In many ways the transition from senior executive to director is encapsulated by the contrast between a task-focussed position and that of a role-centred responsibility. Personal attributes are likely to be more important than technical skills in measuring success.
Political Power
The ability to influence is central to a successful appointment as a director. The keys to exercising influence are the use of power and politics. Politics, outside the purely political sphere, is often considered to be unnecessary, distasteful, and counter-productive. In some cases this may be a fair summary but the reality is that politics are inevitable and essential for honest compromise, which in turn, is part of the decision making process.
Politics is the exercise of power through persuasion when dealing with people and organisations. Its purpose is to influence the outcome of events. It is constructive when the attempts to influence are based on sincerely held views; it is destructive when influence is sought to gain personal advantage over more objective positions. Political power and influence in the boardroom comes from aspects of behaviour and authority. Authority itself is derived from the position a person occupies in the chain of command and is augmented by personal stature and reputation. Effective authority relies on respect and has to be earned; reliance on position alone is insufficient. Appropriate behaviour, that is playing the part in the way that is expected, will consolidate a person’s authority and increase their political effectiveness.
When power and authority are derived solely from a person’s position in the chain of command it may offer short term results but will almost certainly be ineffective in the longer term. If a call to action is not supported by arguments that are clear, credible, and compelling the resulting outcome will inevitably be compromised or debased. Those that habitually hide behind position to impose action tend to become marginalised as boardroom players. For example, the exercise of authority without apparent reason, in cases of minor motoring offences, is a key reason for the growing disillusionment of the law-abiding middle-classes with the police.
Power is easily abused. While powerful individuals in positions of influence can be a beneficial force for change, they can also be at the root of catastrophic misjudgements if they are not effectively challenged. In recent times, the performances of Sir Fred Goodwin at RBS and Adam Applegarth at Northern Rock demonstrate what can happen when people, working outside their areas of professional experience, exercise reckless judgement in the assessment of risk. Judgement is the bedrock of good leadership and failure here, when exposed or discovered, is almost impossible to survive, especially if the leaders enjoy a high profile in public.
Authority derived from personal stature and reputation is probably the most powerful of all. When it is supported by sound argument it can sway the undecided and the unconvinced. Only Archbishop Desmond Tutu could have proposed a Truth and Reconciliation Commission in post-apartheid South Africa to heal the wounds of the past. It remains a unique initiative despite the emergence of many more situations where it might have been called for. Stature and reputation are sustained in organisations by the continuous exercise of sound judgement. This is a demanding challenge. Conversely, a sustained period of consistently poor judgement will destroy even the greatest reputation.
In adversarial societies, such as the English-speaking world, arguments based on facts and evidence will have a big impact on decision making. In these circumstances, good politics will be about the construction of compelling arguments that are presented in a way that will have the desired impact on an audience. Effective and admired politicians are invariably highly skilled in the arts of advocacy and sometimes are accorded the status of being statesmen.
Influence in the boardroom will often be the result of a network of inter-related loyalties. This is tactically very powerful for those that command the loyalties but, as loyalties change with issues and events, so the patterns of influence change, too. Shifting patterns of loyalty are the reason for most boardroom power struggles and fewer things can be more damaging than this for an organisation. Influence can sometimes be exercised through unusual, and sometimes worrying, forms of dependency. Nature abhors a vacuum and will conspire to fill it. So it is in business when there are weak executives in senior positions. The CEO of a large public sector transport undertaking became over-dependent on a capable but very dominant HR director who shielded him from difficult issues in industrial relations. This over-dependence was very obvious to many other senior executives and highly resented. While the HR director was distrusted as a natural conspirator with far too much influence for her position she was powerful enough to distort the whole chain of command into reporting through her to the exclusion of the CEO. The HR director happened to be a very capable and remarkably objective force for the organisation but it suffered badly from its weak leadership because the surrogate leader could only ever exercise a narrowly-based perspective from her position.
Power is often considered to be a drug. Certainly, abuses of power are quite commonplace. Winning arguments and exercising influence can be very exhilarating. The responsible use of power demands a conscious effort to be objective at all times and this objectivity, with the courage to maintain it in the face of opposition, is the only antidote to the abuse of power. Power comes from a combination of leadership, professionalism, relationships, trust, and judgement.
Leaders are people who attract followers. They tend to behave in a way that underwrites the uncertainties of others. Their drive may be based on a personal desire to intervene in affairs when their own values, beliefs and skills are perceived by them to offer better solutions to problems. As Shakespeare observed that some men are born great, while others have greatness thrust upon them, so it can be with leadership. One of the most notable Lord Mayors of London in recent times was Sir Francis McWilliam who knew exactly what was needed in response to the terrorist bombings that devastated the City during his term of office; business continuity in the face of outrage through the immediate availability of alternative office accommodation and access. It disrupted his plans for his Mayoralty but made his reputation.
