All articles in Volume 14 Issue 2

Taking the leap from executive to director

For most successful directors, the journey towards directorship involves spending a significant portion of their career as an executive within an organisation. Some individuals may indeed hold both roles at one time – functioning as an executive on one day, and a director the next. However, making the transition isn’t always straightforward.

We spoke with Alison Gaines FAICD, global practice leader, board consulting, Gerard Daniels, and Phil Thick FAICD, managing director and CEO, New Standard Energy, about what you should bring with you to the boardroom, and what you should leave behind.

AICD: What is the most important lesson you have learnt in making the transition from executive to director?

Alison Gaines (AG): I am both an executive and a non-executive director. I transition between the roles on a weekly basis as I move between a board meeting and my executive leadership role. The trick is to know the difference between the two roles, and particularly to ensure I don’t attempt to micro-manage at the board table. I’ve been sitting on boards for 25 years and I can pick up the look of panic in the CEO’s eyes when he or she believes the board is heading into the “operational weeds”.

‘Letting go’ can be the toughest challenge after a long executive career.
— Phil Thick FAICD

Phil Thick (PT): Your role is no longer operational. Let the CEO and their executive team run the company. Focus on direction, strategy and sound governance and do not interfere in the day-to-day business unless your advice is sought. “Letting go” can be the toughest challenge after a long executive career.

AICD: Did mentoring help you as you moved into your first board roles?

AG: Mentors have been very important, largely for their faith in nominating and supporting me for board roles and committee and chair roles. My first big break came in the 1990s when I was a NED on the national board of the Institute of Public Administration Australia. The chair vacancy arose very suddenly. The person who I expected and hoped would take the chair took me aside and asked me to take the role and listed the ways he would support me in the role. It was a great gift he gave me. Later, when I was nominated to the very responsible role of deputy chancellor of the Murdoch University Senate, people who had been quiet supporters emerged as active mentors who wanted to ensure my success in the role. I learnt that mentorship isn’t a once-off event, but rather a style of interaction with people I trust and admire.

AICD: What skills and behaviours should you bring with you to the boardroom, and what do you leave behind?

PT: Asking the right questions is the most important skill, which needs you to be very well briefed and prepared. Listening to others and trying not to grandstand is also important. More is not better. From my experience those who ask the really on point, well considered questions less frequently get respect and attention.

AG: I’m a great believer in the unique “boardroom competence”. It’s a unique role, of being your own person and bringing your own consideration of the issues to the table, while also belonging to a team of equals and being a partner (sometimes a sceptical partner) with management. It takes time to learn about the enterprise and the unique culture of the board. And it takes time to learn how to frame questions and contribute effectively to discussion and debate.

I had to leave behind the idea I could rely on my narrow expertise. This meant I worked really hard to understand all my director duties and broaden my skills and understanding of the enterprise.

AICD: What do you look for in your first board position, and how do you assess the fit?

AG: My list of criteria is:

  • Do I like the organisation, do my skills align with its core purpose and can I potentially add value?
  • Is it in good financial shape and has a strong brand in its market?
  • Does it have a competent chair, CEO and board?
  • Is the NED workload clear and can I meet the obligation?
  • Do I have any conflicts of interest?
  • Are there any risks for me reputationally or legally?

PT: Look for something that fits well with your experience, skill set and interest. It is easy to broaden in later roles but you want to nail your first one. Don’t just jump at anything just to get the first role. Do your due diligence thoroughly.

Alison Gaines FAICD and Phil Thick FAICD will speak at the AICD Emerging Director Briefing Making the Move: Executive to board director in Perth on Wednesday 16 March.

Facing the fourth industrial revolution 

Four key change gaps that boards must prepare for as the fourth industrial revolution unfolds were discussed this week at an AICD Governance Leadership Centre briefing. Tony Featherstone reports.

Boards should ensure their organisation is preparing for the fourth industrial revolution as emerging technologies reshape the global economy, a leading innovation expert says.

Nicholas Davis, head of society and innovation at the World Economic Forum, says industry is on the cusp of its next revolution as artificial intelligence, 3D printing, precision genome editing (using super-computing), new materials and neurotechnology develop at a faster pace.

Davis leads the Swiss-based forum’s work on the fourth industrial revolution and is a member of its executive committee. He gave insights from the 2016 World Economic Forum annual meeting in Davos in January for an AICD Governance Leadership Centre briefing this week in Sydney.

Davis says the fourth industrial revolution will build on the unfolding digital revolution that began in the 1970s. “The development of a new set of technological capabilities will fundamentally change how we create, store and distribute value, and relate to each other.”

