Building a Strong Board: Lessons from the AFL

imagesThe transcript of a recent speech by Founding Partner Andrew Harris at the Superannuation Trustees Fund Governance Symposium on 22nd Oct 2013.

The parallels between success on the professional sporting field and corporate life are often cited. I think the lessons learned from the sporting arena are very interesting and as equally applicable to the Board level as they are to the Executive of an organisation.

About 10 years ago I conducted some research into the relative performance of two AFL football clubs, St Kilda and Essendon. I grant you that it was not the most scholarly of efforts and won’t be found in the Harvard Business Review, but not surprisingly given the subject matter it did get a bit of a mention in the Sun Herald at the time.

My hypothesis was that the National Draft alone was not sufficient to explain the comparative success of the two clubs and that there was other factors that needed to be taken into account. The analysis looked at the first 16 years of the National Draft. Over that period Essendon had competed in the Finals 11 times, competed in four Grand Finals and won two Premierships. It did not win a ‘wooden spoon’ in that period, and on average finished at least fifth in the home and away competition. By comparison, St Kilda in the same period only played in four finals series and one Grand Final. It did not win a premiership but collected the ‘wooden spoon’ on two occasions. On average, the Saints finished 10th.

Many have argued that the series of selection rounds in the draft would be the great leveller of the competition. However, the performance of the clubs since the start of the national draft system clearly indicates that there are other factors at play. The challenge of building a strong, cohesive Board that is fit to take on current and future challenges is no different.

There are many factors that go to making up a strong Board. This afternoon I intend to speak about those that our Firm sees as that factors that consistently distinguish outstanding Boards from others.

Capability (Talent/Draft Picks)

Boards need to ensure that they have the right blend of skills and experience to ensure that they are able to meet current and future challenges. In part this can be addressed through ongoing education and training of Directors, be it on matters of compliance or a new investment product or trend. Many Boards will have ‘educationals’ run by the Executive or external third parties and this is seen as being of great benefit. Whilst these types of program are clearly important we would strongly advocate that there is a different between ‘learned’ knowledge and ‘contextual’ experience. Let me give you a specific example.

Arguably the key issue facing many Boards into the medium term is how the digitisation of the world will affect the nature of business. Social media, Twitter, Facebook to many Directors are just words. This is the world of Generation Z. It is frankly a world that many of us in this room will probably not fully comprehend. Linked In I get, but the utility of FaceBook is still a mystery to me.

Given that this is a naturally younger domain and acknowledging that the profile of most Boards is around 60, many Directors may not realise or fully understand the implications of the world they now operate in.

Recently our Firm worked with the Board of ME Bank to appoint a Director who was a “digital native” and could stress test the execution of the Bank’s strategy.

Boards need to ensure that they not only have a conceptual understanding, but also practical experience in areas of key strategic importance.

Diversity of Thought & Opinion

The most constructive Boards recognise the benefits of actively encouraging healthy, robust debate. Whilst there is clearly discussion around the most effective means of developing the diversity of opinion around the Board table what cannot be disputed is the need for Boards to avoid falling into the trap of “Group Think”.

Regardless of the merit or otherwise of Independent Directors, or seeking to appoint more female directors the true value of having diversity is that it should fundamentally improve the quality of decision-making.

Board Effectiveness

I know this will sound trite and frankly very obvious, but unless Board processes are structured effectively and are supported by streamlined reporting it is very hard for Boards to focus on what is truly important.

When we conduct Board reviews a common Director lament is the length of reports and the lack of time allowed to properly read and digest the information. Whilst new technology is enabling Boards to not have to carry a “brick weight” of reports around, the structure of Board meetings and their purpose is often less than optimal. Many Boards still hold “functionally” driven meetings where each Executive is given a moment to shine.

The more effective Boards use approaches such as Strategy Maps to drive meetings and view these times as forums to discuss issues and make decisions, not information gathering sessions. Streamlining of reporting frameworks where the Board deals with matters by exception – often aided by traffic lights or scorecards – enables the Board to elevate the quality of the discussion.

Continuous Review & Renewal

Building and maintaining a Boards capability is a dynamic, not a static process! It should be part of a regular business rhythm and comprise both formal and informal activities at a group and individual level.

Critically all discussions must be held in an open, honest and transparent manner. Boards must keep focussed on today’s issues, but keep an eye on the future. In so doing each Board member must be focussed on the currency and vitality of the group and the ability of each Director to make a valued contribution.

Board reviews are clearly a very important part of this process. For many Boards this can be quite confronting. Whilst executives are used to annual appraisals and regular feedback both formally and informally it is a relatively new phenomenon for Boards. When working with Boards we therefore advocate an evolutionary approach so that individuals can build trust and support with the process and with their fellow Directors.

Building the Right Culture

Building a collaborative culture where all have a voice and feel comfortable to contribute is the key to building a strong, cohesive and successful Board. The Chair plays a crucial role in defining the values, character and culture of the Board.

So too will a thorough and robust selection process. Understanding the culture and values of the Board and clearly articulating and documenting that up front, whilst not a full proof means of guaranteeing that new Directors will transition seamlessly onto the Board, does significantly mitigate the risk.

Strong induction programs and mentoring of new Directors by Senior Board Members or external Mentors can also help to reinforce the norms and values of the Board, as can a robust approach to performance management.

Summary

So, in closing, I think it is interesting to revisit the performance of the St Kilda football club since I last conducted my initial research.

At the time I noted in my paper that:

“St Kilda supporters will be hoping that the club can create an environment that nurtures and develops the exciting crop of talented youngsters drafted over the past three years.”

I think we can agree that they have performed well in the subsequent period. Whilst they have not won any premierships in the last 10 years they have made two Grand Final appearances and been a regular feature in 7 Final Series. They have averaged 6th place.

This outcome in large measure can be attributable to the culture created by on field leaders such as Nick Riewoldt and a strong disciplined Coach in Ross Lyons.

Picking well is important, but building a strong team, be it a Football team or a Board, is a far more complex and ongoing exercise!

Thank you

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