Episode 6 - The octopus: using EQ to unlock board effectiveness

SC: Good day, Rachael. I'm Sharon Constançon. I am CEO of Genius Boards and Genius Methods, a board evaluation and board development organisation that support boards being the most effective they possibly can be.

One of the things that really gets in the way of boards being effective is the [issue] that you can't quite get your finger on. Things are not quite working as well as they should, but they're not broken. How do we identify the key item, person, problem, issue, that is causing this board not to be its best? I liken this to finding the head of the octopus. There are a number of issues that are evidencing if you look carefully, and if you put them all together, you realise you've got the eight tentacles of an octopus. What is it within the head of the octopus that's causing these eight areas in the business not to be as efficient? They're not broken; they're not quite working right. That's the area I'd like us to discuss and challenge today.

SC: It depends on the issue in question, but very fair question. Typically, it'll be things around strategy. Another area is risk, the way in which they address risk. Another one will be the degree to which the board remains at arm's length from the executive. We talk about ‘noses in and fingers out.’ To what extent are they [the board] empowering the executive to do their job? Or are they getting in the way? Or are they forced to get in the way because the executive are not performing? It can be coming from either side.

Another [factor] might be around financials in terms of financial sustainability, around sales, product development, sales and marketing. There are a lot of areas that we see, another one typically is governance can often be a problem. The other areas around compliance. It's what aspect of the business could possibly be impacted by something that is not working.

SC: An effective company secretary, an empowered company secretary, a company secretary [acting as] a leader, irrespective of their underlying training, or their age, or their experience, is somebody who owns that position. The most important [thing] is to own what needs to be done by the company secretary to open the eyes of all the players. They are the chief of staff to the chairman, they can have the confidential conversation with the chairman saying, ‘I am worried’. They can go and say, ‘look, the business is not performing, but the CEO is not being accountable’, or ‘the sales area of the business is not working, and the CEO is not holding them to account.’ As the company secretary, you can have those really honest conversations with the chair about your concerns. Because if the company secretary doesn't actually have those conversations, how are the board really meant to know that [fact about the company], because they're not in the business: they've got noses in, fingers out. They're not there in the day-to-day aspects and therefore can easily risk missing some of this detail.

The company secretary must be the mirror, and the voice, and the red-alert flag, warning the board of things that they need to [know about]. To have a company secretary that doesn't step up, speak up, stand up, be heard, is a very, very dangerous position for a board to be in and they need to ensure their company secretary is more empowered, better trained, coached, mentored to be the leader they need to be. If the chairman’s not giving them that space and not giving them that empowerment, you need to potentially change the role, either the chair or the company secretary. Because if those two don't have a very strong bond of major, major trust and empowerment between both parties, you're never going to get to know what's going on in the business. Therefore, for a chair, it's like leading the business with a glass floor between you and the rest of the organisation, which I have seen happen. It's amazing to what extent a glass floor is suddenly not transparent, and they cannot see what's going on in the business. It’s very easy for an executive team to hide the truth from a board.

SC: One of the things I do recommend for company secretaries to do, is to regularly have conversations with the chair of the board. Talk to each other once a week, because otherwise, [if it’s only] once a month, you don't think of the things you need to [cover] and you're talking about the higher-level stuff. You should actually talk about the business. Meet once a quarter, informally, so that you are allowing the chair to breathe some of the things that are happening in the business, even if the conversation is only 10 minutes. It really is important to understand what's going on in the company at that moment in time in the cycle that the business is in. Because the last thing the CEO, that kind of character, is likely to want to do is to report back to the chairman of the board on a regular basis. So, you need some degree of confidentiality, appropriateness, trusted style of engagement, which the company secretary can offer.

There will be things the company secretary will never tell the chair because it's not necessary. Yet, there are other things that the company secretary is told in total confidence by somebody and actually has to work out, it is important that this particular [piece of information], I do have to share, under confidence, because it is mission critical. It's a really difficult situation for the company secretary to be in, to work out what to share, what not to share, and when, and under what circumstances, and in what style, and to what degree of depth that needs to be done. You need a really stable, agile, resilient, capable company secretary who, in a way, is a leader themselves, and able to work with the board, knowing what is right for the long-term sustainability of the company. It's not about who you are protecting as an individual; it's how you’re protecting the company.

