Governance Bites #83: learning boards, with Paul Brown

In this episode, Mark Banicevich asks Paul Brown about learning boards. They discuss the role of continuous education in board effectiveness, and how it influences strategic decision-making. Mark asks how a board can foster a culture of continuous learning, common pitfalls to avoid, and strategies a board can employ to ensure directors remain engaged and continue to develop. He also asks Paul the best governance advice he’s received. 
Paul Brown is Managing Director of Boardworks (https://boardworks.nz/), who perform governance services such as board evaluations and governance structure reviews. His governance experience includes Stephenson & Turner architects and engineers, Emergency Alliance, Independent Living Services, Panuku Development Auckland and Council for International Development NZ. He was also CEO of ChildFund New Zealand for 17 years. 
#governance, #leadership, #corporategovernance, #boardcraft, #decisionmaking, #makingadifference, #ceo, #governancebites, #boardevaluation

Transcript

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Hi, I’m Paul Brown. I’m managing director with an organisation called BoardWorks, and today we’re talking about the learning board. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you just heard, today I have the pleasure again to spend time with Paul Brown. Paul, thank you very much for your time. Cheers, Mark. One of the, when we were first discussing the ideas of what we could talk about in these discussions, you brought up this concept of a learning board. In your experience, what distinguishes a learning board from a traditional board? There’s no real definition of it, but I would say, Mark, a learning board has got a real mindset and a culture within itself that’s always after that continuous improvement. Boards are dynamic. People are dynamic. Organisations change. So unless the board is prepared and committed to learning, it’s not going to be evolving. It’s not going to be able to keep pace with the environment. So I think it’s more of a cultural mindset prerogative than anything else. Okay, okay. Right. What role does continuous education and training play in board effectiveness? I think it’s fundamental. Going back to the earlier, you know, comments that as the environment changes, as the organisation changes in response to the environment, and as people change, not just new directors and old directors coming on and off the board, but people ourselves, we change. We’re living beasts. So I think it’s appropriate that any organisation, such as a board, embraces learning. So it becomes a fundamental part of the DNA of a board. You’ve got experience really across the continuum of business sizes, right. For both not-for-profits, for-profits, listed companies, unlisted companies. A lot of the work that I’ve done is with not-for-profits, and with small businesses. And, you know, with 700,000-odd enterprises in this country, and every company having to have a director but no requirements to be one, you know, you don’t jump on the company’s office website, form a company, and have it ask you, “What are your seven duties?” So you can become a director without even knowing what your duties are. Yeah. So on that basis, I think many directors in this country, probably the majority of, legally, directors, wouldn’t actually have much idea of what governance is, and even as they become more senior, there’s always a place for them to continue to learn the job. Yeah, very much so. We see that a lot in our consulting, too. The fact that the risk of generalising a lot, particularly with small nonprofits, a lot of people are appointed to those boards because they’re technocrats. Yes. They’ve got a subject-matter expert in law, accounting, fundraising, - Finance. - whatever it might be, finance. So they’re assigned to the board because they’re seen as a subject-matter specialist. But you’re right, they may not have the skills or the awareness of what good governance means. So yeah, good to have a strong suit, often that can be a weakness too, in the fact it becomes a blinder for the rest of the board to say,“We’ll just rely on Mark for everything legal, because he’s our legal rep,” without actually realising there are other people around that board table who could ask even better questions than the subject-matter specialist, out of complete ignorance. So yeah, it’s balancing that tension between having technical knowledge, and knowledge of the organisation and what it performs, and also governance knowledge, knowing how to perform and behave as a as a director, and how to work as a group to make collective decisions. Right. And you also raised that concept of people relying on a particular individual for their technical expertise. It’s quite limited legally as to how much you can rely on the expertise of other people around the table, right. Absolutely. Because you're liable for it. Correct. And often we see that around, you know, annual report season, that, “Okay, we’ll default to the finance committee. They’ve done all the financial heavy lifting. As a director,"I can lean back and just say, ‘Nothing for me to see here.’” But you’re right. There are obligations as a director, you’ve got a fiduciary duty to be over those finances as well, even though you may not serve on that finance committee. Yeah, so you don’t have to be an expert, - Correct. - but you have to get in there deeply enough to satisfy yourself that the obligations are being met. Absolutely. Right. How does continuous learning and development influence a board’s strategic decision-making? Well, I think, you know, as environments change and the world seems to be changing at - A faster and faster rate. - an increasing clip. Yeah, that’s right. So I think it’s incumbent on any director to really continually learn more about the organisation and its environment, but also learn about, continually learn about governance and how that’s changing. So it just becomes part of, I think, good directorship. So yeah, just making sure it becomes part of what you all do as a group. Yeah. Okay. Well, getting inside the boardroom and inside the internal DNA, can you share some examples, blinded, of course, of boards that have successfully adopted a learning-oriented approach, and what the impact were? Absolutely. So we see good boards bring in outsiders, advisors. They don’t have to be formally admitted to the board. They could just be a guest speaker or advisor or specialist on a certain topic that helps inform the board. And I think that’s important, in terms of without that information or that awareness, as a director, how are you able to contest or challenge the information that management are presenting to you? Doesn’t mean you need to become a complete expert in that field or specialist, but it gives you a general awareness, and therefore allows you the curiosity to start interrogating the information you’re receiving. So yeah, bring in outsiders, set aside time for learning for directors, and recognise that is actually part of being a director too. Right. Yes, actually, the example that you gave of bringing