A new venture's most productive director
From If You Really Want to Change the World by Henry Kressel and Norman Winarsky. Copyright ©2015 by the authors. Published by Harvard Business Review Press (www.hbr.org).
Board inattention is frequently a problem. There never is enough time at routine board meetings, which last a few hours, to review fully the company's activities and provide useful feedback to the management team. So items for discussion need to be selected carefully. But if board members are not adequately informed ahead of time, the value of the discussions is questionable. Therefore, it is essential that board members be prepared to spend the time between meetings to understand the company's activities and have a continuing awareness of the external industry developments that impact the company's performance. In our experience, it's difficult to find board members willing and able to do their homework. Often, people are not prepared and expect to be briefed at the meetings — a hopeless task. Finding productive board members is hard. In that quest some caveats are in order.
The most productive independent board members tend to be people who have built companies in an industry close to that of your venture. These people understand the
stages of development of a business and can provide valuable guidance to the management. Also helpful are people who have specific expertise in growth companies in areas such as product development and marketing. As the company grows, people with financial backgrounds can be very productive if their experience has been in industries with parameters similar to those of your venture.
Henry Kressel served as a senior partner and managing director at private equity firm Warburg Pincus for more than 30 years. Norman Winarsky is president of SRI Ventures at research institute SRI International.
The hazard of off-base bias
From Corporate Concinnity in the Boardroom by Nancy Falls. Copyright ©2015 by the author. Published by Greenleaf Book Group Press (www.gbgpress.com).
Recently I heard a panel of experts speak on executive compensation. While I don't remember the particulars of what they were recommending, I do recall quite a list of things to avoid, most of them related to the top five issues of the most vocal proxy advisor firms. I had been personally very interested in the Whole Foods CEO salary cap (as a max multiple of the lowest employee), something that few companies were doing at that time. So I asked one of the experts whether Whole Foods was truly an outlier or the beginning of a trend.
I had barely finished asking my question when the responder dismissed the Whole Foods case as less than mildly relevant. I accepted her opinion; but then, less than six months later, such caps were on the list of top 10 comp issues to watch for all boards. Was this expert wrong? Perhaps not, in her narrow universe.
The off-base bias is a particular compensation risk for board members who are currently, or in past lives have been, very highly compensated executives. It is a particular hazard for not-for-profit or small-company board directors. It is important to remember that your personal experience is often not necessarily relevant to the CEO of the company you serve as board director.
Nancy Falls is a founder and CEO of The Concinnity Company, a firm that helps companies transform the way their boards and leadership teams work together (www.theconcinnitycompany.com).
Cyber insurance: A challenge to buy
From A Buyer's Guide to Cyber Liability Insurance Coverage by Thomas H. Bentz Jr. Copyright ©2015 by the author. Published by Holland & Knight (www.hklaw.com).
It seems like a new cyber event is reported nearly every week. As these stories continue to grow in number, corporate America has started to explore ways to insure against this risk.
Unfortunately, cyber insurance policies are both complicated and rapidly changing. There is no standard policy form, which means that the coverage offered by one insurer may (and often does) differ dramatically from that offered by another insurer. There is little agreement between insurers on what should be covered, when the coverage should be triggered or even how basic terms should be defined.
These differences make understanding what is and is not covered very difficult. It also makes it nearly impossible (or at least foolish) to purchase this coverage based on price alone. Notwithstanding, a strong cyber liability insurance policy may offer significant protection to companies. In some cases, it may even save a company from financial and reputational ruin.
Thomas H. Bentz Jr. practices insurance law with a focus on D&O, cyber and other management liability insurance policies. He leads Holland & Knight's D&O and Management Liability Insurance Team. He is making complimentary copies of his handbook available to Directors & Boards readers. For a copy, write to [email protected].
Recognizing the ones who make the blocks
From Everybody Matters by Bob Chapman and Raj Sisodia. Copyright ©2015 by Barry-Wehmiller Group Inc. and Rajendra Sisodia. Published by Portfolio/Penguin (www.penguin.com).
A few years ago, I was at a football game, watching the Green Bay Packers play. The quarterback Brett Favre threw a long pass into the end zone. The receiver caught the ball, jubilantly spiked it, and then, following a long-standing tradition at Lambeau Field, did the exuberant “Lambeau leap.” He jumped into the stands to soak in the adulation of fans, who caught him, patted him on the back, and dropped him back on the field.