Followers can be driven to follow as much as leaders are driven to lead. A highly effective operations director showed unusual commitment to both her work and her boss, the managing director. When, following an acquisition, the MD became much less available for the operations director on a day-to-day basis, the dynamic of their relationship changed dramatically. Suddenly, the employee who had been so eager to please became distant, aggressive, and intractable. On a rational level things were the same. She understood where the company was going, was clear about her role in that future, and was content with her status. However, at an unconscious level the situation had changed dramatically. The operations director had idealised her boss because, while he had time to nurture her, he represented all she had never had in her relationship with her father. The moment his focus changed due to the acquisition he became the “bad father” of her childhood and all the past difficulties of that relationship were projected onto him. This kind of transference is a common occurrence in leader/follower dynamics. The MD found time to re-engage with his operations director when he was made aware of the issue and, as a mark of true leadership, recognised that at the top the job became as much about the performance of others as it about his own.
Leadership qualities should emerge in response to challenges and they can be developed through participating in structured programmes and through experiential learning. Coaching is a process that can transfer skills, advice, and the benefits of experience. Successful leaders often have access to a number of coaches who will rehearse with them the different options they might engage with when meeting specific challenges. As Prime Minister, Mrs Thatcher had access to people such as Professor Alan Walters who was a constant point of reference in the application of monetary policies for the management of the British economy.
Counselling is a process that explores the causes of negative behaviour when the negativity comes from natural instincts. Its objective is identification and correction. When emotional preferences and logical choices are in serious conflict negative behavioural traits will emerge unless there is access to good counselling. This can be very formal, as in the case of serious criminals, or very informal, as in the case of using trusted and objective friends or colleagues as a check against gross errors. Mrs Thatcher again provides an illustrative case in the way she encouraged Lord Whitelaw to drag her back from positions that ran the risk of being too extreme.
Mentoring is a process of exploring new ways of doing things especially when behavioural or institutional barriers would otherwise inhibit progress. Good leaders are always big enough to accept mentors and value their contribution. Mentors help the personality adapt to fit the challenge of the role. Harold Macmillan appears to have been a mentor to President Kennedy when he was being frustrated by Soviet political intransigence early in his term. If this helped him to be more decisive over the Cuban missile crisis it will have been one of the most significant acts of political support in modern history. Good leaders are big enough to change their mind when faced with new evidence and sound arguments. A new, young CEO arrived at a major financial institution, full of ideas and anxious to make his mark. His task was to save an ailing company. Moving swiftly, he laid down plans to bring in fresh blood and failed to recognise the risk that too many new faces would lead to “tissue rejection”. He had failed to recognise the irreplaceable performers that often sit quietly deep inside the organisation. When, after some mentoring, he took the trouble to explore existing talent he came up with a very successful blend of the old and the new.
Leadership is often confused with management. Management is the process of making happen that which is agreed whereas leadership is the process of making happen that which is needed. Leadership demands the pursuit of a strategic vision that transcends personal ambition. This is where the leadership of so many financial institutions have now been seen to fail as they have pursued the maximisation of their income to the exclusion of all else. Good leaders will be decisive when situations may be plagued by uncertainty and ambiguity and simply their getting more things right than wrong will guarantee their success. Good leaders will provide clarity for their colleagues and win the commitment of the members of their team. Working with good leaders provides opportunities to learn, improve, and take on more responsibility.
A good board will comprise a group of leaders committed to a common cause. A weak board will be a collection of powerful personalities with each seeking hegemony or advantage. Powerful personalities who avoid the responsibilities of leadership will inevitably clash whereas true leaders will find the sort of compromise that is essential for constructive co-operation. The qualities that underpin leadership are giving to others rather than demanding of them, understanding consequences rather than being knowledgeable, and being able to influence people rather than hiding behind rank.
Professionalism is the pursuit of uncompromised delivery within an ethical framework of behaviour. It embraces a commitment to getting things right first time and this is, perhaps, the hallmark of a true professional. People regarded as consummate professionals are often credited with a form of selfless dedication that is held in high esteem. The attribute is not won through mere qualifications but has to be earned. It requires objectivity and independence at all times and often comes with the obligation to offer leadership whenever none is forthcoming.
There is a hierarchy of interests in the provision of services that lays a foundation for professionalism. The customer or client must come first in all considerations. The professional firm must come second and personal considerations should always come last. This is a hard regime to apply but it puts professionals beyond reproach and soon becomes a way of life.
In more recent times, a more cynical definition of professionalism has emerged. It is exemplified by the professional foul committed by sportsmen to prevent opponents gaining advantage. This alternative sense is also creeping into business but it has no place there. A good professional will prepare well for new situations and attempt to anticipate the possible range of outcomes and events. This is part of the process of avoiding unnecessary and unwelcome surprises and being best prepared for all eventualities. Professionalism should grow with experience and makes an important contribution to cost effectiveness in business. The qualities that underpin professionalism are objectivity, independence, and ethical integrity.