He says the development of machines that think, in areas such as self-driving cars, will transform transport systems; 3D printing will become a new form of manufacturing; genome editing will drive medical breakthroughs; new materials, such as graphene, could revolutionise the computer-chip industry; and advances in our understanding of the brain could alter decision-making systems and information processing.

The development of a new set of technological capabilities will fundamentally change how we create, store and distribute value, and relate to each other.

“A lot of these technologies are still sitting in university labs or being discussed in the media, but have not yet been commercialised in any meaningful way,” Davis says. “But these changes are coming and their impact is now a bigger part of CEO agendas.”

What boards need to consider

In understanding the potential impact of these technologies, boards should consider four key gaps between business today and that of the fourth industrial revolution.

  1. The gap between the digital and fourth industrial revolutions - “History shows that industrial revolutions are not distributed evenly,” Davis says. “Organisations that do not get their digital infrastructure right will find it very hard to play in the Fourth Industrial Revolution.”

  2. Hype and fear - “People seem to be either huge technology optimists or very concerned about the impact of technology on global inequality,” he says. For boards, that means understanding the opportunities and threats from the fourth industrial revolution and developing different scenarios of what could emerge.

  3. Technology and values - Boards must consider how the development of new technologies, particularly in areas such as neurotechnology and genome sequencing, relate to the organisation’s values and ethics. “The link between values and technology and the purpose of new information systems is hugely important, but we don’t have a clear narrative yet for that discussion,” Davis says.

  4. Partnerships - The implications of these technologies are potentially so profound that no company on its own can have the answers. Ensuring the organisation collaborates with government, academia and start-up enterprises, as part of a broader innovation ecosystem, is critical, Davis says. “Building partnerships that align with the different strategies of organisations in different sectors is a huge challenge. In my experience, Australia is further behind in this regard compared to the US and UK or the Netherlands.”

Davis’s view on the four key gaps between the digital revolution and fourth industrial revolution provides a useful framework for boardroom discussions. Company directors who can consider the long-term impacts of technology, and how their organisation can bridge the digital and fourth industrial revolution gaps, will have a valuable knowledge advantage.

Tony Featherstone is Consulting Editor of the AICD Governance Leadership Centre and a former Managing Editor of BRW magazine.

When family and business collide

The Kailises

For family businesses looking to a future of sustainable growth and success, questions are often asked about when it is appropriate to engage a board, what the board should look like and the role it should play in setting the strategic direction of the business.

One of the sector-specific sessions at last week’s Australian Governance Summit explored the range of options and opportunities available to family businesses and what they should consider when implementing formal governance structures.

The session featured a presentation by Andrew Mostyn FAICD and a panel discussion with Dr Patricia Kailis AM OBE FAICD and Amanda Kailis GAICD on what it means to set up, inherit and help a family business grow.

Both the Mostyn and Kailis family businesses operate out of Western Australia, most often in very remote areas, and they understand what it means when family and business collide.

Mostyn, now WA chairman and director of the National Board of Family Business Australia and executive director of the Craig Mostyn Group, a leading diversified food and agribusiness, shared his lessons learnt from his family business, citing “having a good and strong culture across the management and staff” as key factors to the success of any business. But for a family business in particular, it is important to establish formal systems to manage its unique dynamics, as is appointing qualified family members.

People often ask me if the family is more important than the business, or is the business more important than the family. My advice is: look after the business. If you look after the business, the family will prosper.
— Andrew Mostyn FAICD

These principles were echoed by the Kailis family, whose family business was founded on four key values – honesty, loyalty, trust and compassion – in 1960s Western Australia.

Dr Patricia Kailis AM OBE FAICD, a pioneer of her time, is an accomplished neurogeneticist and founded MG Kailis Group with her late husband Michael. She has seen it grow, having established the lobster industry in Dongara, then the prawn industry in the Exmouth Gulf, followed by a pearl farm and jewellery business with beginnings in Broome. Patricia now serves as the governing director of MG Kailis Group. Her daughter, successful commercial lawyer Amanda Kailis GAICD, serves as a director on the board.

The two recounted stories of trying beginnings for the business that involved sourcing their own water, managing their own sewerage system, laying roads around their factories, building their own home and setting up their own store for supplies in remote parts of WA.

We started with a concrete slab and built up the business from there. We became known for operating in remote areas.
— Dr Patricia Kailis AM OBE FAICD

For a successful family business, the Kailises say “connections, contacts and negotiations all help to establish great advice. Be honest and do what is right.”

Andrew Mostyn

Why is a board beneficial for your business?

