korn ferry 2014 ppt template · 2017. 10. 17. · making and slow reaction to issues facing the...
TRANSCRIPT
© 2014 Korn Ferry. ALL RIGHTS RESERVED.
GOVERNANCE MATTERS Performance evaluation of the Board of Directors including
Independent directors
Bombay Chartered Accountants' Society
25th February 2015
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 1
1. The simple truth
2. What can go wrong with Boards
3. The right things to do
4. The right skills and mindset
5. Staying accountable for high performance
Table of Contents
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 2
A blue ribbon commission of the National Association of Corporate Directors set
out to answer that question. Their conclusion:
Boards that are committed to self-evaluation,
which expect to be held accountable with the goal
of achieving high performance, deliver superior
shareholder value over the long term.
What distinguishes a high-performing corporate boards from
the also-rans?
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 3
1. The simple truth
2. What can go wrong with Boards
3. The right things to do
4. The right skills and mindset
5. Staying accountable for high performance
Table of Contents
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 4
Our Perspective
Common issues in under-performing boards
Disruptions
Poor Process
Management
Implications
• Board members who are unclear on their roles and what their fellow board members expect of
them are ineffectual
• Role ambiguity amongst board members slows decision making processes and can cause in-
fighting amongst members
• Poor meeting preparation, meeting management and communications lead to poor decision
making and slow reaction to issues facing the organization
• Lack of clarity on and alignment with the strategy causes board disruption, and sends damaging
messages to investor markets
• When strategy alignment is not clear, board members to lose focus and default to tackling only
regulatory and compliance issues
• Lack of board leadership can lead to in-fighting and power struggles amongst board
members
• Because a board is theoretically made up of a group of peers, individual board members
often fail to provide feedback to one another
• New challenges for the corporation often require new perspectives and skill sets from its
individual board members
• Boards often lack the ability to reevaluate their makeup to determine if they have the right people
at the table
Lack of Role
Clarity
Alignment with the
Strategy
Poor Team
Dynamics
Wrong Board
Makeup
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 5
1. The simple truth
2. What can go wrong with Boards
3. The right things to do
4. The right skills and mindset
5. Staying accountable for high performance
Table of Contents
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 6
The 3 things that Boards cannot be wrong about
• Strategy, capital allocation
• Financial goals, shareholder
value, shareholder balance
• Risk appetite
• Resource allocation
• Talent development
• Culture of decisiveness
• Be sure that the central idea is
clear and compelling & every
Board member understands it
• Selection of CEO
• Board competence,
architecture and modus
operandi
• Compensation architecture
When to
take
charge
When to
partner
When to
stay out of
the way
• Execution
• Operations
• Delegated executive
responsibility
• Non strategic decisions
• Excluded by Board charter
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 7
Click to edit Master title style, Arial 32pt.
7
– Board aligns NEDs with the
company’s 5yrs objectives
– Normally sector experience for
either Chair or ID
– Chair able to devote a third to
half of his/her time to the role
– NEDs could spend up to 30-
35 days on role
– International / M&A
experience to help growth
– Exposure to new business
models
– High IQ and EQ NEDs, able to
be forensic on arguments and
engage positively with others
– Talent focused, mentor execs
– Global mindset & global
networks
– Strong track record of growth
– Combination of strategic and
operational
– Board skill gaps and
succession regularly
addressed
– Works as team
– World-class insights
– In-depth knowledge on best
practice but relentless focus
on tomorrow
– Candid on development needs
– Diversity of views
– Lives the values
Basic Compliance Future Proofing
Basic Compliance
Basic Compliance
High Performance
Future Proofing
Basic Compliance
Future Proofing
High Performance
Strategic Asset
FOUNDATION BOARD DEVELOPED BOARD ADVANCED BOARD STRATEGIC BOARD
Process
driven
Behaviour
driven
Right Choices – beyond compliance
– Listed companies to have at least
1/3rd of total number of directors
as IDs
– ID to be appointed for two terms
of up to five years each and are
not required to retire by rotation
within the term
– Code for IDs containing detailed
guidelines for professional
conduct, roles and responsibilities
provided
– One of the directors in a company
shall be a person who has stayed
in India for 182 days or more in
the previous calendar year
– Listed and prescribed class of
companies to have at least 1
woman director
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 8
Right choices - A “talent centric” view
1. Composition and Diversity
2. Team Effectiveness
3. Director Effectiveness
– Does the Board have the aggregate strengths to ensure
effective decision making to support the company strategy?
