Dear reader,

Welcome to The Director's Dilemma June 2023

Each month this newsletter looks at a real-life board scenario and considers a range of responses. The scenarios are de-identified to protect the individuals concerned. This month we investigate options for a JV board that is in danger of falling apart.

Of course, scenarios in this newsletter are general, I work with boards and directors as a confidential mentor and help them beat challenges and seize opportunities. If you would like personalised service, please call me.

To read this email in a web browser, go to www.mclellan.com.au/newsletter.html and click on 'read the latest issue'.  I hope you will enjoy the latest dilemma:

 

Daley is a director on the board of a JV Company. He was nominated by his full-time employer which is one of the JV Partners. The six board members are all employees of the JV partners apart from the independent chair, who is a retired audit partner.

When Daley joined, the board was doing a cursory job of overseeing the JV projects and reporting quarterly financial performance to each  JV partner. Daley worked with the CEO and executive team to develop a suite of board reports and, when he believed the directors had a good grasp of the day-to-day operations, he helped the CEO to develop the company's first draft strategic plan. The chair gave his blessing to the preparation of the plan but took no interest in its contents.

When the board met to discuss the plan, after reading it in their board papers, Daley was shocked at the range of responses. It was clear that two partners wanted the JV to maximise the profit from its current projects while the other four wanted to invest in growing the company and tendering for additional projects.

The chair closed the discussion by stating that the plan was only a document and the company had operated without one for several years so there was no need to push to agree one now.

The CEO is now despondent, and the staff are confused. Daley realises that he pushed too far without genuine support from his colleagues.

How can he undo the damage and start to rebuild a unified board?

A strategic plan should document options, including status quo, setting out strategic risks and benefits, resources required, accessibility of the resources, timeline. Risks and benefits can be financial and non-financial.

The strategic plan should recommend one of the options drawn from fact-analysis. If the company can afford it, a consultant can reduce the time and effort required.

The CEO should schedule time to discuss and socialise the draft strategic plan with the board ahead of meeting to approve it. It is appropriate to invite staff to these meetings to address directors' questions. Questions that can't be addressed in the meeting should be subsequently addressed.

Sometimes further discussion is required to exhaust all board questions. It often takes many meetings to achieve clarity and alignment.  Collective board discussion meetings are healthier than individual 1:1 meetings, so that all directors are able to hear the views of others and debate accordingly.

A final meeting should put the recommended option to a formal vote for approval by the board.

Disparity in views amongst directors may stem from lack of agreement on purpose.  Alignment is needed before agreement. Given that each director is a nominee of the JV partners, the directors should be reminded that they must make decisions in the best interest of the JV company.

The Chair is critical in resolving disparate strategic views. There needs to be alignment at the board so management can execute the strategy with confidence. Misunderstandings or disagreements need to be sorted. Without a cohesive board, the disparate views will create confusion that will cascade through the organisation leading to disfunction.

Strategy is one of the core responsibilities of the board. In the interest of inclusiveness, the Chair should seek the views of the rest of the Board including the CEO as to the need for a strategic plan and the risks of not having one.

Karina Kwan is a non-executive director and chair of the Audit and Risk Committee for HSBCBank Australia and non-executive director and chair of the Audit Committee for Wilson Asset Management. She is also a start-up mentor at Stone & Chalk and is based in Sydney, NSW, Australia.

Daley acted as a de facto leader of his board, under the de juris leadership of a disengaged chair. That was never going to end well.

Before doing anything, he must read and understand the current constitution or shareholder agreement. That will outline the most recently documented agreement on how this company should function.

He could next try to rebuild his bridges with the chair by apologising for overstepping the boundaries. Then he should seek to understand what the chair sees as a solution to the lack of strategy.

If the chair proposes a way forward, Daley should support that. If the chair has no way forward and is merely collecting a stipend for conducting the meetings, then Daley needs to step up into the leadership vacuum.

Stepping up will be dangerous. Daley will need the strong support of his nominators for taking a leading role. Once he has gained this, then he should reach out to engage the other JV partners in a discussion about their aims in remaining in the JV and their appetite for either selling down their interest or becoming actively involved in responsible partnership.

These discussions may need to be taken 'over his head' by his nominator and their counterparts. Or Daley may be granted permission to head the discussions. Either way, Daley needs to be mindful of his authority and delegated powers and ensure that, whenever he steps up to take a lead and further the interests of the business, he brings his board colleagues with him.

Julie Garland McLellan is an experienced non-executive director and board advisor based in Sydney, Australia.

Is Daley aligned with his CEO and team's wishes, is the strategic plan vision supported by his full-time employer?

To know how to proceed, Daley and his CEO would do well to map the desires of each of the board members (apart from the chair), so they can engage each of those board members and their wishes within the next iteration of the strategic plan.

Daley needs to investigate if the division between maximising profits from current projects or investing in growing the company and tendering for additional projects is a division in priorities between the JV partners or if this is a personal level opinion of directors.

Once understood, Daley can formulate an approach to pull into the strategic plan the individual wishes of the directors and their corresponding JV partners.

A divide may be pulling the directors in opposite directions, however maximising profits and maximising growth potential are very closely aligned. The CEO and Daley can involve the staff in the vision to help retain clarity.

Once the CEO, Daley and the staff are united behind the intent, the next step is to align other board members to support the strategic plan next time it is raised. Daley can also bring in the chair, by aligning the outcome of having a working strategic plan with the outcome the chair is looking for.

