Welcome to the March 2011 edition of 'The Director's Dilemma'.

This newsletter provides case studies that have been written to help you to develop your judgement as a company director. The case studies are based upon real life; they focus on complex and challenging boardroom issues which can be resolved in a variety of ways. Each way has different pros and cons for the individuals and companies concerned. Every month this newsletter presents an issue and several responses.

Which response would you choose and why?

Xavier chairs the nominations committee for a major listed company board. He was a popular choice for the role as the Chairman is not independent and declined to be part of the nominations committee so that the company could more closely comply with corporate governance guidelines released by the local stock exchange.

The board has just decided that it needs a policy and strategy for the ongoing Learning and Development of its directors. The board has delegated the task of obtaining a first draft for this to the nominations committee. The board developed a rough outline of a skills matrix at the last meeting and directors will be emailing Xavier with information to populate the matrix. His colleagues appear to believe he now has all he needs to get his committee into action.

Xavier has a wealth of experience in the industry and an enviable rolodex of contacts. However, he does not have a background in HR, training or development. Previously the committee has briefed a board performance consultant and undertook two board performance reviews which went well. Xavier normally has a 'can do attitude' but is unsure of where to start or which direction to take.

What should Xavier do?

Mark's Answer

Xavier should start by creating perspective.

His strength is his understanding of and connection with the company's strategy. This is his contextual awareness. It provides the nominations committee with their most important input to the search process; namely explaining in detail why the new role is so crucial to the future of the organisation.

Xavier and his nominations committee are well placed to do this.

They should explore their current reality by asking "Why now?" Reflecting on the past they can establish what happened previously and the consequences of not having the role. Projecting into the future, they should consider the added value they expect to see from the contribution of a director who is now responsible for Learning and Development. In what ways do they expect their new colleague to influence strategy? What impact do they believe this person needs to have on the board's decision-making processes?

Creating perspective will act as a powerful guiding force to the next phase; framing up the skills matrix and briefing a consultant. Whether it is summarised as a model, a metaphor or a story, it needs to convey the nuances of the role they are wishing their new colleague to play.

To counter Xavier's potential weakness, the drafting of a skills matrix should be completed with the assistance of the performance consultant. If a consultant is not chosen to draft the matrix, they should at least be consulted to assess the fit of the new role in the existing group, based on the performance reviews done to date.

Mark Jones is a board member at the Holdsworth Street Community Centre and a Mentor at ThoughtLeaders. He is based in Sydney, Australia.

Julie's Answer

Most boards do not have directors with an HR / Learning & Development background. That does not mean they should abdicate responsibility for their development to staff, or simply omit it altogether. The board has chosen Xavier to lead development of their strategy knowing his lack of expertise but trusting his judgement and knowledge of their requirements.

Xavier should consider the policy first. He can use his board's standard policy template. Inserting into the template the reasons the board decided to develop a policy then the desired outcomes will create a draft document that the committee can workshop into a version to submit for board approval.

When the board has approved the policy Xavier will need to develop a strategy that delivers a reasonable amount of the desired outcomes within the timeframe of the strategic plan. He should reread the plan so he can be sure that his learning and development strategy is consistent with it.

The strategy should cover three key areas:

• How new directors will be inducted,
• How the board will keep up to date with changes in governance practice and regulation, and
• How the board will gain skills for effective oversight of the company as it delivers the strategic plan.

Each of these strategy delivery areas should be costed and some activities clearly identified so that implementation can commence as soon as the strategy is approved by the board. The board policy on recruitment and renewal (if it exists) should be checked for consistency with the new Learning and Development policy.

Xavier may wish to Google a few other companies to see what their published policies contain and to ask his peers for a quick (and confidential) look at their strategies so that he can see what current practice looks like. Xavier's board is at the forefront in moving to establish a proper policy platform for their own learning and development so he may find there are not many examples for him to follow. This is a great opportunity for him to establish a new benchmark for good board practice!

Julie Garland McLellan is a specialist board consultant and practising non executive director based in Sydney, Australia.

