Governance Bites #86: data to knowledge to insight, with Paul Brown

In this episode, Mark Banicevich asks Paul Brown about board reporting – specifically about converting data, to knowledge, to wisdom and insight. Paul describes key features of an effective board report, and how data can be summarised into clear and concise insights for board members. Mark asks about the types of questions board members should ask to derive deeper insights from reports, and how boards can move beyond data and knowledge to wisdom. They discuss the importance of the governance framework, and what structures should be in place to assure materially credible information is reported to the board. 
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, #director

Transcript

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Hi, I’m Paul Brown. I’m managing director of an organisation called BoardWorks, and today we’re going to talk about that doozy topic: board reporting. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you just heard, I get to spend some more time with Paul Brown. Paul, thank you very much for your time. Thank you. When we were chatting about this, you know, the concept of board reporting you introduced. But a very specific angle on this, and you used the term,“converting data to knowledge to wisdom and insight.” And so, we’ll dig a little bit into that, but I want to start by asking you to define the question: what do you mean when you talk about converting data to knowledge, and then to wisdom and insight? Yeah, sure thing, Mark. And at BoardWorks, our core service is board evaluations. And often, we find with our clients, one of the one of their challenges or one of their problems they face is they say, when you interview directors, many of them say, "The board report is rubbish.” So we like to flip that on its head and say, “Well, why is it rubbish?” And we actually, it’s very easy to say,“Well, management are giving us far too much information. The board pack is this thick."I haven’t got time to read it. It’s not strategic, and it tells me nothing.” So we again would challenge the board members and say, “Well, that’s incumbent on you as a director or as a board,"not on management.” Because we would also say to the board, “How explicit have you been"in asking management what information you need from them, and in what form?” So, coming back to your question, we really want to make sure that the board report has one function: the board report is there to help the board do its job. And the board can only do its job if it’s not receiving data; it’s receiving data that’s been synthesised into information. It’s gone further, actually, that that information has then been interpreted and really put into knowledge and into wisdom, in terms of helping the board make decisions about the future of that organisation. Right. So if I can take those three terms, around data, knowledge, and wisdom and insight,

