Welcome to the November 2009 edition of The Director's Dilemma
newsletter. I hope you find it interesting, informative and inspiring.
I advise Boards and Directors on complex and challenging 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 considers three responses to a real issue. Which
response would you choose?
Lachlan chairs the nominations committee of the Board of a
non-profit organisation specialised in funding cancer
research. The market is saturated with small organisations and
his own has had some good research projects but struggled to
raise funds. The Board has decided to accept a merger
proposition from a 'rival' company that has had
success raising funds but has struggled with its investment
strategy. The merger makes good strategic sense and both
Boards have endorsed the proposal.
However, the merged entity would have 23 board members if all
directors retain a board seat. The Boards have endorsed a plan
to form a new Board of nine to govern the merged entity.
The two Boards are very different; one has many prominent
media personalities who engage in fundraising whilst the
other employs professional fundraisers and the Board
focuses on oversight and strategy without getting involved
Only Lachlanâs Board has a nominations committee and
both Chairmen have asked him to develop the board renewal
plan. A steering committee comprised of both Chairmen and
both CEOâs will support him in this. At the initial
meeting it was apparent that there will be intense
interest, competition and angst as all board members are
passionate about the mission and wish to remain on the
What should Lachlan do?
From a strategic point of view, I believe the starting point is
positive and strong: the two Boards have agreed to the new
structure with nine members and the nominations committee consists
of the most senior executive and non-executive members.
The way I see it, there are two general approaches to change:
"Evolution" would support a phased in approach with
full consultation among the two Boards with the
expectation that the final result will be accepted by
all concerned. However, those involved are passionate
and the expectation is that 'intense interest', 'competition' and
'angst' will be apparent. The potential
downsides could therefore be catastrophic for the new
organisation with leadership focus and energies being
diverted from the organisation's real objectives for a
"Revolution" would see the changes implemented
quickly. There would be more initial upheaval, but the
new structure would then be operational and be dealing
with the issues of getting the best results for both
fund raising and research. Don't forget, the Boards
have already agreed to the new numbers and to dilute
the outcome over time just delays the inevitable.
My approach is to propose "revolution" which would include
the nominations committee taking the following steps:
- Agreement on the objectives of the newly merged organisation.
- Decisions on what talent is required on the Board to support those objectives
Understand who among the existing 23 board members has
those talents. As a byproduct of this process, existing
political and personal issues and any 'deadwood'
may be addressed under the consideration of talent and its
application. If it is politically expedient to do so,
members may be asked to make formal applications to the
steering committee. This would enable each board member to
impartially provide their professional credentials to the
Board members omitted as a result of the selection
process could be invited to join Board sub-committees.
This would preserve organisational knowledge and a pool of
'proven' people for future Board vacancies. Sub
committees can be formed to utilise those skill sets
considered worthy of retention. This could dampen the
depth of expected angst and ill-feelings from the process.
The balance of old Board members not retained should be
acknowledged with special awards for their contribution to
- Get on with the job.
Richard Wineberg is Chief Catalyst at Smart Leadership. He is a
former executive of The Australian Wheat Board (NSW) and St John's Ambulance.
Lachlan needs to consider three dimensions - legal, strategic
In the legal dimension he must be clear about the rules of the new
body. Will one organisation absorb the other, or will both cease
and cede their assets to a new organisation?
The newly merged entity will need new bylaws and a constitution,
supplemented by board and committee charters, director codes of
conduct, etc. Lachlan must therefore ensure his proposal is
compatible with the new rules.
Also, Lachlan has a conflict of interest as he wishes to remain on
Board. He should discuss this with both Boards. The process to
manage this conflict must be agreed by all members.
Strategically, the merged organisation must capitalise on the
strengths and synergies of its two predecessors. A new strategic
plan will plot how the organisation will achieve its revised
mission. Based on that plan, with input from the steering
committee, Lachlan can determine the skills, experiences, networks
and abilities the new Board will require to govern effectively
given the challenges ahead. Whilst CEO input will be invaluable in
establishing the skills required, Lachlan must ensure that the new
CEO does not select the new Board.
At a social and philosophical level each of the predecessor Boards
had a governance framework that suited the Boards' ideas of
how best to govern. Without making either of the former frameworks
intrinsically wrong, Lachlan must establish a shared desire for a
new framework. The legal and strategic work will underpin this new
framework but it must be supported socially and emotionally.
Lachlan should involve the board members in designing the
framework and establishing the charter for the new Board before
deciding which members will stay. All members should be encouraged
to suggest ways to commemorate the service of those who will not
remain (before they know if they will remain or not).
The process should allow any member who wishes to resign to do so.
Opportunities to contribute for those that aren't reappointed
must be created; these must be meaningful.
Asking for ideas for how to retain talent, such as a council of
Patrons, life membership, a fundraising committee, etc. will help
Lachlan to understand what motivates the directors and how to
retain their skills for future service. Treating the departing
directors with respect and acknowledging their past contribution
will help to gain acceptance of the decision.
