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1. Editorial: Scenarios for better boards
This issue covers two of my favourite subjects, scenario planning and the effectiveness of boards of directors . Subjects that I believe are areas where we can add particular value as coach/facilitators and areas in which I believe that commercial organisations can improve their own effectiveness.
There is to be a major improvement in the UK of how boards of directors are appointed and developed. This will be a big challenge to many companies. Although the Higgs Review focuses on the appointment of non-executive directors, it also covers development of directors and performance evaluation of whole boards. A key role of non-executive directors is to constructively challenge proposals from the executive. This requires communication skills similar to that of a coach and demands a change of style and mind set for most directors, who tend to come from an executive background.
The new requirements look set to open directorships to a wider range of candidate and to foster a greater application of good practice for appointment, appraisal and development of individuals and teams at the highest level.
One of the biggest challenges to scenario planners is not so much being creative as letting go of established assumptions. Recent world events have made this much easier. We have had ten years to accept the end of the Cold War and to observe the dramatic changes that have ensued.
More recently, we have seen events that will help us unfreeze other stable assumptions: - the Internet, environmental change, AIDS, mass migration, global terrorism, changing international alliances. Whether you welcome these or not, they have reminded us that fundamental assumptions may not hold for ever. These changes may have increasing impact over ten years (or 30 years), and over a period of ten years we can expect more changes that we can't forecast.
In these circumstances we are likely to be more open to scenario thinking – and certainly more aware of the need to carry out scenario planning.
I am delighted to discover that The Mind of a Fox is now available from Amazon. Last year I attended a lecture by Clem Sunter based on a book that had been circulating within the South African business community. At that time the book was not available in the UK so I arranged to import half a dozen copies. I lobbied the publishers to make it available on Amazon so that I could promote it more widely. And at last it is here. See the bonus review below.
Since this issue already includes two of my favourites, I thought I should refer also to that most important subject of goal setting. Research has repeatedly shown that individuals and organisations that set goals achieve more. Simple as that!
I am in the process of moving house and have had to clear out both an attic and a large barn. In one case we are selling an antique. When discussing the deal with the auctioner I was struck when, instead of the negative "No problem" response that is so common, he said "We'll do our best for you," I liked that.
I also found an old personal organiser of my son's. The first page was a mission statement "To recognise my potential and go for it." It could be a universal theme!
INDEPENDENT COMMENT: Executive coaching was discussed in an article entitled "Getting the most from your guru" in the The Sunday Telegraph, March 16, 2003. The article explained how executive coaching can help: assimilating new recruits, helping develop the careers of high potential individuals and improving the performance of teams or individuals not achieving their full potential or targets.
"One of the great things about coaching is the power it has to help the participant reflect on any barriers to achievement in an entirely new way. There are many reasons for this: the opportunity to work with an outsider; the "thinking space" a good coach can provide for the individual; the luxury of a non-directive approach that avoids the trap of going for the seemingly obvious solution; and gaining the commitment of the individual to the process by open and honest discussion at the very beginning."
The article concludes: "Effective coaches ask both the client and the participant for their commitment and time in helping the process work. They will emphasise the shared nature of the process and invest time in understanding the corporate and personal context of their contribution. They will not suggest an immediate sheep dip of psychometric tests but will explain how feedback can be a powerful tool to support personal growth. They will also show the personal satisfaction they gain from helping people achieve their true potential. They are rare."
They may be rare – you will find them at Brefi Group!!
2. Coaching notes: A stronger role for non-executive directors
British companies have a different board structure from either Europe or America, that features a mix of executive and non-executive directors. Over recent years there have been various reports to improve corporate governance and the effectiveness of boards. These include Cadbury (1992), Hampel (1995) and Greenbury (1996). The latest is by Derek Higgs and will be implemented in July this year.
A consequence is that there is going to be a considerable increase in the need for no-executive directors and that they will not all be available from traditional sources. Higgs believes that there should be a step change in training and development provision so that it is suited to the needs of boards.
Although all directors need to understand their legal responsiblities and have knowledge of the organisation and market that they represent, a major part of the Higgs Review focuses on the 'soft' skills that they need and which might be different from those they bring with them. These include: challenging, questioning, probing, discussing, testing, informing, debating and exploring.