combining into one: 2:05

data, lots and lots of numbers and information. Yeah. You then, you’ve got an analyst that’ll be working through that, producing some, telling you what the data shows. That’s your knowledge phase, to say, “We’ve got all these data, we’ve done our analysis, and we can see,"for example, an increase in revenue, or we can see a reduction in the age of our average customer.” Those sorts of things. And then the wisdom and insight part is then, “Okay, well so what?” So what, yeah, correct. What are you going to do with that? Right. What then are the key elements of an effective board report? How’s it structured to provide insights rather than just providing data? Yes, sure. So a good report should be concise and easy to digest. We’ve all got ever decreasing attention spans. So, unfortunately, we’ve got to make sure the information is packaged and presented in a way that gets to the nub of the issue. So, yes, avoid data, but really get into the information you just mentioned before: the “so what.” But it also should be presented in a way that it’s not just “so what,” it’s “if, then.” So we’re going further and further into the future. We see a lot of board reports are very thick, talking about what happened. It’s the chief executive’s wish to disclose how busy they are. So board reports end up being busyness, not about the business. So we want the board report really to be working hard to help the board make decisions about the future of where the organisation needs to head. We can’t change the past. There’s no point reporting on hundreds of pages of what we did. We need to help that information help the board make decisions. So we really want to see a type of report that is focusing on strategic matters. Put in the stuff that’s not important towards the back. And we see this also then filter into how the agenda’s set for each board meeting. And we’ll often see a board meeting start with the very procedural matters, and you’ll see the energy sucked out of the meeting as we go through the apologies, the minutes, who’s here, who’s not. And then often, we’ll see in the agenda the first report up is the CEO’s report, which again drags the meeting right back into operational mode. And we’re saying to boards,"Actually, can you push the CEO report to the back, and make sure the board report,"even if it is a CEO report, is really focused on strategic matters and decisions?” Right. There is one person that I’ve interviewed on this series that I’ve known for a while, and works in the governance space, and he has the confirmation of the previous meeting’s minutes, at the end of meeting. Back at the end, yeah. We see that a lot. Rather than at the start. Right.[#8, Henry Lynch] It’s a really nice approach to focus on the future. And also, in terms of the length of, you know, individual board papers, we, you know, we tend to have this maximum of three pages maximum, right. Which I’ve, you know, having trying to write these things, and having gotten better at it over the years, it comes back to that old, I love that old Blaise Pascal quote, right. That “I have written you a shorter letter, but I didn’t have time.” Yeah. But you’ve got to focus on getting, what are the key elements - Absolutely. Yeah. - that you can pull it out, and then, I guess, you know, your recommendations for what the action is you want off the back of that. Correct. And give the board enough information to pull it apart, and. Yeah, and if there isn’t a decision there, like those minutes in the previous meeting, put it towards the back of the pack, in terms of, it’s not adding value to the to the meeting. So again, keep the board report really concise, really crisp. Right. And if the board have asked management, and specifically asked them"What needs to go in there, and what reporting, in what form? That boxes, we're halfway there. The other half is actually the authors of the reports themselves, management or the chief executive, or company secretary, if there is a company secretary, which not all boards are fortunate to have. You've got to have the scale to have one. You need the scale, absolutely. But have they got the mandate to say to their chief executive, who they might indirectly report to, “Hey, Mark, what you’ve provided"is rubbish. I can’t put that in the pack.” So we’ve got to allow those company secretaries, or whoever is compiling the report, to have the ability to push back, often to people in a higher,- More senior to them. - more senior to them, to say, “Actually, we need to get this tighter.” So challenge those authors as they’re writing that report. They should be asking themselves,“What do I want the board to do with this information?” Yeah. I really like the thing that you, one of the things that you said there, was essentially the, anything that you want a decision made, put, frontload that on the meeting. Yeah. And anything that’s information only, backload. Yeah. So we’re looking for, - That's a great rule. - Yeah. And if it’s a board report or the CEO’s report, get those strategic decision matters up front, then talk about variance. The board have discharged you as a CEO to get on with the plan. Yes. Just tell the board where you’re off plan, or ahead of, way ahead or way behind. Yes. BAU [business as usual]. No time for it. Let’s just keep it focused on the future. Yeah, that’s great. Thank you. What are some best practices for summarising complex data into clear, concise insights for board members? Yeah, and there are specialist consultants who can help with performance frameworks. But we really would encourage chief executives or those who are charged with preparing the report to really focus on fewer indicators, ideally leading indicators, that will help the board understand what the future looks like. Again, we can’t relitigate or recreate the past. That’s gone. So finding those, we talk about four dials when we evaluate boards. You know, we challenge directors, we ask them, “Mark, if you could come up with the one-page board report,"what would the four dials on that board report be that would give you comfort as a board, as a director,"that the business is both conforming and performing?” So really trying to crisp it down to say,“Okay, if I can have a dashboard of just four dials, what would they look like?” And that forces the directors into a real high-level sort of strategic mindset to then actually ask management, “This what we need to start reading and start reviewing"as part of the report.” Right. And I guess that will also tie in with understanding what the key levers are in the business. Absolutely. Yeah. So we, we’re all guilty of populating reports with bumf that doesn’t actually add value. So let’s strip that back and say, “What are those leading indicators?” Getting back to the wisdom. Yeah, yeah. Right. What types of questions should board members be asking to get insights from their board reports? Well, a good director should be checking, in terms of, “How do I know this information is to be true?” And that sounds, and checking the integrity of the data, or the information, and doing that in a constructive manner, that’s not seen to be punitive and beating the CEO up. But I’m a big fan of Roger Martin, who’s