One of the things that you have to protect against is reputational damage. Often some of these more sensitive issues can have a reputational damage element to them. It requires really business-mature people, emotional, personal maturity, to be able to judge how to handle some of the information and how not to handle it, but equally not to look [or pry]. I've seen this occur as well, where a CEO perceives that the company secretary is a corridor of flow of information into the chair’s inbox. I don't know of a single company secretary who’s ever done that. But it is a relationship that the CEO will resent, resist, if they are on a slightly different goal path to what the chairman might be or have a different level of respect for the chairman's capability, and knowledge, and leadership. It's a really difficult balance because the company secretary is reporting to both individuals, but needs to retain their job, retain their paycheck, do what's right by the company, but equally, always what’s right by the board and the organisation. An unenviable position, when times get complex, and a lot of CEOs can get very territorial. The company secretary’s the one person they don't need to be territorial over, in most cases, because [they’re] not the same character that they are.

SC: That's actually an interesting point because, however much the board is a team, and it's a collective, and they're making majority decisions for the benefit of the organisation, each individual can actually perform a very one-on-one role with the organisation to the benefit of that person. You often see a degree of mentoring, or partnering, or pairing, or buddying with an executive and a non-executive to help upskill the individuals both ways round, it could be both ways, it could have reverse mentoring as well.

The important [role] for the company secretary is to share with each of those individuals, the mission of the company, the governance of the company. [To say,] ‘here is our strategy, if we do x, it is completely off piste to what our strategy is, it needs to be something we discuss further.’ Being a sounding board of logic to come back and say, ‘I hear, but shouldn't we do this, because it wouldn't work right, if we don't address it in an effective manner.’

SC: The first thing you've got to have is EQ yourself as a company secretary, [to allow you to] phrase, position, communicate, listen, and not judge, but influence. EQ first resides with the company secretary. I had a student once who was studying boardroom dynamics and she was a black-and-white kind of individual and couldn't get this thing about human beings being judgmental, or difficult, or having agendas. It just didn't make any sense to this individual. That kind of person would not be able to handle this conversation around utilising EQ and influence because they would come at it with a hammer for a nail, and it would have major negative impact on [the conversation].

The important [thing] is to work out, how do you determine the journey of the conversation? How do you use your EQ to only talk about the bits that people are ready to listen to? How do you evolve that conversation over time? Remember, some people are reflective, some people are very fast thinking. When you have those reflective, slow thinking, System 2 thinking people, you need to give them time to absorb what you've said and take ownership. Yet you've also got the other impetuous, emotive, noisy, sales-type character that makes instantaneous decisions, but then sometimes has to rethink them. It's working with the individual you're talking to, to make sure that they can receive the information in their own way, that they can absorb it. A conversation might take a journey of conversations to get to where you're trying to get to, rather than just trying to address the outcome in one conversation, because sometimes you just can't do that. So that is where the EQ element of the company secretary is critical.

The other aspect is the company secretary helping all directors, chair included, to understand they can learn EQ. This is part of a board development aspect, making sure that the board directors themselves evolve their own EQ, recognise the value of the company secretary's ability, and then learn from them. Everyone can learn EQ – IQ, there are limits, absolutely there are – but EQ, there aren't. It's [about] making sure that you are authentic in your learning of EQ, of being inquiring, of listening, you have to be authentic in that conversation.

SC: I would say group EQ learning is not going to work, and not even group coaching. This is one-on-one coaching from the company secretary to help others to learn to behave differently. So, when they were in the meeting last night, for example, yesterday's board meeting and the company secretary phones them the next day, and says, ‘remember when you did x and you confronted the CEO, on that specific topic? The reason you didn't get a good response was [because you asked the big question too early]. Had you asked question one, two and three first, before you asked question four, you might have had a very different outcome, because you gave somebody the chance to own your journey. You've been thinking about it for weeks, and you blurt it out, and all you're gonna get is pushback, and that wasn't what you wanted. Your question was valid, but it was out of nowhere, it was the left hook from the unknown.’ That is not what a CEO or finance director is going to respond well to. Coach them to find out what the three questions to come before, or the two questions before [should be], that set the scene, put the person you are challenging into a place of comfort and safety. You are not being judgmental, which you were in your particular questions that came across very personal and very judgmental. How do we remove that personal affront? How do we remove your tone of judgmental behaviour? Coach them into asking a genuine question in a nice, normal way. If there's somebody on the board who's really good at that, using that person as an example can work very well.