It made me think, “He is an incredibly gifted receiver who worked hard to be in a position to make that catch. It was a great catch, a catch that few people could have made, but the truth is that he didn't do it alone. A lot of people did the right thing to put him in a position to make that great catch.”
Just once, I'd like to see a receiver set the ball down, run back to the line of scrimmage, help a lineman up off the ground (after removing someone weighing 300 pounds who has been lying on top of him), and say, “Great block! I would never have gotten open if it wasn't for that block.” He should go back to the quarterback and say, “Brilliant pass, right where I expected it to be!” When he returns to the sideline, he should say to the coach, “Thanks for designing that play pattern, it allowed me to be open. The other team really didn't see it coming!”
This idea became the basis for our High Five award, which recognizes those who enable others to succeed. For example, when a salesperson receives an order, she can go back into the organization and recognize the people who made the blocks, created the play patterns, and threw the pass that allowed her to be successful. Anyone can nominate a colleague who they feel went out of their way to help them be successful. I send a letter to their family celebrating the recognition, and they receive a simple gift such as dinner for two or tickets to a local event. More than the gift, they feel deeply touched by the letter and by the fact that their peers recognize their goodness.
Bob Chapman is the chairman and CEO of Barry-Wehmiller, a global capital equipment and engineering consulting company (www.bwleadershipinstitute.com). Raj Sisodia is the FW Olin Distinguished Professor of Global Business and Whole Foods Market Research Scholar in Conscious Capitalism at Babson College.
My insight from IBM: No second-guessing
From Positivity by Harry Edelson. Copyright ©2015 by Edelson Technology Inc. Published by SelectBooks (www.selectbooks.com).
‘At IBM, the idea is not to make the right decision; it is to make the decision right.”
When I worked in Wall Street I followed IBM very closely and was often quoted in newspapers and magazines when IBM made news or reported financial results. I got to know many of the distinguished IBM CEOs, the first of whom was Vincent Learson. One time I spoke with him on the telephone, and he gave me this insight on how IBM continued to be a highly successful company. I have seen this quote attributed to numerous people, but to my mind, it came first from Vincent Learson, and it was included in a book he wrote about IBM.
His insight is important and may account for one of the reasons I am always happy. I know people who second-guess themselves immediately after making a decision. They drive to an event and on the way complain about having chosen to attend it, or they choose a restaurant and complain that they should have gone to a different restaurant, and so on. Once you make a decision, live with it and make it right. If the decision turns out to be bad, make another decision, but don't look back, only forward. It is a waste of time and energy to complain — either act or acquiesce.
Harry Edelson is managing partner of Edelson Technology Partners, which has made over 100 venture capital investments in technology companies worldwide (www.edelsontech.com). He is a former
columnist for Directors & Boards.
Market Basket's ‘never before' story
From We Are Market Basket by Daniel Korschun and Grant Welker. Copyright ©2015 by the authors. Published by AMACOM (www.amacombooks.org).
Unprecedented. That is the word so often used to describe the Market Basket protests [over the ousting of the supermarket company's CEO]. Never before had nonunion employees banded together to reinstate a fired CEO. Never before had a protest involved such a broad coalition of employees: from cashiers to store directors to truck drivers to office workers, and all levels of management. Never before had a worker protest spilled over, involving both customers and suppliers, all working in unison to shut down a company this large for this long.
This is the story of one of New England's most admired companies reaching the brink of collapse. It is the story of a battle over the future of the company — a battle that pitted cousin against cousin, employees and customers against shareholders, and some say good against evil.
Market Basket is unique. It is tempting to think that because the story of the protest is unprecedented, it can't be replicated. In fact, the Market Basket story holds lessons for managers, for employees, for customers, and for owners. Managers will find unconventional yet effective ways to motivate their workforce. Individuals will find an inspirational story that reveals the hidden power they wield. Above all, the story forces us to rethink who really owns a company and who gets to decide how it is run.
Daniel Korschun is associate professor of marketing at Drexel University and a Fellow at Drexel's Center for Corporate Reputation Management. Grant Welker is a journalist with the Lowell Sun in Lowell, Mass., who has published more than 100 articles on the Market Basket story.