Welcome to the May 2012 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. There is often no one 'correct' answer; just an answer that is more likely to work given the circumstances and personalities of the case.

These are real life cases; the names and some circumstances have been altered to ensure anonymity. Each potential solution to the case study has different pros and cons for the individuals and companies concerned. Every month this newsletter presents an issue and several responses.

Consider: Which response would you choose and why?

Kate is a director on the board of a large national not-for-profit company. The board is comprised of well-intentioned and conscientious professionals who bring diverse viewpoints and bountiful energy to their board discussions. None of them are qualified in governance or have experience on other boards but all take their responsibilities seriously and strive to meet or exceed the governance guidelines for best practice that are published by their national regulator.

The company has several branches that operate in distinct geographic regions across several state government boundaries. Labour laws are state-based rather than national and, when attempting to develop a corporate HR and remuneration policy, the board discovered that different branches have different employment practices and wildly different remuneration structures. Branch managers are quite independent and resist any moves that would align operations nationally with the argument that they must be free to respond to local needs.

Nationally the OH&S laws are being revised to bring the state laws into harmony and Kate's board would like to use this fact to develop some consistency in their HR practices. Kate has been delegated the task of making this happen but doesn't know where to start. She is aware that, as of now, the national directors could be held personally liable if the OH&S laws are breeched in any of the branches.

What should Kate do?

Susan's Answer

This dilemma is an instance where organizational change will require persuasive internal marketing communication. Kate's success in developing "some consistency" nationally in HR practice depends on her time (hours/month available for board service) and tangible board resources (for PR, information analysis/review, etc.).

Kate should start by getting approval for an informal campaign of personal outreach to branch managers, its structure dependent upon expected implementation of national OH&S laws. Her strategy should combine leverage and partnership; Leverage, by deploying negative motivators associated with risks to branches from continuing resistance to change; partnership, by positioning her outreach as assisting branches during the transition to national OH&S policy.

At the start Kate should also obtain legal counsel to determine directors' potential liability if any of the branches breech national OH&S laws. The potential of such liability for reputational risk to the organization as a whole could be a negative motivator to accept change, and Kate should learn the board's local and national PR resources available to deploy this lever.

Because positive motivation is more compelling, Kate also needs a persuasive message demonstrating how nationally aligned operations would benefit each regional branch. She may need to redefine the "local needs" served by managers, and doing this would require assessing how managers' perceptions of needs reflect local fact. Because the best information is likely guarded at the branches, I recommend Kate visit branches personally and get the Chair's approval to delegate other directors to visit for her, where appropriate.

The visit's goal: Establishing ongoing dialogue with each branch. The communication process would both embody and communicate the message of partnership. As a central point for dialogue, Kate could be a channel for inter-branch communication, thereby adding immediate value while initiating de facto centralization.

Susan K. Becker is a marketing communication consultant and presentation coach at Becker Consulting Services. She is based in New York, USA.

Julie's Answer

Kate's board is at risk. The national directors could be held responsible for any breaches of the OH&S laws in the branch operations. There is also risk in having different human resource policies in each branch; it could be alleged that any difference from one state to another results from unfair bias or discrimination rather than lack of control by the board

Kate needs to think hard about the culture of the organisation and the best way to manage an alignment program. If the branch managers are fiercely independent it may be hard to persuade them to attend a formal course or to take seriously any informal conversations from someone whom they may perceive as having little or no influence. Kate should talk with the CEO to find out how this message might best be received.

Once the education has been delivered, compliance must be enforced. This is a job for the CEO rather than a non-executive director. Kate should confine herself to supporting the chain of command and recommending actions. She must also be sure that the Chairman agrees with, and supports, her recommendations.

Kate must talk with the Chairman about the poor grip this board has on the operations. Fierce resistance is not an acceptable management response to a board initiative. The board needs to lead the organisation and ensure that the CEO has control and alignment. This can be challenging in not-for-profit companies. Some staff may prefer to leave rather than lose their independence. However the safety and reputation risks are such that the current state of affairs is untenable. Kate must act before the risk crystallises into an incident.

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

Mary's Answer

The problem is more of a behavioural one than a legal one. If Kate wants the right answers to the legal questions, she needs to get her branch leaders aligned to the outcome she is seeking, and then engage them in taking on the tasks required to get to the outcome. She has a unique window of opportunity while the OH&S laws are being revised.

Kate's first step will be to understand the outcome she wants in measurable terms. Kate's first order of business should be to articulate why a corporate HR and remuneration policy is necessary, and what measurable outputs of the organization she seeks to achieve by doing so.

Once Kate can articulate her outcome in measurable terms, it is time to begin to engage her branch leaders in the discussion. Without committing the organization to a particular course of action, Kate can begin to show each branch leader the results that are being compromised by not being more cohesive and unified in their approach to remuneration and management. By doing so, Kate is beginning the consensus-building process that will eventually lead to an organizational decision that will be of higher quality than anything that Kate and the board can come up with on their own.

Kate's heavy lifting will come with the listening and negotiating journey that will ensue. Her own managerial style will need to flex greatly as she navigates between her own opinions and the opinions of her team.

For her own opinions to evolve she will need to listen carefully, ask clarifying questions, build on others' ideas, and bring forward the best thinking of the collective whole. This requires a highly relational and participative style that will be tested by the geographic distance between her and her influential constituents.

For her agenda to stay its course, Kate will use an altogether different style. At times she will need to persuade, give direction and quote laws and policies to move her team members out of their comfort zones and into a new way of thinking. It is in this area where she can leverage the national government's initiative to harmonize the state laws.

Mary Legakis is a professional non-executive director and former CEO of the Gledhill group of companies based in Lancashire, England.

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 review - My good friend Yvonne Collier of Madison Training read 'The Wise Fool's Guide to Leadership' by Peter Hawkins. She loved it and alerted me. I loved it also! Here is my review.

New Book of Dilemmas - The second book of collected newsletters - Dilemmas Dilemmas II - is now available at Amazon.com. Like its predecessor, my hope is that this book becomes a essential reference guide that directors can draw upon to seek perspective and clarity when considering their own challenges and issues. If you enjoy this free newsletter, please recommend the book to your board colleagues or, better still, just buy a copy and give it to them. It's a perfect gift for the director who has everything!

Inspirational quote - I have subscribed to a service that delivers an inspirational quote every day. It is a good way to get into a positive frame of mind for the work day ahead. I thought I would share my favourite quote each month. This month the winner is:

"If you don't risk anything, you risk even more."
~Erica Jong

If you would like to subscribe the service is run by Darren La Croix at: quotes@darrenlacroix.com.

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.

How to build a board for a start up - Entrepreneur Magazine invited me to provide some advice. You can read it at https://www.entrepreneur.com/blog/223413

CPA Australia - I really enjoyed meeting the masters group at CPA Australia in Sydney for a talk about starting and developing a director career.

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

Farewell until the next issue (due 1 June 2012).

Enjoy governing your corporations; we are privileged to do what we do!

Best regards
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