Archive for May, 2007
How To Create Great Boards
May 26th
[This was an essay on the blog, now turned into a post]
The board is responsible for making sure that it fairly represents the shareholders interests in seeing the company move forward. Most of the articles talk about their being good governance techniques such as attendance, reviewing the material before the meeting, etc., that are necessary but not sufficient for having an excellent board.
In this regard, it is like many other teams within a corporation. Each member has a responsibility that they seek to uphold but if that’s all they do, they will never become a great team. Great teams are unified by a common goal and a willingness to work together toward a common goal.
Most of the articles written on this subject effectively summarize the book “The 5 Dysfunctions of a Team”. It suggests:
- Trust is necessary to have good conflict
- Good conflict is necessary to have buy-in
- Buy-in is necessary to have accountability
- Accountability is necessary to have attention on results
- Attention on results is necessary to truly have results
That is, trust is required in order to ultimately have good results and is likely to be the most difficult one to build.
One of the things the articles do not mention, but which I find interesting, is that doing peer reviews is actually an excellent way to build trust. By each board member being able to openly talk about and share the results, they both make themselves vulnerable to others, as well as learn more about how they are perceived. In fact, I think most of the suggestions can be viewed through this framework.
This reveals what is different about a board than any other kind of team that is found within a corporation. Most corporate teams have a leader (“The Manager”) who has a stick to help align interests (“The Salary”). Within a board, you don’t have this centralized form of incentive. In addition, a board doesn’t have a clearly defined “Leader”. The chairman clearly ought to be the initiator, but there is no single source of incentive as clearly as there is with “The Manager”. Moreover, the board members all have differing personal interests besides their fiduciary responsibility to the shareholders.
This causes three distinct behaviors. First, it would seem that many people who sit on boards feel a certain amount of prestige. Therefore, their own reputation and/or ego is on the line and they are motivated to try to keep their position. Second, they are all motivated, at least in part, by impressing their peers. This is related to the former motivation but differs in that they are looking to impress those who listen to them (even if it isn’t necessarily helpful to the meeting at hand). Third, they also may have other interests: their own capital or their own time, which might cause them to skew what they think is best for the overall shareholders and business. This can lead to “group think” and its inherent lack of conflict which may not be beneficial to the board.
In other words, they are motivated to maintain their position on the board. But more than this, you have the CEO who is the primary interface between the board and the day-to-day operations of the business. The CEO is motivated not only by the things mentioned above but also by the desire to keep his job/position/authority/power. This can cause him to “manage his manager” in a way that, while not blatantly wrong, can downplay what is truly going on in the business.
So, a team of people with disparate interests, yet a common goal (even if only because it is required of them) is then gathered together to perform tasks toward that goal. Someone on the board needs to take steps to create an atmosphere where trust is developed: where the entire board can step together and do so without requiring too much of their time. This is where peer review could be so helpful, because it enables sharing of vulnerabilities with those on the board. Also, people need to understand how their candor with the board ultimately benefits their own personal interests.
Being on the board that creates a successful company leads to even greater prestige; candor is required to create a successful company.
By sharing openly and honestly with the board, the CEO can obtain useful counsel that can help him to succeed better at his job; the board needs to look at problems shared without trying to kick the CEO for the problems existing.
A final consideration, how should board members handle dysfunction in their ranks. This requires that the members mutually decide the need to incentivize activities that build the board toward becoming a stronger team, and actively discourage activities that subvert the team or create unproductive politics. If these things are not addressed quickly, they become nearly impossible to address. Secondarily, when companies are doing well, money is coming in, everyone is happy, it’s easy to get sloppy about building the team, yet when things turn sour, it’s too late to build trust.
The time to build great boards is now, especially if things are going well.
Dominating the Message
May 23rd
With my wife studying Spanish, I decided to look into some Spanish software so I could learn some too. Rosetta Stone was the first one I started with and then started reading some reviews. From there it lead me to another spanish program called “Learning Spanish Like Crazy” which was recommended. Then I did a google search, and came up with a huge number of AdWord ad sites offering ‘objective’ reviews of Spanish software. One of the programs at the top of these reviews was “Rocket Spanish”. The website for RocketSpanish is like a huge marketing page which requires scrolling to the near bottom to learn the price of the software/CD’s. So I started trying to find some “objective” review of the Spanish software/CD’s and RocketSpanish has completely dominated the message.
They do this by having blogs speaking up the software, they have a lens on Squidoo, they have pulled out not only all of the Adwords for “Spanish Review” but also including words like Scam, Fraud, etc. The way they get you to click on their AdWord sites is to have lines like: “Don’t buy Rocket Spanish until you read this” – the resulting review has the software as being the best one out there.
Digging further, all of the domains were registered using a proxy (to make it difficult to track back who owns them). This was the first example of essentially introducing SOOO much marketing noise online that it’s impossible to really even tell if the software is any good or if it’s horrible. My guess is that the product is at least adequate and so people are not apt to feel like they were cheated (and some reviews that recommended others mentioned RocketSpanish without derogatory remarks).
Anyway, this all got me thinking about online marketing. With so much information at our fingertips, we go online to find out many other consumers perspective, but if you have some cash to spend, you can introduce so much “real looking” perspectives that it drowns out the rest. I hope this does not spell the future of marketing online; in fact, it almost reminds me of the ads that existed in the early 1900’s which were clearly propaganda coupled with the SPAM that invades our inbox with clutter.
So here is your challenge, see if you can find a legitamate review of “Rocket Spanish” and send it to me.
Threshhold of Relevance & Group Action
May 7th
It’s interesting that people essentially don’t take notice of certain things until someone else mentions it to them. This ties into the example that shows up in both Blink and Influence about the woman who was stabbed three different times over some time with over 30 witnesses not one of whom called the police until after she was dead. Essentially, when people are in situations in which they are uncertain, they look around them to see how others are behaving. The problem is that since they are all looking for someone else to indicate that there is a problem, no one does anything.
But this principle doesn’t only apply in times of emergency or in times of uncertainty, it also applies to actions that people would like to take, but don’t always notice or think to take. For example, people generally want to reach out to those around them, but it doesn’t always occur to them to do it, until someone decides to take initiative toward starting the action. Say a friend is sick and could use meals made for their family, it may not occur to people on their own to do something like this; however, if someone makes mention of it, suddenly others also want to take part. Something needs to raise the need to their threshold of relevance (where something suddenly becomes noticed consciously).
Thus the importance of leaders who can initiate. Leaders need to have a threshold of relevance that can help provide focus – they also need to be listening to the relevant points of their team as no one’s threshold is sufficient. Finally, we all need to consider how to make sure we are accurately assessing situations in which no one is doing anything but we should be – could make all of the difference.
Blockbuster Security
May 6th
Recently, when checking out a movie, I saw a very interesting security check. Blockbuster almost always asks for your current address to make sure you are still living at the same place. A woman was checking out a movie and she was doing so on her husbands card. The cashier said, “John?” and she said, “Yeah, that’s my husband”, and she said, “Are you still at 603 Main Street?” and the woman said, “No, we’re at …” The cashier said, “Okay, I was just checking”.
Since Blockbuster regularly asks for your address, asking for the wrong address when the person is suspect provides a pretty good way to make sure someone isn’t using your card illegally. Just an interesting annecdote.