Disscussion: Importance of Board Orientation and Training

THE CORPORATE BOARD SEPTEMBER/OCTOBER 2005 21

Orientation of new directors has long been a hit-or-miss process at most boards. Increas- ingly, boards realize the value of offering new members a well-planned education on the company and its governance, but the author believes this is only a first step. Orientation can be a tool to refocus the role of the board as a whole.

Orientation to a job or role is a critical part of realizing optimal performance. In every other function of your corporate structure an orientation is likely conducted. Yet when it comes to the highest function—that of governance—we just assume that everyone already knows how to serve in that role.

In my role of governance consultant, I have discov- ered that most directors come to the board assuming what the job is and believing they know how to do it well, since they have served on other boards. Yet, there is no discussion about the range of assumptions held around the table, no discussion about what the job really demands at this specific corporation, and no effort to build optimal governing capacity among the group sitting around the table.

As a result, there is little energy applied toward a philosophy of governance, improving governing capacity or recognizing the promise of an effective board of directors.

Consider that governance is a downward extension of the ownership rather than an upward extension of management. If you believe a board’s job is to represent the interest of the shareholders, the board cannot create owner-accountability if it functions as though its primary relationship is to the CEO.

The role of governing is very different from the role of management. It takes some thought and process for the board to intentionally define a value-added role for itself as it develops an owner-accountable culture and behaviors. Governing well demands a

Board Orientation And Board Culture by Susan S. Stratton

different approach to the function of the board and that requires a change in beliefs about the role.

As the highest authority in the corporate structure, the board is responsible for its own job design, perfor- mance, discipline and development toward optimal performance. No one else has the authority to change the board’s culture except the board itself.

The power to “design its own job” demands that the board conduct an orientation pro- cess that helps it fully realize its governance potential.

Most boards that I have worked with rely on tradi- tional habits. They may say, “We’ll use Robert’s Rules of Order,” yet there are few people knowledgeable on such rules to assess whether they are being fol- lowed. Other boards rely on the CEO to direct their work, not recognizing that the CEO has an inherent conflict of interest.

The responsibility and opportunity to “design your own job” demands that a board conduct an orienta- tion process for itself that helps it fully realize its potential.

The process of orientation to any job requires several elements:

How the job fits into the big picture. How things have been done in the past that

brought the company and job to this point in time. The current stage of development of the job or

organization. The dynamics of the work environment and the

group with whom you will be interacting and how to fit into that group.

The rules of engagement and participation inside the group and the organization.

Susan S. Stratton is president of Leading Edge Mentoring, Grand Ledge, Michigan. [www.leadingedgementoring.com]

22 SEPTEMBER/OCTOBER 2005 THE CORPORATE BOARD

Applying these needs to a path of orientation for the board leads us to a five plane process:

In the recruitment/selection process, the pro- spective director needs to understand the demands of the job, its structure, and criteria and qualifications to serve and lead well.

New directors must study on their own, reading documents directly related to the job.

The CEO and new director need to develop a relationship of trust and understanding.

The new director needs to develop a relation- ship within the full board, and the board must fully include the new members from their first meeting as a group.

The new director may need mentorship from seasoned board members for a brief period to un- derstand context.

The board itself is in a much better postion than management to identify what is needed in a director, find candidates, and interview them against that standard.

Plane #1: The recruitment/selection process. The role of governing requires significant leader-

ship and dialogue skill, and a fit with a specific cor- porate culture. Because board work demands thought at the highest levels, the current board should take an active role in shaping selection criteria for new directors. Since governing is different than manag- ing, it is appropriate for the board to identify criteria for suitable candidates.

Management’s view of the governing job is different than that of the board itself. The board is in a much better position to identify what is needed to serve well, identify candidates who meet the criteria, and interview the candidates against that standard.

What criteria should be sought in the role of direc- tor? Leadership and dialogue skills which should be the basis of recruitment include:

Active listening. The ability to listen with your whole body, receiving the words and perceiving and acknowledging the emotion and intensity connected with the words spoken. This requires listening with

your ears and your heart. Contributing relevant experience and knowl-

edge. The ability to accurately assess the impact of relevant experience, knowledge and gaps of information, and contribute meaningfully to the conversation.

