose-on-the-Table:An Organizational Fable aboutCourageous Conversations.www.clemmer.net; [email protected]

by JIM CLEMMER

can give to their jobs, and occasionally har-bour feelings of entitlement that may ormay not be warranted. Regardless, the out-come is the same: decreased productivity.What is a business leader to do?• Inventory what your organization offersand expects, for both tangible and intan-gible factors.

• Consistently hire great people with skillsand a personality/motivation/abilitylevel that fits with what your organiza-tion has to offer. When growth is part ofyour reality, look for evidence of adapt-ability, the ability to lead others and tomanage the stress inherent with change.

• Tell both the past and future story of yourorganization. Great people can moreeffectively use their strengths when theysee their role clearly within a context.

• Equip your managers and leaders withthe resources, including time, to create,maintain and enhance their professionalrelationship with those they lead. Whatthey may give up in operational time,they will more than recover when effec-tively leveraging the time of their team.

• Verify that you and your managers walkwhatever talk you are asking of others.If you are unsure what signals you and

your leadership team are sending, lookaround, as others may simply be echoingyour actions. Having said that, the goalhere is to encourage equitable versus equalbehavior. You have your role for a reason.Whatever you decide to do, keep in

mind that each organization has uniquestrengths and it is when strength and envi-ronment complement each other resultsreally fly. Consider your organization’sunique situation and source the richesfrom within it. X

GROWING INTELLIGENTLY PRACTICAL LEADERSHIP



JUST ONE PLAYBOOKGetting directors on the same page a key to board success

Acritical factor for board success is ensuring that directors and man-agement share the same understanding and have commonly-held

expectations on the purpose of governance. In boardrooms across thecountry (and beyond), the potential for good governance is oftenundermined by an all-too-common ailment where, even amongboard members, there are differing views as to the role of the board,the contribution it is to make and how that contribution will beachieved.

With dozens of definitions of the term governance and an equalnumber of governance models, a key risk to board effectiveness islack of clarity as to what purpose the board is to fulfill as directorsapply their own unique perspectives or experience and often assumeit is shared by their board colleagues.

Around most boardroom tables, there is often the appearance of acohesiveness that can mask an often pervasive problem wherebymembers of these board teams are using slightly different playbooks.

Understandably, most directors bring their own particular take ongovernance to the boardroom: each has their own boardroom expec-tations, experiences, biases and insights. Many will have a preferredmodel or purpose for governance, though often not explicitly defined.And while the myriad perspectives may reflect established gover-nance theory, the practical implementation of best practices or pre-cepts often stymies many boards because the apparent cohesivenessis superficial at best.

The issue here is not about choosing the right model or the bestdefinition. Any model can work well if a board is committed to ensur-ing its successful implementation. Any of the dozens of definitions arelegitimate in their own right as they typically reflect the thinking ofkeen and insightful minds.

A root cause of many governance challenges is the lack of explicit

coined the term “Discuss the Undiscussabull’which is the bull in the middle of the familybusiness living room that no one wants to talkabout. She uses as “talking stick” a beaniebaby bull which family members pass aroundat random when they want to speak. The per-son holding the bull gets to speak withoutinterruption. Like my experiences with moosehunting in management teams, Elaine findsthat this approach works well for drawing outquieter family members who often havedeeply held and very emotional positions. Shetold me used this method in working with themen and women of a Hutterite colony in theirdining room. Elaine reported, “When I pulledout a roll of toilet paper to remind them to behard on the problem but soft on the person –just like toilet paper – they got the message!”

A few years ago The Clemmer Groupdesigned and trained internal trainers at Bar-rick Gold Corporation to deliver a two-dayCourageous Leadership for Health and Safetyprogram around world. This was the core ofa massive effort to revamp attitudes and theculture of this worldwide corporation (28,000employees on five continents) towardshealth and safety. Over the three years sincewe begin, the effort has reduced accidentsand safety incidents by seventy-five percent!At the core the program are “moose hunting”exercises to help supervisors and managerslearn how to encourage members of theirteam to speak up when they see unsafepractices or feel pressured to sacrifice safetyfor production.

Barrick’s Health and Safety Director, BruceHuber, sent me a photo from an Australiansite of a stuffed moose inside a small woodencase hanging to the wall. Underneath waswritten, “In the event of an issue – grabmoose.” X

JOHN DINNER is president ofJohn T. Dinner BoardGovernance Services(www.boardgovernance.ca)e-mail: [email protected]

by JOHN T. DINNER

GOOD GOVERNANCEPRACTICAL LEADERSHIP

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GOOD GOVERNANCE

agreement on how the board will function.It’s rare for a board to take the time strate-gize about how it will operate. Despite bestintentions, this kind of generative thinkingis usually sidelined by demanding agendasof regularly scheduled meetings. Rarely istime specifically allotted for what mightseem to be mere philosophical musings.After all, most boards are made up of expe-rienced directors who bring a portfolio ofskills and insights tailored to the organiza-tion’s needs. However, what is often over-looked is a need to ensure a high level ofunity across boards that are increasinglydesigned to foster greater diversity. While avariety of backgrounds, skills and experi-ences contribute to more effective oversightand decision-making, the rules of the gameneed to be understood and shared. Direc-tors need to take care against adoptingpractices successfully implemented at otherboards assuming they will produce thesame results in another context.

So what is a board to do? The key is fora board to work through a process on itsown and, ideally, with management, tomake choices around the purpose for gov-ernance in their particular organization,recognizing what is good for the gover-nance goose is not necessarily good for

the governance gander.One of the best things a board can do is

to commit discussion and deliberationtime to determine for itself how the boardwill function, why it has adopted a particu-lar structure, how it will go about under-taking its work and how directors willrelate to each other and with manage-ment. This does not mean an exercise ingroup think or eliminating divergent orcontrarian views. However, philosophicalcongruity on foundation governance issuesis key if a board is going to be able to fulfillits mandate.

Boiled down to essentials, all boardsshould undertake an explicit process ofconsidering and making choices fromamong many valid options regarding thepurpose of governance, the role of theboard, its relationship with managementand other critical board success factors. Theprocess is really about deciding what’s inthe best interests of the organization andbeing explicit about the form and functionof governance.

During a recent governance review witha multi-billion dollar organization, itbecame immediately apparent that theboard was split on its support for the CEO:half of the board viewed the CEO as incom-

petent while the remaining directors werehighly supportive of the individual’s leader-ship and the results being achieved. Istrongly urged the board to work on thisobvious lack of shared expectations aroundthe role and performance of the CEO. Notacknowledging the split on such a criticallyimportant matter created factions on theboard and put the entire organization atsignificant risk. Whereas hallway meetingsserved to create divisiveness, having the fullboard address the issue explicitly served tobring about resolution. A pointless powerstruggle was the result of a lack of commonunderstanding as to how the board wouldaddress conflict when it occurred. A deci-sion to undertake more inclusive dialogueand deliberation helped bring about satis-factory resolution and, in turn, fostered agreat sense of unity, trust and team amongall directors.

There are other issues that commonlyhandicap boards from achieving optimalperformance. Most relate to well-intendedassumptions or differing views, both ofwhich can be easily avoid if proactivelyidentified and addressed in a way thatensures the best possible choices are madewith the best interests of the organization inmind. X

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