At the summit, Andrew Mostyn FAICD shared why boards are beneficial for family businesses:

  1. Building the confidence of shareholders
    Boards, particularly with a non-executive chairman or members from outside of the family, offer independence and add a level of trust for shareholders who do not work in the business.

  2. Keeping the management team in check
    Boards traditionally bring a level of scrutiny and accountability to the management team in regards to the day-to-day running of the business.

  3. Diversity of thought and experience
    Boards bring with them new ideas for the business, particularly around its strategic direction.

  4. Board-CEO relationship
    Having a non-family CEO is a means to manage the dynamics of a family business. The board can make life both easier and harder for a CEO, but it is important to keep it professional.

  5. Good governance
    Having formal company and governance structures can ensure private businesses do not look inwardly and keep the conversations about the business and long-term strategy strictly professional.

Read Family business – getting the best of both worlds for more on Andrew Mostyn’s story.

What I’ve learnt: Kirstin Ferguson

Dr Kirstin Ferguson FAICD is one of Australia’s leading independent directors on ASX 100 and ASX 200 boards, as well as the board of the Australian Broadcasting Corporation. She recently spoke with AICD and shared her thoughts on working as a director across diverse industries, the value of being active on social media and applying specialist skills in the boardroom.

AICD: What have you learnt as a director about how to apply your skills in the boardroom, irrespective of their industry context?

Kirstin Ferguson (KF): I currently sit on boards across a diverse range of industries, including construction and mining, property, media and manufacturing. Some of my previous boards have operated in the oil and gas, utilities, sports and arts industries. As most directors would experience when working across different industries, while the context of particular issues may vary from industry to industry, the underlying questions to be asked or the challenges to be overcome are often remarkably similar. One of the aspects of being a director I enjoy the most is the diversity of industry contexts I am able to work in and contribute to. For example, digital disruption is an issue that is confronting every industry that I am involved with in quite different ways. Yet questions around the talent that needs to be recruited, the strategies to be developed and the vision required to leverage opportunities for the future are, in many ways, consistent across each company regardless of industry.

In this respect I think board directors offer a unique perspective for organisations through learning from the experiences gained from one industry approach, assessing the same challenge through a different lens and enabling management to apply that solution elsewhere.

AICD: At the recent Australian Governance Summit in Melbourne, David Gonski AC FAICDLife spoke about the best directors being business generalists, with a specialisation on top of that. As an expert in the field of workplace health and safety (WHS), how do you apply your specialisation in the boardroom?

KF: While I do have a deep knowledge and expertise in the field of WHS, I am also very conscious that it is only one skill that I need to apply as a director to add value in the boardroom. First and foremost, I contribute to board discussions based on my general corporate and commercial knowledge, and my experience as a former CEO. For example, I am chairman of an ASX 100 board committee that includes health and safety within the charter, but also requires a deep knowledge of ethics and whistle-blower provisions, general compliance issues as well as sustainability.

I am also chairman of an ASX 200 remuneration committee, which again includes health and safety in the charter, but requires detailed technical knowledge of remuneration issues for listed companies. I find that when issues of health and safety are being discussed, I am able to provide specialised knowledge to those discussions but having such a specialisation would not – on its own – be sufficient to be on the board. I think Gonski summarises the desired position perfectly in that the best boards will have a number of business generalists around the room, of which there will be a diverse range of specialisations that can be drawn upon as needed.

AICD: You have an active presence on social media, with a large cohort of followers on Twitter and LinkedIn. Why is social media important for directors?

KF: Social media is simply another tool by which we can gain a deeper understanding of the world in which the businesses we govern compete in. As we know, social media impacts every organisation in some way. This impact can be felt through views being shared on social media by customers, employees or other stakeholders. Or, the impact may be through observing the activity of competitors, or through missing out on participating in discussions shaping the industry in which the organisation operates.

While a director should only be active on social media if they feel comfortable to do so, it does help if directors have some personal experience in understanding what social media is all about and how it works. Ultimately, this will assist directors to be able to ask the right questions of management, particularly with respect to how their organisations are developing and implementing the most appropriate social media strategies for their business.

It should be remembered that if a director does decide to be active on social media, it is important to have a very clear idea of how you plan to use it and are disciplined in doing so. I find social media incredibly rewarding but I do use it with a great deal of care, consideration and caution.

Managing a PR crisis

How you and your board handle a high-pressure situation – from initial crisis meetings with management to dealing with the media – can make or break the organisation’s reputation, not to mention your own.

David Marshall AM FAICD, chairman of high-profile not-for-profit Snowy Hydro SouthCare Rescue Helicopter Trust and a trainer and media consultant for business leaders, shares his tips for responding to a crisis and minimising the damage.