When the plan is next presented, those that have contributed and are aligned will most likely support and defend it.

Daley will find it worth reminding the board that continuing in the previous fashion will not reach all the individual and collective goals as fast as a focused and combined approach that has been strategically mapped out.

Thomas Green is a director of the Australian Suicide Prevention Foundation, Mindful Growth Hacker, and head of Growth for Blockchain Cyber Security. He is based in Melbourne, Victoria, Australia.

(Well, everyone says it will put directors out of a job so Thomas thought we might like to see how it responded!)

The key to resolving the dilemma lies in effective communication and collaboration among the board members. I firmly believe that Daley should strive to foster an open and inclusive environment where all voices are heard and respected. By actively listening to the different perspectives and encouraging constructive dialogue, Daley can work towards finding common ground and shared goals.

It is essential for Daley to address the concerns of both profit maximization and growth. I firmly believe that striking a balance between short-term financial gains and long-term sustainability can lead to a more holistic and robust strategic plan. By emphasizing the potential benefits of investing in growth while ensuring profitability, Daley can build consensus and rally support from the board members.

Furthermore, I advocate for Daley to engage with the CEO and staff members, providing transparency and reassurance about the ongoing efforts to unify the board. By effectively communicating the steps being taken and the importance of their input, Daley can help restore confidence and clarity within the organization.

Engaging the chairperson is also crucial, in my view. By highlighting the positive impact of a unified board and a well-defined strategic plan, Daley can seek their guidance and support. I believe that demonstrating the value of collective decision-making and aligning it with the company's overall objectives can motivate the chairperson to actively participate in the process.

Overall, I firmly believe that by prioritizing open communication, finding common ground, and engaging all stakeholders, Daley can overcome the challenges and rebuild a unified board that is aligned towards the success of the JV Company.

Video resources - I post short video insights on LinkedIn. They disappear after a few days. You might like to visit (and please subscribe to) my YouTube channel to see the videos whenever you want to watch them. Let me know if there are any topics you would like to see addressed.

Board training - Every board - just like every other team - needs to train and develop if it is to achieve and sustain success. In May I delivered training to boards in the government, listed, family and not-for-profit sectors in Victoria, NSW, Tasmania, Abu Dhabi, and Malaysia. When your board next needs to conduct training please remember that I would be delighted to help. If I can help, please contact me at julie@mclellan.com.au.

Book Review - How to Listen by Oscar Trimboli

I normally consume my books as though they were hot chips; dashing through and gobbling up the ideas while I am still hungry for them and before they have a chance to become stale.

This book is designed to be savoured and studied slowly - the author recommends reading a chapter each month and putting the ideas into practice before progressing to the next. It is good advice although I couldn't resist reading ahead.

From the first case study to the closing thoughts of Kano Jigoro in the final case study, the book is a delight to read and a font of reminders to listen, carefully and well, to all that is said and unsaid by those who communicate with us.

I was captivated by the philosophy as well as the practicality of the ideas shared in this book. It is completed with notes and references to podcasts and other resources that can be found online.

Available at Amazon.com

Inspirational quote for June

There is no such thing as a perfect board or an un-improvable plan. Always be willing to keep learning. It is the only road to success that I know.

A note on names - A few readers have asked me where I find the names for the protagonists in each case study; I 'borrow' them from people I meet or things that I read. 'Daley' is an old Gaelic name that originally meant 'assembly'. Our protagonist will need to assemble a board that is capable of creating a unified strategy.

This newsletter - If you have any ideas for improving the newsletter please let me know. If you are reading a forwarded copy, please visit my website and sign up for your own subscription.

Suggestions for dilemmas - Thank you to all the readers who have suggested dilemmas. They are greatly appreciated. I will answer them all eventually. I could not write this newsletter without your help and without the generous help of all the experts who respond each month to the case studies.

Be a contributor - if you would like to attempt a response to the dilemmas for publication you will be most welcome. Simply reply to this email and let me know. I am always on the lookout for new talent from around the world so please reach out if that sounds like something you could do. I am also always grateful for the generous sharing of the current and past contributors. I couldn't create such an engaging newsletter without their help.

Let's connect - I use LinkedIn to share information about boards and directorship with my friends and acquaintances. If you use LinkedIn and we are not yet connected I will welcome a connection from you. You can find me at linkedin.com/in/juliegarlandmclellan.

Farewell until the next issue due 1 July. I look forward to greeting you again then.

Enjoy governing your companies, it is a privilege!

Best regards,
Julie

Main photo by David Garrison at Pexels.com

Quote illustration Keitchy Sanchez for Julie Garland Mclellan

Disclaimer: The opinions expressed above are general in nature and are designed to help you to develop your judgement as a director. They are not a definitive legal ruling and do not constitute legal advice. Names and some circumstances in the case study have been changed to ensure anonymity. Contributors to this newsletter comment in the context of their own jurisdiction; readers should check their local laws and regulations as they may be very different.

Privacy: I am privileged to have your contact details and keep them as safely as possible. I will alert you if they are ever accessed by any unauthorised person. The technical staff at ayuda help with publishing and issuing the Director's Dilemma and have access so they can send the newsletters to you. I do not sell your details to anyone; they are kept only for the intended purpose - sending you this newsletter and helping to build the judgement of company directors by providing a safe way to consider potential responses to real life events.