The game is up

Grace Borelli, Managing Partner at Christian & Timbers, takes a look at boardroom politics and how to manage them.

Someone’s leaking to the press! Quick, get the chairman to facilitate a discussion! It’s not the most exciting rallying cry. But it might make more sense than spying on your boardroom colleagues, in the manner of Hewlett-Packard. The exercise destroyed what little sense of common purpose remained at the company’s most senior cadre, and may yet result in criminal charges. Hewlett-Packard has admitted using private investigators to access phone records of board members to see who had been talking with journalists. Chairman Patricia Dunn stands accused of orchestrating this activity. Director Tom Perkins resigned in protest, calling for the chairman to go, and in September Dunn resigned.

Boardroom political games and spats erupt frequently onto the business pages. Another recent example was Vodafone, where chief executive Arun Sarin has been embroiled in a fierce and public battle at the board of the world’s largest mobile phone company. Given the repercussions that such disputes can have, it is worth considering whether they can be either avoided; also whether the energy generated by a policy or personality clash can be channelled into creative activity.

In the case of Vodafone, for example, some genuine differences over strategy have occurred. Sarin sold the poorly performing Japanese operation, appearing to signal an end to the global ambitions set in train by the audacious earlier takeovers of Airtouch and Mannesmann. But it became personal, with non-executives briefing against Chairman Lord MacLaurin, and plots to remove key executives emerging in the press. On 12 March 2006, Britain’s The Observer newspaper described the board as “more like a faction-wracked politburo than the inner sanctum of one of the world’s most admired companies”.

Respond well

Yet a falling-out need not be a disaster. Sometimes, when a nadir is reached in a company’s (and a board’s) fortunes, and enough stakeholders appreciate the gravity of the situation, it can become a turning point. In the case of Marks & Spencer, serious boardroom disagreements had been a feature of its travails, but the subsequent change of leadership and overhaul appears to have been successful. The trick is to recognise that dips in fortune, and disagreements, are inevitable. It’s how you respond to them that matters. When it becomes public, often the board members are managing their own PR, rather than the company; leaks and briefings become commonplace.

At the heart of the problem is a reluctance to acknowledge that basic human needs like trust, well being, respect and a sense of purpose are as relevant in the boardroom as in any other walk of life. The problem with the HP board member was not that he was leaking stories to the press per se, but that he was angry and disengaged. Finding out why would have been a more effective intervention than imposing more stringent controls.

I have come to the conclusion that two factors often dismissed as ‘soft’ – trust and motivation – are at the heart of everything we do in business. They make or break the board. They make or break the organisation. Any approach that does not make them a high priority is an extremely risky one to take.

Conflict control

What happened at Hewlett-Packard was that trust had broken down and, instead of trying to repair it, the Chairman Patricia Dunn damaged it further by introducing surveillance. It is quite clear what she should have done: spoken with every board member, one-by-one, and asked them what was bothering them. Found out what their ambitions and niggles were. Got to know them. There may be an individual who is disenchanted; there may be a group. But it is part of the chairman’s job to know.

So while honest conflict of view, openly aired and discussed, is perfectly healthy, a full-blown crisis rarely is. If it does emerge, the chairman has to devote attention and energy to understanding the root causes, defusing the personal element and facilitating the discussions that lead to recovery.

When soft is tough

People pay less attention to the ‘soft’ stuff than they should. Most senior executives I have spoken with describe it as both more important, and more difficult, than they initially realised when they first commenced a senior post. Clarity of role is also essential. There have been moves recently for annual appraisals of a non-executive director, which is laudable. But how many non-executives have a sufficiently clear remit for this to be workable? There is never a job description, so how is it possible to know if they have been effective?

It is easier to drive effective stewardship at board-level by treating it like any other team, with perhaps a few unique features, rather than imagine you are entering a completely different world through a corporate looking glass. Effective governance rests on trust, communication and engagement as well as the right blend of corporate strategic skills. Without these key elements, be prepared for unwelcome briefings to the press.