Not-for-profit (NFP) organisations can face many risks: inappropriate behaviour by field workers, financial mismanagement and poor distribution of donations are recurring sources of crises and reputational damage. The fallout, as always, can extend to directors who find themselves personally liable if it is proved they breached their duties, or at the least suffer significant personal reputational damage that hurts their governance career.

According to David Marshall AM FAICD, “as a board member, reputation is everything.”

If your personal reputation is damaged because of a crisis, it can have very serious consequences for you personally and for your career.

“There are many directors of NFP boards who are very well meaning, but perhaps haven’t had that much experience at board level, or certainly at a company level, and can tend to forget that their responsibilities are equal to that of a for-profit company,” he says.

Marshall adds that sometimes NFP boards don’t see where damage could be incurred to their reputation because they make decisions without the filter of public opinion.

“Making a decision without thinking about the consequences of public perception can be very dangerous,” he says. “Particularly with media scrutiny, boards should always be aware of what the headline could possibly be. They should consider: will our decision create any public angst? Will it pass the ‘pub test’?”

Make your move

If a crisis situation develops, speed is critical, and directors need to take a proactive approach. “One of the first things I suggest is a very quick crisis meeting with the management team – perhaps with the board – to examine exactly what the issue is,” says Marshall.

“Clarifying the issue, and its implications, can sometimes be quite challenging. I have been in situations where it has taken an hour to actually clarify what the board is talking about, to make everybody aware of the problem and to confirm what it is that we’re addressing.”

Marshall also recommends that a director or organisation consider putting out a holding statement. “If you don’t make a comment, others will fill the void.”

“One of the challenges is that often people will seek legal advice, which is very advisable. But often legal counsel will advise to not make any comment. My strong recommendation to boards is to really consider whether that’s the right approach. There is a lot you can say without jeopardising any investigation, and often silence in a crisis can be incredibly damaging,” he says.

“As soon as you possibly can, make amends or at least advise people, what processes you are going through to fix the situation. Ultimately there should be an apology or some sort of admission given – and you must do that with consideration of the wording you use – but always be honest, be open, be forthright.”

A matter of probity

If a matter comes before the board where you believe there may be a credibility or probity issue, Marshall provides the following tips:

  • Make yourself heard – If you are of the view that you dissent from a decision, you need to make sure that is minuted.

  • Always read the board minutes – Many directors do not thoroughly read the draft minutes before a meeting to make sure they are accurate. Of course, when an inquiry erupts, these minutes are very valuable.

  • Consider resignation – It’s a very big call, but if you feel that the board has made a decision and you’re very uncomfortable with it, then you really need to consider whether you should resign. Remember, if your personal reputation is damaged because of a crisis, it can have very serious consequences for you personally and for your career.

Effective board reporting: Writing

In part one of our series on effective board reporting, Dr Judith MacCormick FAICD, principal partner, BoardFocus, provides five key tips for writing a board paper.

Effective board reporting informs better strategic decision making, builds trust and provides the platform on which boards can work with management to add real value to the organisation. Below are a selection of tried and tested tips that can contribute to better board reporting – and enhance your communication skills more broadly.

1. Before you start writing your report, employ the “PACKO” principle. Think about:

P What is the PURPOSE of this report? Why should a board member spend time reading it?

A Who is your AUDIENCE? What background and expertise do the board members have?

What are their expectations of style, content and presentation? What do they need to know for effective governance vs what management wants to share? Stand in their shoes.

C What is the CONTEXT for writing this report – what is the background, what has changed, what might change?

K What three to five KEY MESSAGES do you want board members to remember after reading your report?

O What is the OUTCOME you are hoping for? What are you asking the board to do after reading this report – make a decision? Note the key issues? Discuss and challenge the threats and opportunities you have identified?

2. Ensure your report makes a clear connection to the organisation’s strategy. Whether you are reporting on past performance, proposing a new venture, or requesting more resources, how do the issues in this report relate to the strategy and “what success looks like” for the organisation, e.g. KPI impact?

3. Schedule time to revise, revise and revise your report. Ask others to constructively critique your report and return the favour. Both constructing and critiquing roles will improve your writing.

4. Remember e= mc2. Indeed (mis)quoting Einstein “if you can’t make it simple, you don’t know the content well enough.”

5. Three C’s: Keep it clear, concise and complete. No jargon or big words (include a glossary for technical terms and new topics).

The more you work on improving your board reporting, the better you will become as a communicator (and leader). The board is always looking at the quality of talent in the organisation – make your capability evident in the excellence of your board reporting.