LISTEN TO THE RIVER
Boards need to seek out external information sources
The English poet John Donne famously observed “no man is an island.” The same is true for an organization. But if you read some of the board packs which get issued to company directors for their regular meetings you might get the impression that the company exists only inside its own little world. Boards have a tendency to gaze into their own corporate navels and not take enough notice of forces at work outside of their organizational walls.
Board packs are often thick with data on sales, costs, margins, and variances over time. Operating statistics are broken down by business unit and geography. This sort of internally generated data is relatively straight forward to collect and increasingly just flows out, directly, from cloud-based management information systems. This does provide some insight into the operation of the organisation itself but often fails to draw attention to the external causal factors – the things that are making sales or costs go up or down. Understanding the dynamics of customers and suppliers demands heightened awareness of the environment – hence “listening to the river” as it flows past your corporate location.
Looking back on the examples of corporate underperformance I have been involved with the main lesson is: We should have paid more attention to inviting outside voices to be heard at the boardroom table.
The most obvious challenge is to understand what's going on with customers - be they the end-user consumers or intermediate business-to-business clients. What do your customers really think about your products and services? How are their own lives and requirements changing? Are they finding better solutions either from your competitors or from completely different alternatives? Your sales data tells you how they behaved in any given month - but not why.
My first real job was working as the personal assistant to Charles and Maurice Saatchi who at the time were breaking records with the success of their advertising agency. Standing by the door of Charles’s office was a life-sized representation of, what to my eyes, looked like and down-at-heel cleaning lady. It was one of the Saatchi collection of, probably hugely valuable, modern art. I finally plucked up courage to ask Charles what it meant - expecting some sophisticated art connoisseur’s analysis. He simply looked at it and said “ That's who we're writing most of the copy for. You should get to know her.” In effect a permanent resident of the office exemplified our ultimate consumer. It was a lesson I don’t think I really took on board at the early stage in my career - but I do now.
By far the most important voice that should be heard at the boardroom table is that of the customer or client. It is the people who pay your bills that should cause you the greatest degree of fascination and interest. The dynamics of your sales data is simply a representation of the customer’s attitudes and actions.
Most companies do invest in market research (and having been chairman of data analytics company YouGov for 16 years I am very grateful for their custom) but it is often used as a dipstick or one-off snapshot of customers moods when a more continuous process of assessment produces more insights. The genius of Amazon is not just its delivery logistics, but the constant feedback of what customers are looking for as new product features and alternatives become available. Boards must find ways to ensure the customer is always top of mind
The same logic applies to the company’s suppliers which, of course in most cases, include its own workforce. I was on board Uber in the UK for years and some of the most useful insights came from understanding our own drivers. Like other gig economy businesses, the drivers are not employees but are crucial suppliers of services. No drivers would mean no Uber. Happy drivers make Uber a better experience. Roundtable sessions, where board directors sat down with drivers to hear the challenges of their work, was a hugely valuable source of insight. Even more useful is some of the board directors went through the training and licensing system to become drivers ourselves.
UK retailer Marks & Spencer requires directors to spend time working on the shop floor as does coffee chain Starbucks. These policies must not be simply a cosmetic device to read well in the annual report but need to be genuine initiative to have Board directors stand in the shoes of employees and other suppliers.
On some Boards a non-executive director takes on the role of being the voice of the consumer or the worker on the board. In a few cases this is formally recognized as part of board practice but in many others, it is a useful informal arrangement.
However, you do it you could probably do a lot more and keep doing it. The river has lots of secrets to divulge and it is in constant motion. To use a much earlier quote than that from John Donne the Greek philosopher Heraclitus noted “No man ever steps in the same river twice”