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Friday, 2 January 2015 00:00 - - {{hitsCtrl.values.hits}}
Good players
Great music cannot be created without good musicians in the orchestra. You cannot win soccer matches without good players. However the epicentre that makes it all happen is the conductor of the orchestra and the manager of the soccer club. In a similar vein a good chairman is arguably the most important person in a company.
The role of a good chairman
A good chairman will not manage the business, but will ensure that it is s is well managed.
That is the dilemma that is the challenge. Never to manage, but to ensure it is well managed.
The task of the Board is to produce the results that will increase shareholder value. To pursue this objective the best human resources should be recruited in every discipline. They must then be given the space and the freedom to use their knowledge and skills to grow and develop the business. The chairman should not take on the role of managing the business himself and making all the decisions, and thereby not utilising the skills and talents in the business
The chairman in collaboration with the Board should identify and set out the overall strategy for the business. The CEO and management must be empowered to execute it. The Chairman must use a mix of skills to ensure that the empowered team delivers. He must inspire, cajole, nudge and when required kick butt!
The test of a good chairman
Ask the executive directors and other senior executives the question: “How is your chairman?” The answer should be something like, “He is a nice person, he chairs meetings well, and he handles the Annual General Meeting nicely,” and then “eh eh eh” and silence!
Then ask the next question: “Is the company different now from what it was like when he became chairman?” They should say: “The company is very different. It has been transformed. Now there is a clear vision on the way forward, a strategy to pursue the vision, and clear financial hurdle rates. There is an annual plan with measureable targets. Objectives and targets are set for all senior managers and there are regular reviews of performance against objectives. Good risk management systems are in place. The remuneration policies are very good and there are clear succession plans. And processes are in place to ensure compliance with the Companies Act and other regulatory requirements.”
If you than asked whether the chairman had a role in all of this, the answer should be: “Of course it was the chairman who initiated and pushed a process driven approach to create the style of the current business, But as he always left it to the management to execute the processes, we often tend to forget his role, in creating them.”
The chairman who wants to manage
A chairman who endeavours to manage a business is a bad chairman. The board of a public company has a responsibility to the public shareholders to grow and optimise the value of the business. If the chairman endeavours to manage the business without giving the space and freedom to the managers, he or she will be saying in effect ‘I am better than all my managers’. That can never be true. Therefore the interests of the shareholders will be sacrificed to stoke the ego of the chairman
A conversation with the managers of such a business will run something like this: “What’s your chairman like?” “He is thinks he is a very clever person, who is smarter than everyone else. He makes all the decisions and tells you how to execute them and blasts you into outer space if you do anything different. It’s very frustrating as the managers are given no space to contribute.”
“Why don’t you give him the classic British two finger salute and leave?” “Well it is a prestigious firm and the salary and perks are better than the market. And after some time one gets use to accepting, what you must, which is do as he says, and ask no questions. So it becomes a bit like the Chinese proverb, which says if rape seems inevitable lie back and enjoy it!”
Profile of a good chairman
Experience: The person should have been a CEO of a major business or at least the CEO of a major division of a big business. Ideally should have come up the marketing ladder to CEO. Marketing is the discipline that is relevant to all businesses, as the key to success is to understand the needs of consumers or users of services and to develop goods or services that will meet these needs.
This discipline should be well entrenched in the DNA of a chairman accumulated in his journey up the marketing ladder. There are others who have come up the finance or human resource streams who may not have the technical marketing skills but have an equally good appreciation of the need to meet the needs of consumers.
Emotional intelligence: Emotional intelligence as defined is the ability to monitor one’s own and other people’s emotions to distinguish between different emotions and to use emotional information to guide thinking and behaviour. A good Chairman must have the emotional intelligence to understand emotions and to fashion his leadership to be a combination of technical skills of business and the management of emotions.
Understanding people: If you go back to the definition of the role, as not to manage but to ensure the business is well managed, it is clear that a key skill is getting other people to do what has to be done. A chairman has to spend a lot of time thinking about and understanding his fellow directors, his CEO, executive directors and other key managers. In relation to each of them has to find the key to open their minds to ideas and suggestions. He has to find out what motivates them and what inspires them. He has to find what upsets them. It is in the context of all of this that he has to devise his words and actions to increase shareholder value.
Power of the chairman
It is a powerful role. The chairman controls the board. All key decisions in a public company have to be approved by the board. The annual plan has to be approved by the board. The annual and quarterly accounts have to be approved by the board. The CEO is hired and fired by the board. All senior appointments are made by the board. The directors are appointed by the board. Remneration of key staff are determined by the board.
Controlling the board
If the members of the board respect the experience of the chairman (who invariably will have more experience than the other directors) and if the Chairman is emotional intelligence savvy when relating to his fellow directors, he is indeed in a formidable position. He does not need to shout and thump the table.
When I was on the Board of Reckitt Benckiser Plc, the Chairman was Sir Michael Colman. If after a presentation to seek approval for a major project, the Chairman mumbled: “I wonder whether that’s a good idea?” the CEO would say, “I think we should look at this again” and that would be the end of that project.
Not to manage, but to ensure that it is well managed
This is an intriguing and fascinating challenge. A chairman who can do this well is indeed a rare gem.