There are some podcasts, videos, content around this kind of thing . There might be external material that they can be directed to. People like ourselves do a lot of coaching in this space as well, where we're independent and can support the company secretary's mission to achieve this, rather than the company secretary feeling like they're trying to be the teacher, the coach, the mentor, and they're receiving the darts in their direction at the same time. Sometimes it is beneficial to use an external influence to share that journey, if it's going to be a complex, difficult one.

SC: The nice thing that the Chartered Governance Institute UK & Ireland has now implemented into their final qualifying programme is the subject [of] boardroom dynamics, which is probably the most difficult exam I've ever seen students try to get through: it is hard, it is tough. But it must be in a way because it's not a plain sailing environment, you can't just learn the text and generate it out again. It really is important to learn to work with people and to find that common ground and that solution that is relevant to the current situation that they're dealing with. And it will be so unique to every situation.

SC: And to ensure our chairs have that skill set as well.

RJ: Absolutely, that role of the chair in the middle managing all of those diverse perspectives and personalities is going to become even more important as we strive for more diverse boards.

SC: Totally agree.

SC: The most important thing is to have freedom of conversation. We can only have freedom of conversation, if we can ask the right questions, [which give us] non-pushback-style responses. In other words, we create a safe place of challenge. We create a safe place to think blue skies without the CEO feeling, ‘they all think they know how to do my job.’ All those kinds of negative feelings a CEO can have in a strategic planning process. It is really about, ‘everyone's against me, everyone thinks I can't do this.’ It's a very difficult process for a CEO to go through, and I think that is often not respected.

The role of the company secretary is to ensure that the process is not negatively aimed at anybody, that it's about thinking differently, and allowing the collective mind to support the CEO’s ability to lead the company. Not saying that that person doesn't have it all, well, they won't, because they’re only one person, that's why you have a board in the first place, is for the collective mind. It's important for the facilitator, under the guidance of the company secretary, to respect the particular individual sensitivities, whether it be the chair’s, whether it be the CEO’s or the finance director’s, and ensure that they do go through that strategic planning exercise in a productive, positive manner, [so] that everybody genuinely does own it.

We forget to talk about the personalities involved in strategic planning. Some people can do it more successfully than others: a CEO might be able to do amazing blue skies thinking, and the CFO says, ‘until it's written in a spreadsheet, I can't get my mind around it.’ Those are your two extremes. It's important for the company secretary to work with the facilitator of a strategic planning process to ensure that all the people are protected, and are safe, and are not drawn into uncomfortable areas. And collectively, we manage to get the whole 360 degrees dealt with competently.

SC: …functions, works together. There are a number of assessment tests out there that are very accessible and very affordable and can be done quite quickly but are incredibly accurate in terms of their output. If you've got a NED that has a different EQ capability to somebody they’re challenging, [they should] know and understand where the other person's at. You can work it out, or you can go through a process of assessing everybody and sharing the collective [outcome] in a comfortable way, non-threatening way, to each individual.

I think the most important [thing] is, the more you know about yourself, the more you can therefore recognise in others. So do as many of these assessments as you can to understand how you think, how you respond, what your DNA is. Because if you can do that, you can work with others, because you'll know how to guide yourself to get the best out of the other individuals because you can work out where they are if you know where you are, because you know what the framework is that you're assessing against. But if you don't know what the framework is, you don't know what the other person could possibly be and therefore how to work with them.

I then come to self-mindfulness, and therefore mindfulness of the collective, if you've done assessments. Also, just sitting as a company secretary, you could probably take the four quadrants of any form of mapping, and map your directors onto that map and say, ‘okay, with this slot, I'm going to have an EQ conversation around the values. With this group, I'm going to have evidence, facts, figures, graphs, tables, leading indicators, measurements, and I've got them both to understand what I'm looking at. But I've used a very different conversation with the two groups of people.’ It's being able to do both, and to encourage your executives to be able to respond in both those ways to the respective individual. You'll find your risk chair, for example, will be completely different to your audit chair or remuneration chair: they will all think differently, and how do you work [with] them to get the right outcome?

SC: We can thank the pandemic for one or two things in life, not many, but there are some we can thank the pandemic for. What Covid-19 has done is helped boards, who are above people, [understand] that people make up the team. People can have good days and they can have bad days. People can work from home efficiently. People can't work at home efficiently. People can work with teams and people can work isolated. People can really have a tough time emotionally, for things that you would consider quite normal. I think the pandemic has allowed boards to mature in a way of respecting the internal stakeholder, being the staff complement that delivers what the business is all about.