– Have we developed director profiles that support the
strategy of the company?
– Is our Board composition diverse across the 4 key
dimensions: geography, gender, race, and experience?
– Is each individual Board member
contributing to his or her full potential?
– Is there a mechanism for Board members
to both give and receive constructive
feedback to other members?
– Do Directors have ample opportunities to
reflect on their contributions and further
develop their individual effectiveness?
– Do Board members communicate
effectively with one another?
– Are all Board members clear on their
individual roles?
– Do Board dynamics support collaboration?
– Are our Board debates healthy and
productive?
Composition &
Diversity
Team
Effectiveness
Director
Effectiveness
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 9
Right things to do - The “Gold Standard”
1 Ensure the right tenor at the top
2 Be clear on the Board decision making – when to take charge, partner or stay out of the way
3 Guide and review the “central idea” and the alignment of strategy and direction
4 Dealing with dysfunction or under performing Directors and holding self and each other accountable
5 Recruit Directors who build value through rich, diverse and open contributions to the Boardroom and also to
the Executive suite as required
6 Keep CEO succession, retention or support as a standing Board agenda item to ensure a multi-layered,
multi-generational process that are driven by business strategy
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 10
Click to edit Master title style, Arial 32pt.
Education on key business issues and governance issues is prioritized by
boards, with two-thirds undertaking training at least once a year. 1
5
Institutional Shareholder Services ranks companies higher for assessing
individual directors.
After Audit & Risk, Industry & competitor data asked for the most frequently
by Boards
4
3
2 Integrated reporting that includes responsible statements to create a
deliberate and serious understanding of its approach to sustainability
Increased usage of secure computing devices for the purpose of Board
communications; 52% use Board portals; reduction in paper; destroying
sensitive documents important protocol
Right direction forward - some current trends
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 11
1. The simple truth
2. What can go wrong with Boards
3. The right things to do
4. The right skills and mindset
5. Staying accountable for high performance
Table of Contents
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 12
These times are different –
Smart growth governance
needs different mindset & skills
maturity The individual leader’s ability to operate effectively at the appropriate level of complexity, ambiguity and risk and bring order, meaning, and composure to the business
agility
The individual leader’s ability to operate effectively with un-known un-knowns, speed and volatility and drive transformation, innovation, change impacting
results of the business
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 13
maturity The individual leader’s engagement & ability to filter experience to operate effectively at varied levels of complexity, ambiguity and scale and bring order, meaning, and composure to the business at high speed
COGNITIVE MATURITY
EMOTIONAL MATURITY
The ability to work with and navigate through the organization and its stakeholders
The ability to sense and respond to trends, information, data and insights with logic & reason
The ability to stay in the most effective emotional state to get the best out of self and others
ORGANIZATION MATURITY
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 14
PEOPLE AGILITY
CHANGE AGILITY
Operates across domains, interested in unrelated areas and connects the dots to solve problems
Reads people well, adapts to diverse groups and shows astute interpersonal judgment
Not afraid to challenge the status quo, introduces new thoughts and gives courage for change
MENTAL AGILITY
agility
The individual leader’s ability to operate effectively with un-known un-knowns, speed and volatility and bring
transformation, innovation, change and results to the business
RESULTS AGILITY Is able to drive outcomes in diverse challenges, prioritizes quickly, mentors to help set and achieve goals in good and bad situations
SELF AWARENESS Reflective about self and open to feedback, genuine interest in learning about and developing self
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 15
1. The simple truth
2. What can go wrong with Boards
3. The right things to do
4. The right skills and mindset
5. Staying accountable for high performance
Table of Contents
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 16
Click to edit Master title style, Arial 32pt.