Genuine gratitude for former service, a process based on the
strategic needs of the business going forward and meaningful
opportunities to contribute in other ways will give this Board a
good chance to succeed.
Julie Garland McLellan is a specialist board consultant and practising non executive director.
Lachlan should immediately convene a Strategic Governance Workshop
with all existing Board members and CEOs. There will be no buy-in
This Workshop's sole aim is to agree on key criteria, that
Defining the role of the new Board (strategy, risk
management, stakeholder management, legal, accountability
of Board and Senior executives, etc)
Identifying the desired balance of board member talent
that represents a relevant mix of skills and stakeholder
representation. For example, in trading off governance &
decision making skills versus fundraising & media profile,
Lachlan might propose a 7:2 mix with the proviso that the
two high profile fundraisers also have the capacity to
Reinforcing the agreed size of Governing Board (nine
Establishing a transparent set of criteria for appointment
to the new Board
Establishing term limits
Agreeing to the necessity of clear accountability
measures based on the new strategic plan, and results
of an annual Board evaluation made publicly available
to key stakeholders
Establish a 'High Expectations' statement (so
that all stakeholders understand the high standards
being placed on the new Board members)
This workshop and resultant agreed criteria will also manage the
expectations and perceptions of those who believe that they should
be on the Board, but can understand the rationale as to why they
may not be the best fit.
From that workshop, the following outcomes can be achieved:
Agreement on a transitional Governance Board of nine with
a one-year term
Development of the strategic plan and identifying the
roles required within the new Board in order to
successfully create the future that the strategy describes
The creation of a Fundraising Advisory Body (don't
call it a Board or Council or anything that might confuse
people about decision making rights) that consists of key
stakeholders (including the fundraising ex-Board members)
with a clear mandate to raise funds
A meaningful acknowledgement and celebration of the
contribution of past Board members
Good luck Lachlan, it is all about managing people's
is Managing Director of Conscious Governance, a
leading international adviser in corporate and nonprofit
governance, strategy, leadership and risk.
Let me first state that 'the devil is in the details'. Getting two
groups to agree on the concept is the easy part. From there,
working out the details and trying not to ruffle feathers is much
more difficult. As noted at the end: "it was apparent that there
will be intense interest, competition and angst."
Might I suggest a two-phase approach:
Develop a phased-in plan of Board reduction. If
necessary, start with the 23 members for a year or two
with a planned reduction to a mid-point, such as 15
members. Then in another year or two, further reductions
to reach the optimal nine members. During this time, both
groups will have equal representation and input into
necessary development of the new organisation's by-laws,
policies, and strategic planning process.
The second, concurrent phase would be to begin working on
the details that will cause angst as the process moves
forward. Determine what the best parts and 'successes' of
each group are and implement those into the 'new'
organization. Determine ways to use those passionate types
who will not be on the Board through some infrastructure
changes...if not holding a Board position, how can their
skills be best used in another capacity? Chairing a major
committee or fund raising event, for instance. This could
be a way to reduce the current board members by
'repositioning' talented people to something that might
well put their skills and traits to better use than
sitting in on Board meetings. Put them where they can do
best with what they bring to the table.
In my experience, there is nothing particularly easy about merging
two groups, especially those with passionate members with strong
beliefs about their own groups.
Terri L Maurer is the owner of Maurer Consulting Group and a
former National President of the American Society of Interior
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 have been changed to ensure anonymity.
Book review –
Directors do a lot of reading. I keep a note of my thoughts on
each book I read. Here is my review of Boards that Deliver by Ram Charan.
The Truth About Getting Onto Boards – I had so
much good feedback from my presentation at the Australian Institute of
Company Directors that I decided to re-record it and share with you.
It is available on my website (you will need to use your
computer's speakers or headphones to receive the audio).
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 divulge my
non-confidential travel plans each month. Where events are open
to the public I list the organiser and title. Where events are
private I can only meet before or after the function and cannot
AIM professional networking
function on 'Presenting to Boards' (evening function)
Thoughtpost Directors Luncheon – a roundtable
discussion of 'board and director capabilities' is
on the menu. Email me if you would like details.
Women On Boards seminars (all day)
One day course on 'Presenting to Boards'. Details
at Australian Training Guide.
Breakfast presentation 'Presenting to Boards' at
Sydney Business SWAP.
Australian Institute of Company Directors 'Long Lunch'
(I still have a space on my table – call me
if you would like a seat)
Please call or email me if you would like to schedule a
meeting or find out more about attending one of the
conferences or course listed.
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 next year.
Suggestions for dilemmas –
Thank you to all the readers who have suggested dilemmas. I
will answer them all eventually.
Be an expert –
I will post the next dilemma on LinkedIn. If you would like to
feature next month just log on to my Q&A
and type in your advice. I will pick the best answers to be published in the
Farewell until next issue (due 1 December, 2009). Enjoy governing your corporations; we are privileged to do what we do!
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