in outsiders is a really good one, because you never have all of the expertise around the table, right. As much as you have a skills matrix, you’ve got a handful of people, seven to nine people, and there’s always going to be gaps. And that willingness to bring in an expert from outside, and having a board culture, and hopefully the budget in many cases, as well, to afford to bring somebody in, is really worthwhile. Budget, both financially, both, and also in time, as well. And the outsider may not be from your industry or your sector. It could be an adjacent sector or adjacent industry that actually provides a totally different aspect of learning. Right, yes. How can a board of directors then foster that culture of continuous learning? Yeah, I think it comes back to curiosity, making sure that directors are asking questions of each other and of management, and not making it lighthearted, but making it fun, and realising that, you know, as directors, we should always be learning. Recognising, the chair, perhaps, should start recognising that, and assigning time, even within the agenda, to say, “What are people learning? What’s on their horizon? What have they read lately?” So you can find ways of actually sort of baking it into the governance framework. It’s interesting, isn’t it. Because a director role isn’t a full-time role, and quite, even a director that does this as their sole source of income will have a portfolio of roles. Most professions, it’s really part of a definition of being a profession, that you will have some sort of plan for ongoing learning. It’s a requirement. And as an engineer, as an accountant, as a lawyer, and so forth, we don’t have those kind of requirements in governance. But maybe one of the things that could be done by the chair or the boards is to say, “Look, I expect everybody in this board to have their own professional development plan,"and be delivering and learning according to that plan through the year. And, you know, maybe we should see it"every now and then." I think it’s a very good point. I think actually, I’d go further, if I was the chair, in terms of, rather than just expecting directors to take it upon themselves to keep learning, is it being tracked? So there might be a register in the back of the pack, in the appendices that say, “Right, what are we learning?"What are the programs we are each undertaking? Have you done it, Mark? What did you learn?” So, inspect what you expect, as a chair, as well. So rather than just saying,“We expect you to learn,” let’s just check in on that. Yeah, that’s a good approach, because the board, as well, there’ll be some discussion where they can say,“What are the things that we as a group need to learn? And who’s going to be" - Responsible for that. -"specialist in those different areas?” And every industry and every company, the learnings required will be different, as you said before. The environment changes. They’re in different environments. So having that discussion and maybe working together on some sort of plan around training is really, really valuable. Yeah. One way of extending that, too, is, we work with boards to set their skills matrices, to understand what skills they need, not just today, but for three years away from now. What does the future look like for this organisation? How do we get that future thinking around the board table? So when boards typically score themselves on those strengths or those skills within that matrix, and those attributes, a lot of people score themselves quite highly. But one way of actually challenging or checking in with why that score was so high, you could say,“Well, Mark, you’ve given yourself a great rating for being an absolute guru in finance. We appreciate that."How would you be able to teach the rest of us the basics of finance?” So that would be one way of validating,“Okay, that really is a strength or skill strength that you have.” Yeah. While also elevating the skill level of everybody on the board. Yeah, absolutely. That’s a great point. What are some of the pitfalls that boards face when they’re trying to become learning boards? And how can they avoid them? I think the pitfall is we’re going back to what we said previously, is if you assume it’s just going to happen in free time, and actually not demarcating it or actually regulating it and saying, “Let’s make this formal.” The training itself doesn’t have to be formalised, but making sure there’s time and respected in people’s, you know, weekly lives to say,“Well, we expect you to do so many hours of reading about our industry, our organisation.” So making sure that it’s actually captured in that way. Yeah, so without that, without that pitfall, we all got busy times, and we’re likely to drift. So like anything, people do what the boss watches. Yeah. Correct. Yeah. So yeah, it bring it out into the open. Probably addresses part of the next question, as well. What are some of the strategies for ensuring that board members remain engaged, they remain proactive, and they remain really focused on continuing to learn? There’s a whole different level of learning, the governance learning we’ve talked about, but also the technical learning in terms of how is the board, the governors, how are they engaging with the team, the people working in the business? So it could be informal learning, just by chatting to people about how they do their job, how are they talking to stakeholders, how are they talking to shareholders, but preferably stakeholders, and how are they talking to customers? So those are ways the board can actually find out more and learn more about the organisation and what it’s good at, and where it’s not so good. Right. Okay. Thank you. I’ve got one final question for you. Again, a more of a general question. Yeah. In your history of governance, which, with your former chief executive roles, as well as what you’ve done in BoardWorks, you’ve got a bit of experience in the governance space. What’s the best advice you’ve received? The best advice I've received about governance? So well, a good mate of mine encourages me to be wise before you get old. So I think that’s a really good tenant to apply to governance, in terms of, don’t just wait until you’re on the rocking chair on the on the patio, rocking back and forth, and saying,“Yep, I finally made it. I’m now wise.” Try to be wise sooner, and learn, learn, learn. Keep reading, keep asking questions, be curious. I think that’s part of good directorship. Yeah. Which really ties back to what we’re saying about a learning board. Absolutely, yeah. Being curious is all about continually learning. Yeah. Yeah, Paul. Thank you very much for your time. That’s been a really interesting conversation. Cheers, Mark. And a lot of really cool points have come out of that. So I really appreciate it. I’ll look forward to catching up again soon. Thank you. And see you next episode. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel, where I interview directors and experts on various topics relating to boards of directors and governance. We’d love to see you back, and please like, subscribe, and share the videos and podcasts.