Kroese Board Quality Index, by Kroese brands & behaviour

KROESE BOARD QUALITY INDEX ®

White paperKroese Board Quality Index ®


Board Culture is a ‘hard’ issue

Companies, acquisitions and investments generally don’t fail because of lousy products, bad intentions or insufficient plans.

If they fail, they mostly do so, because of the way their leaders behave: the choices they make, the way they solve problems, the way in which they (fail to) cooperate.

In short: because of the management board culture.


What is the quality of our management board culture?• How good is their teamplay?• Do they get things done?• Do we comprehend their plans? Are they built upon facts or merely

visions?• Do they provide the organisation the right energy? Do they inspire the

organisation to become better, to innovate, to grow?• Are they acting in the company’s best interest? How deep is their

involvement with the company’s success?• How much of the company’s success can be attributed to their initiatives,

creativity and efforts?• How sustainable is the performance they report?• Are they in agreement on strategy and operational priorities – or are their

meetings a mere display of different perspectives without resolution?• Do they create a context for sustainable success?• How do they relate to our key customers? And to employees,

shareholders and other stakeholders?


The perspective of the supervisory boardSupervisory boards need a dashboard which helps them answer the following questions:

1. What constitutes a good management board culture, for our company in this sector?

2. How can we use management board culture in the interest of the company we supervise?a. how can it be measured?

b. how can it be managed?

c. how can we report on it to the company’s stakeholders?


Do you combat the fever or the disease? Most key performance indicators – such as market share, recognition, image – are mere symptoms.

The driver of these results is the organisation and the way it solves problems and dilemmas. In short: its culture.

LONG-TERMDRIVERS

SUSTAINABLERESULTS

Culture is the driver of distinction.


Strong board cultures generate strong, distinctive, companies

• Strong organisational cultures build strong brands. Strong brands are more profitable.

• corporate culture starts at the top of the organisation: board room culture is decisive for sustainable performance.

• However, for long ‘board culture’ has been perceived as something elusive for executives and non-executives alike. Why bother with the ‘soft’ side of business while we can focus on the ‘hard’ side: figures that tell us how we are doing?

• This attitude foregoes the fact that board culture is a long term driver of (short term) results.


Strong board cultures generate strong, distinctive, companies

• Moreover, it overlooks the fact that figures are results. Meaning: symptoms of achievements at a certain moment. It is important to know what your profit is, but it is more important to know what drives that profit in the long run: that knowledge provides supervisors the insight to intervene successfully!

• Corporate dramas may be years in the making: while profits are still rising, the executives may be setting the stage for sudden decline and breakdown. If supervisors are capable of managing boardroom culture, they are able to intervene at the right time.


Key cultural characteristics

Culture shows in the attitude of people and in the way

they behave.



Attitude:

1. sense of reality; do they face the facts?

2. subservient to the company’s interest: is it company first or ego first?

3. modesty: how do they cope with responsibility, especially in case of bad news?

4. adherence to strategic priorities: are their plans coherent and consistent with their actions?

5. inspiration: is there a sense of progress in the air?

NB:list of characteristics depends on supervisory board choices, which may, e.g. be influenced by type of industry, strategic phase etc.



Behaviour:

1. board dialogue: is there a search for consensus or are discussions dominated by one or a few?

2. cooperation/teamplay: are they in it together?

3. perseverance: do they have the ability to get it done?

4. creativity: are they able to inflict necessary renewal of products, processes, people?

NB:list of characteristics depends on supervisory board choices, which may, e.g. be influenced by type of industry, strategic phase etc.



The key cultural characteristics may vary in time (life cycle), among organisations and sectors. They are part of a continuous (change) cycle which consists of four dimensions that determine the results of the company.

Context

Attitude

Behaviour

Results


Board culture is part of an action-result cycle.

BEHAVIOUR

CULTURALCONTEXT

PERCEPTION/ATTITUDE

RESULTSWHAT IS THE

DIFFERENCE THE BOARD MAKES?

I. How does our context influence the mindset and attitude of people involved?

II. Perception and attitude generate behaviour.

III. Behaviour generates results.

AN EXCELLENT BOARD?

Distinctive

KEY CULTURAL

CHARACTERISTICS


Insight in the cause-and-effect relationships within this cycle provides the supervisory board:

1. fundamental knowledge of the quality of the management board;

2. priorities for attention and/or improvement;

3. input/starting point for, improved and factual, boardroom dialogue;

4. concrete ideas on where and how to start.


BEHAVIOUR

CONTEXT

PERCEPTION/ATTITUDE

RESULTS

DO NON-EXECUTIVES LIKE WHAT THEY GET??

Distinctive

TASKS & WAY OF WORKING

LEADERSHIP

PHYSICAL ENVIRONMENT

COMMUNICATIONBALANCE OF POWER

REMUNERATION(RE-)APPOINTMENTS

SENSE OF REALITY

COMPANY INTEREST FIRST

COMMITMENT & INVOLVEMENT

MODESTY

ADHERENCE TO STRATEGIC PRIORITIES

INSPIRATION

COOPERATION/TEAMPLAY

CREATIVITY

MANAGEMENT BOARDDIALOGUE

PERSEVERANCE

DILEMMAS & PROBLEM SOLVING

QUALITY OF DECISION MAKING

FLOW OF IDEAS

NUMBER OF SUCCESSFUL IDEAS

KPI’S/QUANTITATIVE RESULTS

VALUES

CORPORATE MISSION


Kroese Board Quality Index (KBQI)

FeaturesIt provides a valuable instrument for non-executives to measure, manage and report on a board’s culture.