an ex-lecturer [dean] at Rotman [School of Management, University of Toronto] in Canada, whose focus really was on strategy. And actually, if you read his books about devising winning strategy. But he always had a really good question, which began with, “What would need to be true for…” And you can fill in the blanks, according to your organisation. So, as a director,“What would need to be true for this to be happening?” So that is a directive that forces you to understand, “Okay, well, what are the conditions? What are the assumptions?"What does the environment need to look like for us to actually land on that space?” Right. Great. Thank you. That’s really helpful. How can boards move beyond data and knowledge to gain deeper wisdom that guides the long-term strategy of the business or the industry? There’s no shortcut. It comes back to understanding how the machine operates, what it’s there to do, how does it, if it’s a commercial entity, how does it make money? And understand those, you mentioned the word “levers,” understand what those levers are. For profit, if it’s a commercial organisation, if it’s a for-purpose or non-profit, you know, what are the levers for achieving impact? And often, we tend to, if I’m talking about the for-purpose space, we tend to get it comfortable looking at outputs. It’s easy to point to things and measure things. Outcomes are a bit more foggy. Impact foggier still. But you’ve got to keep challenging yourself to keep your eye on the prize, which is impact, or could be profit in the commercial space. And another good author, if you’ve got time to read, Ann Mei Chang, who wrote a book called “Lean Impact,” built on Eric Ries’s “The Lean Startup.” And Ann Mei Chang was saying, “What are the conditions"that you can do as a board or as a chief executive to set up innovation in the for-purpose"or non-profit space?” So how do you get more innovative? And what Annie was saying is,“Obsess, absolutely obsess, and fall in love with the problem you’re trying to solve."Don’t be seduced by the solution your team has come up with.” And I’d encourage that to all board members, whether they be for-profit, for-purpose, or public sector entities. Really stay in love with the problem. That’s what you’re there to do. Yeah, right. That makes a lot of sense, because if you fall in love with the solution, then you’ve got the blinkers on,- Yeah. - and you’re not looking at any other opportunities - Correct. - that may arise. Yeah. Yeah, okay. How can governance frameworks support the effective use of data and board reporting? When organisations are, you know, heavy on data. And thankfully, we’re seeing technology, AI [artificial intelligence], for instance, has a great ability to collapse, condense, and summarise information. Not necessarily synthesise, so you still need some human eyes looking over those. But frameworks and structures, you could look at committees that could actually do some of the heavy lifting of aggregating some of that data, so it’s then presented to the wider board in a more palatable format. Doesn’t mean you’re off the hook as a director, if you’re not on that committee, but it just allows, I guess, the board to have more bandwidth on more important issues, yeah. One of the, you know, I started my career really as an analyst, working through, creating a lot of spreadsheets and little databases and things to analyse data and report. And, you know, one of the challenges I recall, risks really: Microsoft Excel. Everyone uses it. Some people have been trained in what it does, but very few people have been trained in how to use it well to analyse data. And so that creates a whole lot of people that are self-taught, create, you end up with a whole lot of spreadsheets that are chaotic, - Yep. - haphazard, and open to risk of error. And I, you know, there’s a risk that these are the sorts of models that are being used to make board decisions. What governance structures need to be in place to ensure data integrity and the credibility of the information and the insights that have been provided to the board? You’ve got functions such as external auditors or even internal audit to be that sort of, bellweather, and making sure that processes and procedures and data has got integrity. So I’d be leaning on those. Yeah, it is a challenge, if you’re not part of that industry, to really sense-check that data, what you’re being fed. But again, bring in outsiders, if you don’t feel comfortable. Learn from those outsiders. But be prepared to ask the questions. I mean, if you don’t understand, seek to understand, and ask the question of your team. Yeah. And challenge your assumptions, and know what you’re relying on, right. Yeah, absolutely. It’s, yeah, very easy to see a report with some numbers on it and think, “Okay, I can make a decision based on those numbers.” But are those numbers actually correct or materially correct? Well, absolutely. And I think, too, you mentioned a minute ago, Mark, you know, risk was an example that we, earlier in your career. I think too, with risk, as with all data, we just tend to look at one item at a time, and not realise there are interdependencies. So, what would happen if this risk changed along with this risk, or they combined? So, rather than just being, the frailties of human nature, just looking at one thing at a micro level, how do we step back and view it at a macro level and say,“Okay, these things actually are interrelated.” Yeah, absolutely. One final question for you for this conversation. Could you share with us a memorable learning event from your own governance experience? I think we touched on it before. I think we’re all, and maybe I was on the other side of the governance table as a chief executive, I think we’re all guilty of trying to beat our chests and say how busy we’ve been, as opposed to how effective we’ve been. So the learning for me is actually,“Effectiveness is better than busyness.” So, really trying to distill what that information is saying, how the reporting is actually capturing that, and moving away from just pure volume. So, yeah. Yeah, I can see that. If you’ve got that mindset as a CEO, producing the report for the board, you’ll end up with much smaller board reports, for a start. There’s probably a, there may be a tendency where sometimes you’re thinking,“What effectiveness have I got to report?” And so, you fall back on the busyness. Yeah. But if you’ve always got that mindset of, you know,"What are the challenging questions that I really need to take the board,"where I need help making decisions? Apart from that, you know, I just need a short report"to give the board the confidence that I’m on track - Absolutely, yeah. - to do what I’m trying to achieve." Yeah. And coming back to that point, the board report is there to help the board do its work. How does it fit in with their work plan? And how does it fit in with the future of the organisation. Not for the CEO to report how busy they've been. Correct. Yeah. Yeah, great. Paul, thank you very much. Cheers, Mark. I really appreciate your time. Great conversation. Hopefully, we’ll catch up again soon. And see you next episode. Thank you. 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.