They are the skills of coaching and are best developed through coaching support.
Higgs proposes the following definition of the role of the non-executive director: -
Traditionally many non-executive directors have been friends of the chairman or chief executive and, reputedly, recruited at the golf club. This will change. The new code requires that there should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. The board should include a balance of executive and non-executive directors such that no individual or small group of individuals can dominate the board's decision taking – and at least half the board, excluding the chairman, should compromise non-executive directors determined by the board to be independent. This excludes former employees and consultants or suppliers to the company.
We welcome a requirement that all new directors should receive induction on joining the board and should continually update and refresh their skills and knowledge. The performance of the board as a whole, of its committees, and of its members should be evaluated at least once a year – and "The board should state in the annual report whether such performance evaluation is taking place and how it is conducted". It is the reponsibility of the chairman to select an effective process and to act on its outcome. The use of an external third party to conduct the evaluation will bring objectivity to the process.
Companies seeking help with this should contact Brefi Group.
3. Tools notes: Goal setting
Setting goals is the gateway to success. A famous Yale study of their graduates over a thirty year period is reputed to have shown that only a small percentage (3%) of them had specific, written goals for their future. Twenty years later, researchers polled the surviving members of the Class of 1953 -- and found that the 3% with goals had accumulated more personal financial wealth than the other 97% of the class combined!
Unfortunately this story is a myth. But as Brian Tracy replied when he heard: "If it's not true it should be."
For properly constructed goals are powerful: they motivate the subconscious and they affect your filters. If you know where you are going you will notice opportunities. If you know who you will be it affects your attitude.
So what is important about goal setting? Traditionally we have been taught that they should be SMART. Specific, Time-bound, Achievable, Relevant and Time-bound.
Specific – This means that the goal has a specific outcome that can be clearly defined
Measurable – This means the goal can be measured and the measurement source is identified.
Achievable – The goal must be achievable given the time, resources and the context of the individual's life or work conditions.
Relevant – The goal must be relevant to the individual's vision or greater goal.
Time bound – This means stating clearly when the goal will be achieved.
SMART conditions are excellent for defining a goal or objective. They are clear, rigorous and easy to follow. However, they might not actually contribute to achievement. The key here is to link the present to the future. To visualise or 'future pace' the goal into your future. To dream about its achievement, to explore it. To rehearse the future.
If you wish to take an intellectual approach, then the SMART conditions allow you to work backwards to set out how you will plan to achieve it. If you are prepared to let it go and trust your subconscious, then the exercise will anchor the goal and give it something to aim for.
The reason that the subjects of the mythical Yalestudy were so successful is that they knew where they were going; specific written goals defined their objective and reminded them of the outcome. Every opportunity or decision that faced them could then be dealt with in a context. As the Cheshire Cat said – "If you don't know where you are going, then it does not matter which path you take." But if you do know where you are going, you are already half way there!
4. Book review: "The Art of the Long View" by Peter Schwartz
I have owned some classic cars, including a Mini and a 2CV, though not a Beetle. I have also read some classic books, including Built to Last, The Machine that Changed the World and The Structure of Magic. Until now I had not read The Art of the Long View by Peter Schwartz. I have studied several other books on scenario planning that bring the process up to date. But they all refer to Peter Schwartz. So I thought it was time to get back to the original.
The Art of the Long View was published in 1991 and the paperback version in 1996. I recommend this book as an introduction to scenario planning. It is not a text book, nor is it a history book describing the evolution of scenario planning. It is an introduction to the concept, based on Peter Schwartz's experience, both at Shell and with the development of two small companies. It demonstrates the technique by looking at trends and driving forces of the time, and developing three scenarios for the world in 2005.
An interesting comment on the concept of scenario planning is that the word "Internet" does not appear in the book, but he does conceive of "video cafes" and comments "the 1990s are almost certainly bound to spawn several world-changing innovations that nobody but a few scientific specialists had ever heard of in the 1980s." He continues "The single most frequent failure in the history of forecasting has been grossly underestimating the impact of technologies."
