In the first blog in this three part series, I introduced the concept of the mindful board. And while we can each take responsibility for developing and enhancing our own presence of mind, and that of the boards we serve, I also recognise that there needs to be structural changes to facilitate and underpin this new way of approaching corporate governance and directorship itself.
There are three aspects to this restructure. First of all there is the corporate form. It has served us incredibly well. Indeed, one American academic has labelled it the single greatest invention of modern times, and there is justification for making such an assertion.
Yet in the highly fluid environment that we are now facing, the set nature of an incorporated structure provides very little by way of porous boundaries, given its “hermetically sealed” nature. Conversely, we are increasingly seeing across all sectors, for-profit and for-purpose, blurring of the operating lines between organisations. Whether it’s through greater partnering, supply chain integration, joint ventures, partnerships around innovation and co-creation, there is a recognised need for alternative models or different cultures in the ecosystem of a more traditional firm.
These flexible structures are uninhibited by being a single corporate entity, and while we have seen some interesting ideas, for example the incorporated limited partnership model that the Federal Government has championed for the use of start-up ventures between often large corporate entities and entrepreneurs, we have not seen significant innovation in the corporate form. In Australia we are lagging by decades in the creation of a social venture structure or responding to advocacy for tax and structural change from the private equity sector.
For more on challenging the corporate form see Elizabeth Jameson’s blog https://boardisruption.com/2016/06/17/why-boardisruption/
The second possible area for restructuring is the current governance model. Over a period of 30 years we have created highly defined and demarcated zones of governance. There’s ownership: what is the role of the shareholder? There’s directorship: what is the role of the board? There’s management: what is the role of the executive? And while this has been useful in separating and creating role clarity, it has created a sense of a Cold War between those three, with a kind of uneasy Détente at the inflection points around board and shareholder meetings.
What would it take for a board at the fulcrum of those governance relationships to become more fluid, at times to operate more like an owner, at other times to be more like a manager, and others to be more like an entrepreneur? While at other times, to be more like a risk manager, a safe pair of hands? What would it look like to have a “directorpreneur” mindset to coordinate or to link a range of views that one might have at any given time, to be able to permeate across the boundaries of the role while remaining true to the core intent of the role?
Thirdly, there is the board model itself. It’s quite bizarre, when you think about it, this idea of putting nine people onto a board, giving them three three-year terms which can be renewed three times, putting one of them in charge for all of the endeavours and conversations that happen at the board. The closest we’ve got to innovation is creating subcommittees with outside members, as if that’s revolutionary.
While these are an effective mechanism, what would it take for us to create very fluid structures? Consider, for example, “pop-up boards”, boards that occur in a given context as and when they’re needed to deliver a certain particular purpose. That might be an acquisition. It might be expansion into a new territory. It might be as an ongoing strategic partner to a core group of directors, maybe three to four who provide the continuity and the stability.
What about the idea out of Chicago University called “Boards-R-Us,” the idea of contracting a ready-made team, people who are already highly engaged with each other, and who are able to work together as a board to deliver value according to the unique life cycle of the organization and the issues it is currently facing.
All of those structural elements should and must be considered in order to move forward. Of course, in reality the structures do not inhibit us from being able to achieve competitive advantage right now, especially through our choice of people, thinking styles and ways of operating.
We must continue to build the argument for greater diversity, and in the first instance around gender diversity. I will leave it to others to make the case for such an approach, which I support whole-heartedly. But, ultimately, whether they are diverse or are more of a traditional nature, our boards can still deliver competitive advantage through mindset. It’s the way that directors think that can make a significant difference to decision-making and strategic outcomes.
Next: Creating Competitive Advantage