Jason's Answer

There are a number of approaches that Xavier could consider. As a starting point, Xavier should review the skills matrix to understand how each board member delivers strategic value to the organisation. It will be important that the skills document be written in terms of competency and related experiences, so that each board member can effectively be assessed against a 'standard' of competency and skills.

This is then used to identify the gaps and outline the specific skill development approach needed. Development may be through further technical training for those with a level of competence to ensure that all the required skills are adequate, as well as providing guidance for each board member's education to the minimum skills required.

Xavier should also consider the area of base education, such as ensuring all the directors complete a board director training or certification that is available in their jurisdiction (such as the Company Directors Course in Australia).

As education is an ongoing activity of life, Xavier may want to consider rotating directors through annual company director conferences in their country/region, attend industry specific conferences, and have board members become involved in the various director discussion groups that occur in most cities.

One of the challenges Xavier will face is that some senior people believe that they are in their role due to their experience and learning to date and resist the need for further development and training. In framing his recommendations it will be important to outline the benefits to the company and the individual board member in regard to the investment in time and money being made in ongoing professional development.

Jason Masters is the Independent Chair of the Audit and Risk Committee at Country Rail Infrastructure Authority, the Chair of the Audit and Risk Committee at NSW Ombudsman, and an Independent Member of the Governance Committee at Wyong Shire Council. Based in Sydney, he is also a senior governance consultant at Jason Masters Governance.

Liz's Answer

Xavier doesn't need to reinvent the wheel but should instead learn from best practice in other parts of the world. He should immediately check out the website of the National Association of Corporate Directors (www.NACDonline.org). NACD is America's premier provider of education for directors of public companies and provides education to meet the needs of directors at every stage of their boardroom careers.

How to Be(come) A Director is an online course suitable for on-boarding new directors as it takes a couple of hours to outline fiduciary duties, board responsibilities and key roles. NACD also offers a 2-day immersion course in board functions and committee structures and processes and a wide variety of webinars and other forums and conferences: directors often learn as much from networking with each other as from formal learning. NACD offers directors the opportunity to become NACD Board Leadership Fellows. Directors complete a comprehensive program of study and are able to document their commitment to continuous learning and exemplary board leadership, sharing their Fellowship status with their shareowners.

The foundation course for NACD Board Leadership Fellows is The Master Class, which takes place three times a year. Each class is capped at 40 lead directors and committee chairs and provides opportunities for exploration of critical topics, interactive peer exchanges, and networking.

Xavier would be welcome to send his directors to these classes or to sign up his board to study online. He might also wish to ask NACD Board Advisory Services team to travel to his boardroom to provide customized training at an annual retreat.

Liz Barron is the Director of Education for the National Association of Corporate Directors, based in Washington, USA.

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. 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.

What's new

Book reviews – Directors need to read. There are so many new books each month that it is hard to keep pace with the supply or to assess the likely quality of each new publication. Each month I publish a review of a book I have read. This month I have reviewed Mistakes Happen (make the most of them) by Margaret Wright. It says much about the character development required for senior executive and boardroom success.

Success tips for board presentations – My new book "Presenting to Boards; practical skills for corporate presentations" will be launched this month. You can get a copy through Amazon.com or from independent book retailers. I was thrilled to receive an early review from James McRitchie at CorpGov.net

Where's Julie? – A few readers manage to catch up with me on my travels and it is such a pleasure to meet them that I now share my travel plans each month.

Please call or email me if you would like to schedule a meeting or find out more about attending one of these events.

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. It is (still) free. As an existing subscriber you will continue to receive a free subscription when a charge is introduced.

Suggestions for dilemmas – Thank you to all the readers who have suggested dilemmas. I will answer them all eventually.

Farewell until next issue (due 1 April 2011). Enjoy governing your corporations; we are privileged to do what we do!

Best wishes
Julie

www.mclellan.com.au | PO Box 97 Killara NSW 2071
email julie@mclellan.com.au | phone +61 2 9499 8700 | mobile +61 411 262 470 | fax +61 2 9499 8711