Staying in the present moment, with judgment suspended. This state of mind allows one to be open to the logic of others, while at the same time weigh- ing the value of that logic to the situation. In order to achieve active listening, one must be in this state of mind. Defensiveness, talking over others in a dialog, and “checking out” of the dialogue are sure signs that a director is not offering this awareness.

Focused curiosity. The ability to recognize and inquire about the perceived emotion behind the words spoken. What information gaps exist, and what underlying assumptions drive an opinion? For example, “What do you know that I don’t know that is driving you to an opinion totally opposite of mine, particularly when we are looking at the same facts?”

Thinking laterally: This is the ability to explore issues by “standing in someone else’s shoes” or looking at the situation with different eyes. When each director “tours” different points of interest, new insights emerge. For example, looking at a situation from the financial perspective, the strategic impact perspective, and the ethical perspective.

Self-management. The ability to take responsi- bility for all your thoughts, feelings, physical environ- ment, people you are with, and other circumstances. It is a personal commitment to be an active player in the moment, contributing dynamic energy in every situation.

Focused drive. The ability to create ambitious goals, direct energy at specific targets, balance tasks when faced with little time and resources, and retain focus despite distractions.

Conceptual thinking. The ability to create a vision through a process of connecting ideas or situ- ations into new groups, patterns, and applications.

Systemic thinking. Ability to deal relationally with all the interdependent segments of a board issue, anticipating the patterns and natural consequences

Susan S. Stratton

THE CORPORATE BOARD SEPTEMBER/OCTOBER 2005 23

found in any system. Strategic thinking. The skill needed to assess

short and long term gain, access creativity to solve problems and resolve conflict, and actively create policy and direction.

Emotional intelligence. The ability to practice ethical behavior, honesty and integrity with yourself and others. This competency brings tolerance of other beliefs that conflict with your own.

Negotiating skill. A talent for modifying per- sonal behavior to meet the needs of others, resolve conflict, and access creativity when resources are scarce.

Trusted influence. Ability to maintain effective

relationships in a highly political environment. From a board perspective, recruitment and selection

is a rational first step in a development process that nurtures solid leadership in the corporate governing environment.

Before agreeing to serve, candidates for director- ship should review the board’s code of conduct policy and other ethical policy statements so that they can reasonably evaluate the job. It is also help- ful to new candidates to observe the board in action so that they can assess whether the culture of your board is a good fit.

Suppose your board has adopted a specific model of governance, such as the Policy Governance model

BOARD ORIENTATION AND BOARD CULTURE

Orientation Toward Performance The Five Planes

Plane #2 A Self-Study Orientation

Plane #4 Full Board Orientation

Plane #1 The Recruitment/Selection Process

Plane #5 Follow-up

Director to Director

Plane #3 CEO to New Director

24 SEPTEMBER/OCTOBER 2005 THE CORPORATE BOARD

designed by John Carver. A board cannot assume that every director understands the rules of engagement as you employ that model. Learning occurs when we bump up against information that conflicts with our own beliefs and assumptions and we notice it. Learning a new role requires internal reflection as we take in new information. It requires a way to process the gap in understanding with appropriate sources of information.

To assure correct understanding of com- pany documents, the new director should first read them, and then debrief with other board members. This also helps build board relationships.

Plane #2: A self-study orientation. A board task force should identify key material

the new director should read prior to the first board meeting. The list of documents should at minimum include:

Articles of incorporation. Bylaws. Board policy manual. Minutes of the last six months. Strategic management plan. Relevant articles on governance issues. Other relevant materials that will help the new

director understand the context for this specific board’s work.

To assure correct interpretation of corporate con- text, the director should first read, then debrief with other board members on the documents. The more the board facilitates relationship building for the new director with other key players, the better the new member’s integration into the board’s operating system. Developing collegiality with the chairman of the board is a good start in that relationship building. Questions that should be discussed specifically with the chairman include:

What are the board’s traditions (its formal cul- ture)?

