'Great companies in the way they work, start with great leaders.’ Steve Ballmer, former Chief Executive of Microsoft 2000-2014.

In the modern business world there only seems to be room for only one ‘star performer’ in many organisations, that of the Chief Executive.

Many CEOs seemingly have it all: money; power; and the excesses of success. Is it any wonder then that many CEOs frequently see themselves as superstars and often rule as monarchs? (See blog, ‘CEO and Divine Right’, 25th June, 2018).

Fortunately, as Ballmer points out – and after 14 years’ experience as a CEO he should know - great companies ‘start with great leaders’. In other words, there is more than one leader in an organisation.

Certainly this thinking was behind the UK Government who in 2010 passed into law the Corporate Governance Code following a number of corporate failures in the late 1990s and early 2000s attributed to the behaviour and shortcomings of Managing Directors/Chief Executives and significantly, Boards who did not do their job.

The Code was updated in 2018 and whilst covers only listed companies essentially lays out that the Board of the business, led by the Chairman comprising of both the Executives and Non-Executive Directors, has 6 key roles to fulfill that can be summarised as:

• Providing leadership;

• Setting strategy;

• Ensuring the human and financial resources are available to achieve objectives;

• Reviewing management performance and remuneration;

• Setting the company’s values and standards; and

• Ensuring that obligations to shareholders and other stakeholders are understood and met.

Whilst updating the Code is an interesting move the Code introduced in 2010 has not been as successful as it was hoped with the latest Carillion failure being but another example (see blog, ‘Relevance, Obsolescence, Learning, and Adaptability’, 30th March, 2018).

The Financial Times on the 13th November 2016 reported upon research by Grant Thornton that found that 38% of FTSE 350 companies were not in full compliance. More worryingly, the research also found that only 15% of companies published plans for the future and succession planning, only 20% provided any insight into their culture, and of perhaps more concern that ‘shareholder engagement’ at 36% ‘was on the slide’ over previous years.

The Code is clear that the leadership of the Board of a company rests in the role of the Chair whose role is to lead the board, set its agenda, and importantly ensure that it is an effective working group at the head of the organisation.

The Chair is responsible for ensuring that all Board members have accurate, timely, and clear information whilst creating a culture of openness and debate so the Board can carry out its responsibility around the 6 roles above and make the key decisions around the health and future direction of the organisation.

The role of the Chairperson is a different leadership role to that of the Chief Executive.

The CEO as the senior Executive Board member is responsible for putting into motion the decisions and policies of the Board with day-to-day responsibility for the leadership and management of the organisation.

It is important to recognise that a CEO is a member of the Board and to which they are totally answerable.

The Code is quite clear than an effective Board requires the Non-Executive Directors to play a ‘strong role’ - in other words also be leaders along with the Chair - with their job description demanding that they:

• Provide constructive challenge and help in developing the strategy;

• Scrutinise the management’s performance in achieving the strategy;

• Monitor the performance of the Executive and management;

• Satisfy themselves on the integrity of the financial information reported to them and subsequently be responsible for what is released to shareholders, the market, suppliers, stakeholders, etc;

• Ensure that there are robust controls in place and that risk is identified, understood, and managed;

• Determine the appropriate levels of remuneration for executive directors;

• There is in place succession planning in place to achieve the strategy and that there is key talent in place for the future; and

• Appoint and removing executive directors.

A Non-Executive Director, along with the role of the Chair, is a tough job with great responsibility and not one for the weak or fainthearted.

From January 2019 that the Code will be extended to private companies with 2,000 employees or revenues over £200 million and with many existing Chairs and Non-Executive Directors not effectively carrying out their leadership role it does beg the question of: Where will the many Chairs and Non-Executive Directors required will come from?

We have through the years worked with many Chairs and Directors across diverse businesses and organisations helping them through the ‘Sandpaper Leadership’ philosophy (see blog, ‘Change and Sandpaper’, 15th May, 2018) rooted in the underlying principle pointed out by the Roman playwright Titus Plautus that: ‘No one is wise enough by themself.’

‘Sandpaper Leadership’ is a powerful attitude based approach that uses the metaphor of different grades of sandpaper from coarse to fine to raise and tackle the many challenges that organisations face in a fast changing and increasingly complex world. The ideal 'Sandpaper Leader‘ possesses the 'extra coarse grit’ to ask the tough questions, speak the truth, and put the real issues on the table at the very top of the organisation.

Unfortunately, too many Chairs and Non-Executive Directors lack the ‘grit’ required often dodging or evading the role of leadership for which they are employed and, too often over generously, paid to execute.

'Sandpaper Leadership’ © 2018 is a highly pertinent and practical approach to optimising and sustaining organisational performance.