Directors should spend time on the shop floor
COMPANY boards have been given a ‘‘B+’’ by boardroom consultant Henri Eliot, but he says directors could take heed from the Undercover Boss television genre and spend more time on the front lines of the businesses they govern.
Eliot’s firm, Boardroom Dynamics, surveyed 30 company chairman and chief executives and found many were concerned ‘‘increased scrutiny’’ had forced them to focus more on compliance issues than on business strategy.
Most felt they needed to review their succession plans and most admitted their boards didn’t have the skills to respond to a major crisis of the ilk of the Christchurch earthquake. Relations between chief executives and boards were generally ‘‘good’’ rather than excellent.
‘‘A lot of boards don’t have a proper induction for new directors to get to know the business,’’ Eliot said.
It would be best practice for them to spend a day in a retail shop, if they had one, or to work as a teller for an hour ‘‘or just to walk around the warehouse or factory talking to people at all levels’’.
‘‘As a director you are not running the business, but if you don’t understand the business, how do you govern?’’
In the United States and Canada some bank directors had spent a day behind a teller, observing, he said.
‘‘At one organisation
I know quite well, one of the board members spent a day in the warehouse stocking shelves and they got to know the people.’’
Telecom and The Warehouse had both taken steps to ensure new directors were familiar with their businesses, he said. Telecom spokesman Ian Bonnar said it had given directors tours of its phone exchanges.
But Eliot was not aware of any New Zealand businesses going as far as having directors work as an employee for a day.
‘‘Humility’’ was not often discussed in business, but was an important quality for company chairman, Eliot said. ‘‘The experienced ones have egos in check.’’
Institute of Directors chief executive Ralph Chivers agreed there was no substitute for ‘‘firsthand experience’’, but he said the institute wouldn’t want to be prescriptive about what that might involve.
‘‘Trading places’’ could cut both ways, Eliot said. Many would-be directors didn’t feel they could get a foot in the door and mentoring could help, he said. ‘‘You could have a trainee or a cadet in the boardroom for a year.’’
There was room for improvement in the diversity of some boardrooms in terms of ‘‘ethnicity and age’’ as well as gender.
Chivers said directors couldn’t be apprentices, as such. ‘‘You are either a director or you aren’t. There is no ‘maybe’ about it.’’ But one iwi had a ‘‘very active programme’’ letting people attend board meetings on a confidential basis so they could broaden their experience. A few companies had tried similar initiatives.