Pete Souza: White House chief photographer, US Government
Imagine walking up to a front door and peering through the peephole into somebody else’s house.
How would you know what it looks like inside? How is it structured and which rooms lead off the hallway? Is the décor modern, pristine or a bit shabby? Does it have carpet or flooring? Is the kitchen full of the latest mod-cons? Most important, how does it work as a home and who are the kind of people who live there?
We are curious by nature – think about how many reality TV shows are based around people’s homes. To satisfy our curiosity we could try peering through the peephole or letter box, but even if it opens just wide enough to reveal something, all we can get is a partial glimpse of what the owner will allow us to see.
Being a non-executive director on a board is like squinting through the peephole to someone else’s house.
Just as the size, layout and content of a house impact on the people who live there, the variety of purpose, scope and scale of housing providers determine the environment for everyone who lives and works inside them. Boards are not separate entities with their own homogenous cultures, and NEDs function in diverse ways to meet the needs of the enterprise and board. Nowadays the Regulator of Social Housing expects boards to share the load of scrutinising the performance and impact of social housing providers, which is referred to as “co-regulation”. Boards of social landlords have been assigned shared responsibilities for upholding regulatory standards and protecting the interests of residents.
According to OECD research into board effectiveness in 2018, NEDs of listed companies indicated that they spent most of their allotted time on matters of legal and regulatory compliance. These directors have much to lose when something goes awry.
The advent of consumer and building safety regulation, carbon neutral targets and ESG objectives on top of traditional oversight functions in financial viability and risk management put social landlord NEDs in the same bracket as their private sector counterparts, in most instances without the trade-off of significant financial compensation.
The role of the NEDs is to bring an alternative perspective to that of the executive directors, which is not to say that this is always a contrarian perspective. As with the relationship between the Chair and CEO, which relies on getting the balance right, the ideal NED perspective aims to maintain a balance which ensures that different views can be discussed and debated in the boardroom.
When and how should NEDs get involved outside the boardroom
Let’s return to the image of the non-executive board member peering through the company “peephole”, trying to catch a glimpse into what is going on inside. It might help to use some tools, perhaps a 360-degree lens in the form of conversations with staff at senior and shop floor level, or glasses with X-Ray vision that enable board members to derive knowledge and insights from the volume of data and information with which they are routinely confronted before board meetings.
From time-to-time board members need to find the right way to go outside the boardroom to do their jobs effectively. To achieve this, they need the right combination of skills and attributes, in particular:
- The ability not only to ask the right question, but to pick the right moment to ask it.
- A willingness to raise a challenge and persevere until everyone has clarity.
- Always retaining curiosity.
- Using influence judiciously in and outside the boardroom.
What board members must avoid is breaking down the company door to see what is happening and taking control of the wheel. I have witnessed examples of interventions by NEDs, even those which were well intentioned, misfire which resulted in exposing weaknesses in the organisation’s governance and sowing the seeds of mistrust between the executive directors and NEDs. The damage that such missteps cause can take years to rectify.
Board members are often unwilling to get their hands even slightly dirty for fear they might be charged with meddling or interfering in management’s domain. At the same time, having a “peephole” perspective without the benefit of X-Ray goggles risks the NEDs exposing their ignorance and potentially undermining their credibility with management and staff. By themselves these constraints should not deter NEDs from getting their heads under the car bonnet from time to time. There are usually other options to fall back on such as calling in the internal auditors or forensic consultants if the board feels it is unsighted about something significant.
My ten rules for non-executive board members venturing into management and process-level issues are:
- Listen before you speak.
- Ask pertinent questions in a non-threatening manner.
- Get as wide a perspective as possible.
- Don’t call yourself an expert on the subject in question – even if you are one.
- Don’t go round the whole executive team in pursuit of answers or information.
- Don’t take charge; leave your position of authority outside the room.
- Don’t fly solo – keep your NED colleagues in the loop.
- Treat the exercise as a privileged opportunity to get behind the peephole.
- Show staff and managers respect; recognise their expertise.
- Remember to say thank you to staff and ensure they get feedback (often overlooked).
Patrick Dunne, author of a seminal book on governance called simply “Boards”, writes that the more NEDs are seen as helping the management achieve their plans, the greater will be their influence. This of course needs to be tempered by the board’s responsibility to hold the executive team to account, a responsibility that rests with the whole board. As consumer standards and stock investment demands have ramped up, the role of NEDs on housing provider boards has become more prominent which is why regulatory expectations of their influence both in and beyond the boardroom are set to increase.
David Levenson is a housing non-executive director, boardroom coach and advisor, and governance trainer.
David has devised a framework for great governance called Ten Steps to Become a High Performing Board©. He has also created a unique metrics-based system for Measuring Board Effectiveness.
For more information, contact David on LinkedIn: https://www.linkedin.com/in/davidlevenson7/