Governance Bites #75: balancing strategy, risk and BAU, with Simona Turin

In this episode, Mark Banicevich asks Simona Turin about boards balancing strategic discusions with discussions about risk and business as usual. They discuss how director liability can incentivise conservativism, and how boards can find a better balance with strategy. Simona also shares some advice with new directors. 
Simona Turin is Chief Executive Officer of AcademyEX, succeeding Frances Valintine. She is presently a director of Fidelity Life, and two tech startups. Simona has an extensive background in information technology. She has started her own companies, and has held senior and executive roles in companies such as Spark, Air New Zealand, and Xero. She has worked in New Zealand and the United States. 
#governance, #governancebites, #ceo, #boardroom, #boardcraft, #leadership

Transcript

0:00

Kia ora. my name is Simona Turin. I'm director at Fidelity Life, Hectre and Loaded Reports, and I'm also a CEO at academyEX. So we'll talk about the balance between risk and strategy in the boardroom. Yes. And BAU [business as usual] topics versus strategy, I think, yes. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you just heard, I'm really lucky to spend more time with Simona Turin. Simona, thank you very much for your time. Thank you. We want to talk about the balance between business as usual activity in the boardroom, or overseeing business as usual, overseeing risk, and spending time future-thinking on strategy. Can we start, then, with what is the, let’s explain them: what is risk, what is strategy, and what is BAU? Let's define the terms we're starting with. So, I think, as part of governance, of course, one of the key roles of a board is how to manage risk, that's for sure. That is also working with the executive team to drive longer-term strategy for the company. And, of course, also understand the business-as-usual items like finance, people management, and sales operations, etc. Yes. Okay. Do you, where do you think boards commonly focus their time, and what do you think is the right balance between spending time on those three areas? Traditionally, and I have seen some reports and insights that, especially in New Zealand, there is a little bit of a tendency for boards to focus too much on risk and BAU, and not enough on challenging strategy and the ambition to drive business forward. Now, I could also, right away, say that — well, to be Devil’s Advocate — there’s another viewpoint, of course, that if you focus too much on strategy, and not enough on execution and understanding the capabilities of a business, you will have this beautiful strategy, but no execution, and no ability to do that. So, really, the board needs to help executives and the business to drive, not just drive the strategy, but really connect, what does it take for it to be successful? Right, okay. And you mentioned before risk, and directors that often spend possibly a little too much time on risk and not enough time forward-thinking and focusing on the execution of that. What do you think drives that behaviour? You know, often compliance and different governing bodies, the kind of requirements, but also, of course, director liability. I think, also often, maybe the director, board composition is out of balance. You know, if you have many, sorry to say, but directors who have experience, or their background is in accounting. I was going to say, "You’re going to say lawyers and accountants, aren't you?" Yes, I'm sorry, I'll be that cliché! But then automatically, that just kind of, and we provide a really good perspective, but I think we need to have diversity of board, in that balance. You know, people like myself may be challenging on why we haven't implemented AI [artificial intelligence] yet, and where the business is going forward. Right. So, yes, as you say, there is significant liability as a director, and the downside risk is possibly much greater for the directors themselves than the upside. So, there could potentially be a tendency to focus on "let’s make sure this company is safe and secure," rather than thinking "where could this be," you know, the real blue-sky thinking. And it’s quite understandable. And so, as you suggest, a way to manage that risk is by having diversity in the boardroom to balance your lawyers and accountants, for example, with people who maybe have entrepreneurial experience, or technology experience, and those sorts of areas that can be a bit more forward-thinking. And I would add, in addition, I think, having board members that have international experience, even for New Zealand companies, because that ambition that sometimes could be lacking in New Zealand companies. You kind of provide a little bit of that "bigness" or, you know, a little bit larger ambition. Yes. Larger? You mean more than the boat, the bach, and the BMW? Yes. The traditional thinking of a New Zealand entrepreneur? Yes. Whereas, you know, just because - you've come from the US, of course - and so many people dream of starting a billion-dollar company, right? Whereas here, if it's big enough that I can buy the bach, the boat, the BMW, then I'll retire and that's all I want, right. Exactly. And you know, that ambition. I think most New Zealand companies at some point will need to expand overseas. It’s just the size of the market. Yes. How do you do it? How do you think about it? You know, it’s challenging, but I think that’s how you need to think. Most companies are global nowadays. So, I think having that perspective, and even a discussion at the board, is really helpful. Yeah, absolutely. So, what portion of time, if you can take, well, we know of course that there will be board meetings that are focused on strategy, or you’ll have your strategy session maybe once a year. You’ll have your Audit and Risk Committee that is focused on risk. But let’s take a standard board meeting. What portion of time do you think should be spent discussing strategy and the execution of that strategy, versus the other business-as-usual activities, risk management, finances, and those sorts of things? Sometimes it’s really depending on the company. You know, Fidelity versus most of the startups that I am on will have very different, of course, time allocation. But what I like often is to have rotating deep dives. So rather than, "We need to cover every board meeting."We need to cover all topics." You know, anything from finance, budget, to sales, to customer or product. Having deep dives where really board members understand, let’s say, a product we’re releasing, or a customer perspective, and an ability to kind of educate, but also maybe seeing, how does it tie to the overall strategy? What have we learned? What do we need to maybe pivot a bit? So I really like the approach where at that point, business as usual is more about questions, and raising, "What do we need?"What decisions do we need to make?" Or, "What is not going well?" and kind of focusing on these, and then having deep dives on a specific topic. Right, okay. Now, the Institute of Directors, of course, the first pillar of good governance is around setting the strategy. You talked about execution. What role does the board play in the implementation of strategy and the execution of strategy? Guiding, keeping, helping the executive team to keep on track, accountable, but also supporting. So, you know, if things are not going as well, "What needs to be true in order for us to execute on strategy?" Or is there a question — and I like when things are not going as we planned — is having that discussion:"Is this strategy still true? Should we still be going in that direction?" Or, you know, having a really brave conversation and saying, "Well, we need to rethink this." Yeah. Right, right, okay. Thank you. Well, one final question for you, and a little bit more towards the director role generally. Given your experience as a director, what's the best advice you would give to somebody who's starting out? Focusing on your value as a director. What can you bring to the table? I think, you know, I often, before I even consider any board role, I often ask, "What does success look like for that company?"If I was part of the board, what does success look like?" And I think keeping my own integrity and my own values. Really questioning myself, "Am I the right person?" So that’s probably the first one. The second one is being curious and really focusing on how to ask questions. The art of questions is really key as a board, as a director. And I think that's the second one. And the third one is creating relationships with other board members. Because I do believe as a board, we are a team. And how we collaborate, and having these relationships is key. Right. It is essential that the board always expresses a united front outside of the boardroom, isn’t it? Otherwise, you'll get some rather adverse effects to the company. Exactly. And we talked about strategies. Aligning everyone to that strategy. It’s kind of "disagree and commit," but commit. Yeah. Great. Thank you very much, Simona. Thank you very much again for your time. I really appreciate it. It’s been lovely to talk with you. Thank you. And I'll look forward to seeing you next episode.