This appeared in the Financial Times on 27th June 2013
There are times when those of us who live non-executive lives wonder whether we really make any difference at all. Business failures are a non-executive’s worst nightmare, and avoiding them is the point of us.
Then we look at the several banking fiascos and ask what on earth were the non-executives doing? They were not stupid people and none of us is infallible when it comes to risk – but why didn’t they challenge their chief executives?
I am about to retire as chairman of the governing council of the University of Sussex after six years in the role. In that time, higher education has seen drastic change and its own fiascos. It makes me aware that the biggest trial any board faces is finding a way of challenging the executive team in a collegiate, yet rigorous, way, constantly negotiating the line between governance and management.
Although rules can help, this is not fundamentally a question of process. It is a matter of pursuing the purpose and integrity of the organisation above the personal discomfort that can arise from differences of opinion. It requires a degree of emotional intelligence to navigate the human relationships. Challenging people is difficult; it is easier to be swept along.
When I became chairman of the council at Sussex University, it is fair to say that the governance was not working well. There was little that was reliable and consistent about the information coming to the council and decisions were not dependably carried out.
Consequently, the council leant in too far, distrustfully wanting to become too involved in the detail. I had to get it back to flying at 30,000ft and only occasionally coming down to 1,000ft.
University councils dating back to before 1992 are oddly constructed. Ours, which is fairly typical, has 25 members: 15 are independents; two are the vice chancellor and deputy VC; six are elected academics; and the final two are the president of the students’ union and a representative of the professional (non-academic) staff. There is huge potential for the confusion of provenance with role. So my first task was to try and get it to operate as a single body, each member behaving as an individual trustee.
For the first two years I used a programme of telephoning every member before meetings. At 12 hours each time in all, it was arduous. But it gave me the chance to get to know their concerns individually, to understand where they might be coming from in debate, and to help them express what they wanted in a way that was strategic and useful.
It also gave them a chance to understand that I was only interested in chairing a council that reached collective decisions, based on our agreed strategy as individual trustees. There was to be no grandstanding or lobbying, but a hard-nosed concentration on improving the performance of the institution.
The culture of challenge in a board goes in two directions: first, there needs to be an openness between members – debate must be rigorous but at the same time anyone can ask the stupid question without embarrassment. Second, challenge goes towards the executive.
There is a social element to both forms of challenge: you need to know each other to work well together. You need to come to value each other’s differences. And the chairman, in order to leverage that diversity of thought, approach and perspective, needs to be able to allow it to flower and then manage it to a viable conclusion.
We therefore reorganised the schedule of the meetings to take a strategic day twice a year and spend time in the evenings eating together.
Committees were also hampering the formal process of challenge. They had grown over the governance structures like barnacles. A sub-group, chaired by my deputy, took a scythe to them and produced a streamlined three-committee structure: finance and investments, performance, and audit (plus the few statutory ones we are required to include, such as honorary degrees, remuneration and nominations).
Our biggest innovation was to introduce one-off oversight groups on particular projects, such as the reorganisation of our loan book, the commissioning and building of new residences and, most recently, the process of working with external partners to deliver catering and total facilities management.
This process is difficult for management. It can feel like we are second-guessing them, that we don’t trust their expertise. But we do. We just want to add to it by providing the crucial external perspective through interrogation of the process and assumptions used to reach conclusions. There is general agreement that, although initially resisted to some degree, it has added very considerably to the capacity of the university to get a very complicated contractual process right in order to deliver the best quality and value to students and staff.
Crucial in underpinning all this has been a transparent process of recruitment – only of the independents, of course, as the others are elected – and an agreement that we would institute a formal system of appraisal. I have explicitly used recruitment to vary the age, gender and range of skills on the council. We have developed a formal matrix for the skills we need and appraisals. Board appraisal can seem too much for a voluntary organisation: we are all volunteers, after all. But we are still responsible for a £200m, highly complex organisation, and appraisal is part of judging both the effectiveness of the council as a whole and of individual members.
Working together in this way with management we have increased Sussex’s income by 66 per cent, student numbers by 25 per cent, research income by 38 per cent, academic and technical staff numbers by 12 per cent, and our league table position has gone from the low 20s to an average of 15 in 2011-12.
There are a series of very well- written codes on governance, from Cadbury to Higgs and the UK Corporate Governance Code. But while rules can guide, and you need the right structures for the formal process of challenge, only the culture of the board can make the difference between nightmares and successes.
My experience at Sussex has led me to develop, in my professional consultant life, a form of board self-assessment that concentrates on the self-conscious capacity of a board to examine how it behaves, measure its effectiveness and then work together on enhancing its effectiveness.
The ability to leverage difference of approach, provenance, style and perspective in this way is what develops challenge in boards. As Henry Ford said: “If there is any one secret of success, it lies in the ability to get the other person’s point of view and see things from that person’s angle as well as from your own.”
And that comes by developing the right culture, not ticking the boxes of compliance.
Simon Fanshawe is partner and co-founder at astar-fanshawe, a consultancy that encourages equality and diversity. www.astar-fanshawe.co.uk
The Better Boards series of features and videos can be viewed at FT.com/management/better-boards