High-Impact Boards: the New Management Paradigm?
How can companies put together high-performance boards that bring value and have greater strategic impact? This was the challenge presented at IESE by the Women on Boards Club (WBC) and IWILL (IESE Women International Leadership Lounge) to 20 women board members who explored possible answers in a session led by Prof. Nuria Chinchilla titled "Boards with high strategic impact: a new paradigm is possible."
The day began with a presentation by a specialist in setting up boards: Jaime Grego-Mayor, managing partner at Advisory Board Architects. In “How to be high-performance board members,” he first defined what 'high-performance' really means. According to Grego-Mayor, it is the ability to anticipate rather than look back, to think strategically, to encourage debate instead of argument, to ensure that good management is sincere and not just a formality, and – above all – to bring value rather than create costs.
“A board should always be a focus of strategic thinking, ideas and growth,” said Grego-Mayor. According to his theory, the function of a board is to offer control, service and strategy. “However," he added, "in my experience the vast majority of boards focus on the first point; that is, control." In Grego-Mayor's opinion, most boards pay attention to data and figures but neglect the other two elements.
Form Follows Function
Grego-Mayor told the audience that the first step toward correcting this tendency was to be clear about why a company needs a board, if it needs one at all. Only after answering this key question, he said, should a company begin to think about who should sit on a board and how it should carry out its mission. Grego-Mayor also noted that the architecture and design principle of 'form follows function' should be applied to boards. He highlighted the importance of understanding the optimal functioning of a board, which he defined as a cyclical process that follows four key steps:
Design: Clarify the specific goals that the board needs to achieve over the next few years, within the context of the company’s overall strategic aims.
Build: Look for people who have the right profile to take the company where it wants to go.
Strengthen: The board needs to function well before, during and after meetings. It shouldn’t be something that only works at fixed times with no follow-up. As Grego-Mayor said, “The true value of the board is not created during the meeting, but afterwards between board members, through interaction.”
Assess: It is essential to assess the performance and execution of board functions. This can be done through '360º assessment' where each board member is reviewed by the rest, through third parties (headhunters or independent assessors) or through analyzing impact in relation to goals.
Roles and Hats
Having discussed the theory, it was time to put it into practice with a role-play session. Participants set about arranging and holding a board meeting based on an IESE business case, in which a fictitious company has to decide whether or not to accept a takeover bid.
It wasn’t long before the problems that typically arise at such meetings began to appear. One of them was the conflict caused by an individual wearing several 'hats' at once – being a board member, a shareholder and an executive. Other problems included the financial, personal and political links between members, the trafficking of influence or privileged information, and the emergence of conflicts of interest. All of these factors can compromise the essential independence of a board.
A 100% Female Board
The experience also served as an example of how a board made up entirely of women could develop. “Amazing,” was the verdict of José Manuel Arnaiz, managing partner at Advisory Board Architects. He and his partner Grego-Mayor were impressed by the orderliness, sincerity and the total transparency with which the various women board members made their respective cases.
They observed that the women didn’t dodge or ignore each others’ personal motives (work-family balance, personal and professional ambitions), something that is rarely seen when the board members are men. They also showed an ability to project and assess the future implications of each strategic option, and not only in short-term financial terms.
They also noted that the women were extremely pragmatic and focused, as they showed by continually returning to the key points of discussions and reminding each other that they had to decide what was best for the company.
Although the exercise was only a role-play, Prof. Nuria Chinchilla said that it demonstrated that “a new paradigm is possible.” Boards of directors can and should function better, in her opinion. “It’s not a question of gender. But it’s clear that women, by nature, have a great capacity to understand the realities of both doing business and being human.”