Whereas intellectual intelligence drives competence in analysis and the construction of a thesis, it is emotional intelligence that drives the formation of relationships between people and their organisations. Relationships are the foundations for teamwork, alliances, and contract negotiations. Good relationships will result when the different parties involved in a situation recognise their relative positions, accept their respective responsibilities in working together, and prepare channels to agree on how to move forward collectively. In the absence of good relationships communications between different parties become more difficult and misunderstandings become more prevalent.
Teamwork is critical in modern business activities. It accommodates the contributions that can only come from different specialists, it spreads the workload, it provides a broader basis for the assessment and mitigation of risks, and it builds commitment through participation in decision making. Team building skills are vital for members of the board. Indeed, the reputation of the Chairman will ultimately rest on an ability to build a team for the boardroom. Inter-personal relationships often drive the true effectiveness of a team and it will be a matter of the team leader’s judgement as to whether the different participants can be made to work together effectively. President Johnson built his cabinet on the principle that it was better to have his main dissenters inside the tent than to have them outside and free to cause mayhem, although he described the process in more colourful language. In contrast, Alf Ramsey dropped Greaves, his leading goal scorer, for the final of the World Cup because he did not fit well into the style of play he wished his team to employ.
Good external relationships are as important as good internal relationships in an organisation. The special sensitivities that come with external parties usually mean that diplomacy should prevail over the simple exercise of authority. External relations are increasingly seen by modern organisations as the responsibility of specialist departments. The workloads involved, particularly since the narrow concept of responsibility to shareholders has been widened to responsibilities to stakeholders, inevitably make this a growing practice.
Negotiation is a critical component of all relationship building whether or not a formal contract is the result. It is a process of recognising the positions of other parties and finding common ground so that progress towards complimentary objectives can be made. Formal or informal contracts are the usual result of negotiations. In adversarial societies negotiations are often, but mistakenly, seen as games with a win-lose outcome. In parts of Asia there is often a more powerful desire to find win-win outcomes.
Many relationships will become crystallised in a formal contract. While this may lack a certain degree of flexibility it may have compensating benefits in terms of risk containment. In all cases, disputes over contract are better settled through an agreed process of arbitration than by litigation.
Alliances will emerge when independent parties have a clear common interest. Such arrangements are essential with suppliers but are unethical, and probably illegal, when made with competitors in the form of a cartel. Alliances are usually the result of negotiation and enshrined in a contract. However, all alliances should be valued by their utility alone and should be terminated, without rancour, if changed circumstances eliminate the benefits. Lord Palmerston once observed, as Foreign Secretary, that Britain had no permanent friends and no permanent enemies; it only had permanent interests.
The qualities that provide skills in relationship building and negotiations are being a good listener, exercising fairness at all times, and diplomacy in addressing sensitive issues.
People who are trusted have an extra weapon in their armoury in the fight to persuade or influence. Trust can swing opinion more powerfully than argument alone. However, it is a perishable commodity and cannot be faked despite the continuous assault of rogues and fraudsters. Trust empowers people and, at its best, will often simplify relationships without making them vulnerable. It comes from continuously ethical behaviour and the consistent application of sound judgement. It is always earned and can never be demanded; it takes time to build and it can be lost in an instant of recklessness. When trust is common currency around the boardroom outstanding performance usually results. It is the basis of honest and objective debate; it underpins all personal influence; and it helps to mitigate risks through a process of sharing the burdens of decision making.
Directors are, effectively, trustees appointed by the board with shareholder approval to look after, to best of their abilities, the best interests of a company or organisation. The qualities that comprise the foundation for trust are integrity, transparency and selflessness.
It is axiomatic that without judgement all else is worthless, especially in the boardroom. As is often the case, evidence for action can be incomplete, absent, or ambiguous. In such cases judgement will have to substitute for deterministic analysis. Exercising good judgement comes from mobilising experience. It is essential, in different situations, what the test of judgement ought to be. For example in criminal law the test is beyond reasonable doubt; in civil law the test is on the balance of probabilities; in science it is known to have satisfied all recorded observations and successful in predicting new events; and in the US Constitution it is what the Founding Fathers probably intended. Few organisations will be able to set out their various tests in such precise terms and, unfortunately, the subject is rarely discussed. This is why judgement calls frequently create dissent as board members subconsciously apply different tests. This often leaves judgement calls to be proven long after events when objective analyses can be carried out.
Every organisation will seek some balance between untrammelled enterprise on the one hand and crushing conservatism on the other. This balance, whether implicitly or explicitly derived, will help define the image, style and culture of an organisation.
Judgement must be separated from decision making. Although all decision making should be based on sound judgement, expressing a judgement is more likely to impose a constraint or an objective rather than constitute a decision.