It delivers a key performance indicator, which depicts a management board’s performance in one figure. This figure is broken down to scores on the key parameters that make up total board quality.

Each key parameter is also ranked on a maturity scale which depicts inherent quality of the score itself (e.g.: we score high on teamplay, but low on maturity because we meet often but do not search for consensus).

Furthermore on key issues the extent to which people (dis)agree is plotted. This provides insight in the common ground for improvement (are they on the same songsheet?).



Delivery 1: knowledge and insight

• the relationships between the governance context, board culture and the results the company gets

• a thorough and common understanding of: the quality of the company’s board culture the way the board culture influences (long term) performance

• insight in maturity of board performance: are they busy being busy, or are they focused on the right

things?

• insight in whether board is on the same songsheet: to what extent is there (dis)agreement on certain dimensions or

topics?

• insight in board’s intentions/plans for the future on dimensions & topics compared to score ‘X’ today what do you want it to be next year?



Delivery 2: how to toss the frisbee!

• agreement on priorities for improvement and most urgent issues

• ingredients for a sound improvement plan and agreement on the process

• commitment on executive and non-executive level

• ideas for interventions

• implementation/change plan


Client: Contact:

Date: 16 Maart, 2009Consultant: Theo Kroese, Jan van de Poll

KBQI: Kroese Board Quality Index

Illustrative figures. For demonstration purposes only

Assessment structureFour questionnaires divided in 22 dimensions

Actual Maturity LevelsThe 7 respondents from the

Supervisory Board comparedon all 4 questionnaires

ImprovementscenarioMoving ‘Attitude’

to Maturity Level 3

Maturity Level

Maturity Level

DendrogramSignificant disagreement Among Supervisory Board respondents re. improving on ‘Attitude’

Division 1 > AttitudeScore Type: Planned

Management SummaryColumn- & Row totals plus KPIs

4.3

Methodology nominatedfor the ICT-prize of theEuropean Community

Kroese Board Quality Index

Stacked HistogramShows how respondents plan to improve. Compare with top-down priorities to identify areas of waste or under-investment

Shortage

Waste

Waste

Examples of Output

One overall score

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How does it work?

1. Define key cultural characteristics on Attitude and Behaviour.

2. Define questionnaires on the four dimensions in the board-culture cycle:a. questions posed on actual situation and managements’ intentions

what do you consider the score on this item? what do you want to make it next year?

b. Weigh answers in order of maturity.Example for the dimension cooperation/teamplay: meeting frequency of management board is important, however, the way the meeting is conducted has more weight in the maturity score. (e.g.: search for consensus versus majority vote)

3. Choose respondents:a. management board

b. supervisory board/non-executives

c. vice-presidents

d. stakeholders (shareholders, employee committee/unions, banks, key customers, suppliers)


How does it work?

4. Perform analysis

5. Interpret results:a. define overall results, specific results

b. define causal relationships

c. results per dimension and per response group

d. intrinsic results versus maturity

e. how do respondents match up in agreement? On which topics is there strong (dis)agreement

f. Compare respondents’ improvement plans with top-down priorities to identify areas of waste or under-investment

6. Decide on priorities for improvement:a. do we aim for all dimensions, or do we focus?

b. decide on action plan: what do we do?

7. Repeat analysis periodically, track progress


EXAMPLES OF POSSIBLE RESULTS

Summary results. Please note that these results are meant as example.


SAMPLE RESULTSCAUSE-AND-EFFECT RELATIONSHIPS IN THE CHANGE CYCLE.

HOW CAN WE MANAGE?

Context Attitude Behaviour Results Intervention

Board works closely together, seeking consensus on major decisions

Executives feel committed and involved. to bring the company forward.

There’s a 90% consensus on strategic and operational priorities.

Solid and steady performance.

Help keep focus.

Board works closely together, they meet as often as possible.

Sense of reality somehow gets lost because of long and frequent meetings.

There’s a 95% consensus on strategic priorities. However, 35% consensus on operational priorities.

Board room dialogue scores a 7, however a1 on maturity.

More intense contact with supervisory board as to improve quality of decision making process.

Command & control style of CEO prohibits effective team play.

Lack of inspiration. Low board commitment.

Other executives ‘play along’ but not wholeheartedly. They tend to focus on their own portfolios.

Lack of coherence in operations (maturity 1). This hampers our battle in the marketplace. Growth rates are low.

If team play and consensus are high on priorities, coaching program for CEO or switch CEO’s.

Board communication to organisation lacks clarity and strategic consistency.

Board in ivory tower.Vice-presidents interpret for themselves and build their own kingdoms.

Business units compete instead of cooperate.Energy is spent internally, not for our customers.

We’re a cost ineffective company, as there’s no synergy. Furthermore, we lack innovative power.We are loosing ground to competition.

Set up a compelling internal communication program, which enables board to touch base with the soul of the company and radiate enthusiasm.

Remuneration based on growth figures.

Focus on acquisitions and joint ventures. Without clear vision on company interest.

M&A-dominant strategy. Board room dialogue adventurous & playful. Insufficient attention on company’s opportunities and challenges.

Decision making process immature, a constant sense of urgency. Supervisors feel under pressure. High growth figures, higher risk profile, lack of internal controls.

Disapprove of further acquisitions until organical growth and M&A can be balanced.Discuss adaptation of remuneration package.Focus on internal controls.


More info…

www.kroese-bb.com

Kroese brands & behaviour bv

Handelsweg 59e

1181 ZA AMSTELVEEN

THE NETHERLANDS

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Stand out…sustainably!

http://www.kroese-bb.com/

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