I think that maturity is going to go a long way towards helping organisations be more effective and to respect their greatest stakeholders. I think also our external stakeholders, whether that be customers, investors, interested bodies in the supply chain, for example, wherever it might be, there's a much greater respect now for the importance of all those different components and how they can singly or collectively impact our business. It's [about] making sure that the board, [through the] learning they've had, [is] absorbing some EQ into their DNA, into their thinking patterns, and into the agenda that never existed before, whether it be the internal stakeholder, external stakeholder, or whether it be opening their minds to the modern agenda of E, S, and G, as well as the diversity, the mindfulness, the inclusivity that they need to have in their behaviour as a board.

[There’s] no point bringing in a new person who’s completely different to the rest of them, and then all of them shunning [them]. They equally have to use their EQ and welcome change, which none of us are very good at. It's about making sure that the collective board absorbs and works with change, and that the company secretary educates them [about] the natural feelings of rejection when there’s change coming on and supports them to be inclusive of the change that all businesses are going through, particularly boards. Boards have been through a massive degree of engagement change with a business, not that they must now become intrusive, but they must become more respectful of the component parts of how the investor or the customer feel. No, they don't want this kind of product delivered to them in this way anymore. They want to see diversity. The internal stakeholder wants to be able to have a voice. All these things have now become really critical. Boards have been pushed into this, kicking and screaming, but in most cases have absorbed it. All I pray is, they don't lose it. It’s so critical to have your ears open to the stakeholder conversation, and that requires all the EQ possible collectively from the board to [be able to] listen.

RJ: Yes, I do think it's become more nuanced. Like you said, EQ is what's needed to understand why certain actions, perhaps from your business, are responded to it in the way that they are, and perhaps very differently to how they might have been even just two years ago before the pandemic.

SC: Totally agree with you in every respect.

SC: One of the most common themes I [come across] when I interview directors is [that they say,] ‘I have a number of skills, and I'm being pigeonholed into being the governance person, or the legal person, or the industry specialist. I'm not being drawn upon for my greater business skills, the experience I've got in similar industry, or I've been through.’ Typically, where we're seeing this is somebody who's been through a culture or digital or combined culture and digital transformation, where they've had to ditch the old technology and move into the modern world. There is a huge amount of that kind of experience that exists out there and you may well have some of those kinds of experiences within your board.

So often, boards do not actually understand what their collective capability is within the room. To unlock this, there are two important conversations that need to happen. One is in the induction process, to understand the new director’s capabilities, [so] that's understood by their team members, by the company secretary, and by the chair, and documented. I would always look to the nominations committee to make a really good précis of why they chose a person and what their skillsets [are], whether they [were] chosen for that or not. What else can that person bring? As a company secretary, regularly in [the nominations committee], have a closer look at all of [the directors]. That’s the more structural, governance way of approaching it.

The other way is the human interaction: talk to each other, talk to the company secretary, talk to the other directors. [The] company secretary [should] talk to the new NEDs and the old NEDs. Another thing I always recommend is that you buddy a new NED with a longer standing NED, and they both go and do a walk-the-floor somewhere in the business. They go and they chat to somebody in a foreign location, a different branch [or] another office. The longer standing NED will see the environment through the newer NED’s eyes, and vice versa. It's like going to a pantomime, the story you see and the one your kids see are two totally different stories. It's taking the strength of a different pair of eyes and buddying them with different people every time. So, the board gets to know each other. That is so, so critical, because then they can call on each other when they remember, ‘so-and-so has the skillset and I have a problem in this area, I'm worried, I know who to call on to discuss this with.’

Then you've got the chair who needs to know their directors. Quite simply, they just need to know their directors and know them well. That doesn't mean that they cannot give constructive criticism when it's required, that they can't do evaluations of the individual because they've got to know them well. It's making sure that they do understand the strengths that those individuals can bring, and to call on them regularly to bring the diversity of thought.

SC: Thanks, Rachael, I found that a very useful conversation. What we achieved was [to understand that] what we need in the head of the octopus is all the EQ possible [so] that we can disperse some of the negativity that might be coming from a common problem that's affecting different parts of the business. Effectively, by bringing the EQ to the head of the octopus, we can equally counter at all levels within the business where things are not as effective as they could possibly be.

RJ: Thank you, I think that's a really interesting analogy, really useful. Thank you.