How was the board mission developed? What was the process?

What “legends” have emerged from the board’s process?

What are the unspoken rules of the board (its informal culture)?

What is the chair’s view of the role of direc- tors?

Ask questions of the other directors. What is your view of the role of the director? How is the boundary set between the role of manage- ment and that of the board?

To better develop relationships that reach into the board, a new director might seek answers to the following questions from at least three other board members.

What was your most helpful document or experi- ence in learning the boundaries and role of director for this company?

What is your view of the role of director? What role does the board play as it relates to

governance? What role does management play? How is the boundary defined between board

and management decisions? How would you describe the ethical stance of

this board? Since the director often has opportunities to serve

on various other boards, self-evaluation and reflection are also important. What are your own motivations in serving on this board? What do you expect to gain from it? What do you need to learn in order to best serve in a governance/leadership capacity? What skills or information must you develop to increase your abilities as director?

This reflection should lead to a plan to learn the needed information and integrate it into your ap- proach to governance.

Plane #3: CEO to new director. Trust is built on achieving results, acting with

integrity and demonstrating concern, wrote Robert Bruce Shaw in the book Trust in the Balance. Thus, the CEO should take the opportunity to start building a relationship with the new director. The objective

Susan S. Stratton

THE CORPORATE BOARD SEPTEMBER/OCTOBER 2005 25

BOARD ORIENTATION AND BOARD CULTURE

is to nurture rapport and the beginnings of a trust relationship. This starts with getting to know each other as people. This dialogue might include the vision for the future, and sharing how they think about the future and about governance.

Plane #4: Full board orientation. Orienting only the new members to your governing

process does not integrate them into the group. In fact, splitting off the new members from the whole can create the beginnings of a divided and conten- tious board. Consider the need for board holism in a well-functioning board.

Anytime you have a new board member, you have a new board—a new system with dynamic energy that needs to be understood by each board member regardless of tenure. Because it is a new system, consider holding orientation with the full board. Such orientation is best done with a facilitator to guide the event. A third party facilitator allows the chairman of the board to participate fully and get to know the newest board members.

The board as a whole should create an annual “plan of work.” This adds value to the board’s role, and creates buy-in from the board’s new- est members.

The objectives of a full board orientation in- clude:

Building rapport and camaraderie with a focus on inclusion of new directors.

Sharing and discussing: assumptions about the board’s governing work; how the board operates—not only the what but the why; vision, mission, core values, ends; traditions of the “corporate culture”; and how to get questions answered.

Defining the board’s annual plan of work. The “annual plan of work” may be a new concept

to many boards who are accustomed to being reac-

tive rather than proactive. In a new design of board governance, to become active and bring a value- added role to the corporation, the board creates its own agenda. This centers on key strategic questions to be explored throughout the year. This exploration should define strategic outcomes and priorities, or result in other broad policy that sets the ethical value system.

When the board works from this perspective, it brings added value to the corporation and serves as a link between the external environment and cor- porate operations. When the new board as a group determines its plan of work for the year, its creates inclusion and buy-in for the newest members to the board.

Plane #5: Follow up director to director. The culture of boards varies from corporation to

corporation. The content or format of reports may vary significantly. Consider the value of current di- rectors mentoring new directors for a limited time. That type of mentorship might include conversation before and after the board meetings to answer any questions on the context of the meeting.

The pre-meeting contact might include a walk through of board materials, explaining the expecta- tions of the board’s role relating to the documents presented. The mentor might provide context for the work and the meeting agenda. A post-meeting mentoring dialogue might include a debriefing on what was observed in the boardroom and discussion on how the established rules of engagement were applied in the context of the meeting.

A rational approach toward corporate governance should recognize that orientation to any function is critical to good performance. Orientation to board governance work is a necessity for optimal perfor- mance. Understanding the big picture and culture of the organization and the context of board work in that culture provides the underpinnings to dynamic and positive governance.

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