16
REVIEW “ELEMENT” DESCRIPTION
Review of effectiveness of Board
structure, process, alignment,
engagement and dynamic.
“The core” of a typical Board review. Normally combination of questionnaire and
interview. Increasingly “fire side chat” approach less acceptable and questionnaire
based “evidence” supporting interview based insight becoming standard. May also
include direct observation.
Review of individual Board member
performance.
Peer review of the content and style of contribution of each Board member. Can be
open, anonymised, aggregate, individual etc..
Benchmarking against other “Peer”
Boards
Specific review of the structure, process, competence and dynamic of a target group of
competitor or comparable Boards. Desk research plus confidential interviews with
members of peer Boards.
Strategic review of Board composition Review of appropriateness of board competence and skill given medium term strategic,
operational and organisational context. Normally conducted ahead of a period of Board
rotation.
Specific review of committee
effectiveness
Review of selected committees to assess effectiveness and engagement with / reporting
to main Board.
What can Boards review?
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 17
What can be covered in a “Core” Board Effectiveness Review?
Answers to these
questions will
provide a clear
picture of the
Board’s overall
effectiveness
Examples of Typical Discovery Areas
• Is Board composition compliant with market regulations?
• Does Board have aggregate strengths to ensure effective decision making
and support company strategy?
• Is Board governance and structure in line with regulation and industry
benchmarks and best practices?
• Does Management engage the Board sufficiently and early enough in
debate on key issues?
• Does the Board challenge management sufficiently ?
• Do Directors invest enough time in understanding company issues ?
• Does the Board address company and industry risks rigorously ?
Composition and
structure
Engagement with
company issues
• Are critical operational Board processes effective?
• Does Board culture allow for review and change of Board process?
• Does the Chairman lead the Board effectively?
• Are committees managed effectively?
• Is the interface between committees and Board effective?
• Is the overall Board dynamic effective in supporting challenge and debate?
Processes and
Effectiveness of
Interactions
• Do Board members have a shared vision of Board’s role and value-add?
• Do Board and management team have a shared vision of role of the Board?
• Is there common understanding of the operational interface between Board
and management?
• Are Board members aligned with each other and management on strategy?
Strategic
Alignment and
Direction
© 2014 Korn Ferry. ALL RIGHTS RESERVED. 18
How intense does it get?
Review of Board structure and
processes:
Review of Board in aggregate
Minimum time commitment of
Board members
Main Board only, no engagement
with committees or executive team
• Questionnaire on overall Board
effectiveness to each Board member
• Structured discussions with Board
members
• Consideration of best practices from
other boards
• Primarily report based and to the
Chairman
• Observations and recommendations
on structure effectiveness
• No behavioural feedback
Review of Board structure, process,
behaviour and contribution (in
aggregate):
Review includes focus on Board
and committee dynamic and
interaction
May include members of wider
executive team
• Questionnaires and interviews
covering main Board and selected
committees
• Each director to complete
questionnaire covering contribution of
each colleague
• Review specifically addresses
conversational dynamics
• Board and committees may be
physically observed
• Report back to Chairman and to Board
• Aggregate View of Board behaviour
and culture
• Recommendations on development
actions including team based
behavioural input
• Chairman given specific feedback on
directors for annual one to one review
sessions
Review of Board structure, process
and contribution of each Board
member:
View of Board in aggregate and of
individual Board members
Key non-board members of
executive team included in review
• Questionnaire, interviews and
assessments
• Each director to complete
questionnaire covering contribution of
each colleague
• Individual technical assessment and
behavioural interviews of each Board
member
• Possible Psychometric assessment
• Report back to Chairman, Board and
to individuals
• Confidential developmental feedback
reports for each Board member
• Specific feedback on interactions
between Board and management
team and intra Board
If appointed, we will tailor scope of the review, methodology and feedback to your needs
LIGHT
MEDIUM
DEEP
What is done How is it done What is the nature of feedback
© 2014 Korn Ferry. ALL RIGHTS RESERVED.