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At Criticaleye’s recent NED Retreat, almost half (49 percent) of the non-execs present felt unable to say their Chair, CEO and CFO were fully aligned on strategy (up from 26 percent two years ago). Indeed, a concerning 15 percent said they were only aligned to ‘a minor extent’.

Commenting on these findings, Tom Beedham, Director of Board Mentors and NEDs at Criticaleye, says: “Against a backdrop of business model disruption, the role of non-executives in providing a sounding board, external insight and robust challenge is more important than ever.

“However, they also need the skills to pull divergent views together and ensure people leave the boardroom as a united team, with a strategy that everyone has bought into.”

Tea Colaianni, NED of businesses including Watches of Switzerland and global Payroll and HR service provider SD Worx, recognises that alignment between the execs and non-execs on the Board is critical: “When those key players aren’t fully aligned that is one of the worst things that can happen to a business. You send the wrong messages to all your stakeholders, whether they are your investors, customers, leadership team or employees – the lack of alignment is there for everyone to see.”

This can have both an operational and a financial impact, says Tea, who is also a Board Mentor at Criticaleye. “That can lead to paralysis in the business. People may be unclear about what is expected of them. It can also lead to decisions being made that need to be cancelled with a huge cost in terms of cash, resources and time.”

However, achieving strategic alignment isn’t easy. Keith Edelman, Chair of Revolution Bars Group and a Criticaleye Board Mentor, says: “You’ve got to work really hard at this, particularly at Board level. We spend a lot of time making sure we are aligned on strategy – if you aren’t then the Board isn’t functioning.”

To arrive at an agreed direction, first all dissenting voices need to be heard and concerns given proper consideration. “People need to be able to speak openly and honestly. As Chair, you need to make sure you bring everyone into the debate,” Keith says.

Michael Roney, Chair of Next, agrees: “You need good, robust discussions. As Chair, you should create an environment where people feel free to talk and give their opinions.” He finds that “thrashing things out without a timeline or rigid agenda – just getting people’s views – is always productive, especially if you have thoughtful people with good experience”.

He also has advice on how to surface alternative options and avoid groupthink: “Ensure that those people who aren’t making the ultimate decision can give their view ahead of the CEO and Chair. As sometimes, if the CEO or Chair lead off it can influence what the others have to say,” he suggests.

Negotiating Alignment

If a significant disagreement over strategy does occur, then how this is dealt with can make all the difference. Fiona Clutterbuck, Non-executive Chair of Paragon Banking Group, has found her past experience in mergers and acquisitions useful here. “It’s trying to understand the drivers behind people’s views and seeing if you can find a meeting of minds,” she says. “You need to have emotional intelligence and ensure that when you negotiate both sides feel they have won, as that creates a better atmosphere around the table and makes for a more fruitful relationship in the future.”

Consensus can be more difficult to achieve if personal agendas are at play. “Disagreements sometimes arise because people are protecting their position,“ Fiona says. “If people can respond to challenge in a rational way, then that makes for a much healthier atmosphere around the Board table.

“The best Boards are those without too many egos – people who don’t feel they have to defend their corner all the time.”

In some circumstances, it can help to get a third party involved – with different skills and knowledge – to facilitate alignment. Keith explains: “At Superdry the executives developed an international strategy, but it wasn’t focused or cohesive. We employed an international consultancy firm to ensure a strategy was developed that could be supported by the Board.

“The consultants were very data focussed and worked closely with the executives. This resulted in a coherent strategy which was owned by the executives who then effectively and successfully implemented it,” he says.

Ultimately, Chairs and NEDs must always act as soon as a fracture appears. “If you see any lack of alignment then you must jump on it very quickly. Otherwise, it can run through the executives and then into the rest of the business leading to underperformance,” Keith says.

Tea agrees: “The worst thing you can do as a NED is put your head in the sand and pretend things will go away. You need to talk about them and clarify any misunderstandings.

“That isn’t always easy to do as a non-exec when you are dipping in and out of a business, but it is your duty to bring those issues to the table.”

Emma Carroll, Senior Editor, Criticaleye

The Criticaleye NED Retreat 2019 was held in association with Brewin Dolphin and BDO.

Other results from the NED Research 2020 include:
  • 83 percent of NEDs think their management teams are too inward looking
  • 57 percent believe the quality of strategic debate with the Exco needs to improve
  • 83 percent say their Board is currently grappling with business model disruption, while 19 percent have little or no confidence in the ability of their senior executives to respond
  • The top three priorities for Chairs and NEDs are currently: 1) strategic alignment, 2) retaining key talent and developing skills, 3) innovation. 
Next week's Community Update will explore best practice in crisis management.