Scenarios are vehicles for helping people learn. The goal is the liberation of people's thoughts. The end result is not an accurate picture of tomorrow, but better decisions about the future. The role of scenarios is to arrange the factors so they illuminate the decision, instead of obscuring it.
He gives an illustration:
"If the planners of Three Mile Island had written a story about how things could go wrong, instead of a numeric analysis of possible fault sequences, they would have been better prepared for the surprise they actually encountered when their complex machine went astray."
"How do you judge whether a scenario was effective? The test is not whether you got the future right. The real test is whether anyone changed his behaviour because he saw the future differently. And, did he change his behaviour in the right direction? Did he do the right thing?"
"You can tell you have good scenarios when they are both plausible and surprising; when they have the power to break old stereotypes; and when the makers assume ownership of them and put them to work. Scenario making is intensely participatory, or it fails."
In the paperback edition Schwartz added sections on strategic conversation. The appendix summarises the text by listing steps to developing scenarios.
If you are interested in the field of scenario planning, I recommend this book. If you wish to run scenarios then read it first but then read more recent books that bring together the practical learnings of the last decade and explain in more breadth and depth how to go about it. The Art of the Long View is an easy and fascinating read – the others are text books. Alternatively, read The Mind of a Fox (see below).
5. Bonus book review: "The Mind of a Fox" by Chantell Ilbury and Clem Sunter
This lovely little book is only 143 pages of easy reading but it represents a breakthrough in scenario planning. In particular it warned before September 11th 2001 that America was vulnerable to a terrorist attack. In a demonstration of the technique in the book the authors included a personal letter to the new President Bush drawing attention to the risk and proposing two scenarios: "The Friendly Planet" and "The Gilded Cage".
As the authors commented in their introduction to the third impression: The book warned of "the possibility of terrorists planting a nuclear device in a Western city. While the tools of destruction and the method of delivery were different to what we had envisaged, the impact was just as devastating. Nothing could have demonstrated the power of scenario planning more effectively than this terrible tragedy. We could never have captured it in a forecast, but it was possible to provide a warning in the form of a scenario."
The title of the book is based on their suggestion that many of the world's true leaders in politics, business and sport have succeeded by adopting the mental processes typical of the ingenuity of one of nature's most resourceful animals – the fox.
They demonstrate their scenario planning model by repeated application of a simple matrix based on two questions "What do you and do you not control?" and "What is certain and uncertain about the future?" A key part of the exercise is to identify the contents of the bottom right quadrant: what is certain about the future but cannot be controlled. These they call the "Rules of the Game". In the case of America, the rules of the game included demographics with the rich and old millions of the developed world and the poor and young billions of the developing world, and globalisation.
Having identified the rules of the game, the next stage is to move to the bottom left quadrant where we have both absence of control and uncertainty. Here there are two exercises. First identify the key uncertainties. In America's case nuclear terrorism and disintegration of world order. Then generate some appropriate scenarios. In this case "the friendly planet" in which America uses its power to spread goodwill or "the gilded cage" in which it withdraws within its boundaries and seeks to protect itself against threat.
The third quadrant is for options; things that we can control, but there is choice. In this case constructive engagement to foster a friendly planet, or isolationism. Finally, the fourth quadrant is for decisions, in which there is both certainty and control.
It would seem that America is going through the decision process at present!
Clem Sunter has an excellent pedigree. He was involved in the scenario planning exercise that helped the South African apartheid government recognise the need for change. "Because the whites had the guns and the blacks had the numbers, no winner takes all scenario existed. If the whites hung on to power, there'd be a rising tide of violence which would be unstoppable. If the blacks tried to take the country by force, they'd fail or, after a long struggle, inherit a wasteland. A second rule therefore followed from the first: a positive scenario could only materialise for the country if there was compromise on both sides and some interim formula for sharing power was agreed. Therafter South Africa could, and should, evolve into a genuine, representative democracy."
Sunter is now using scenarios in South Africa in the battle against AIDS. I wish him well.
Here are some other titles to stimulate your thinking
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We hope you enjoyed this issue of CorporateCoach. If you would like to learn more about how we can work together, then please contact me, Richard Winfield:
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