Get on Board

 

Taught by experienced Chairs and Directors IoD's Director Development Programme leaves plenty of room for discussion

Words: Lorna Thornber

When Auckland lawyer, management consultant and director, Giselle McLachlan moved to an especially remote section of South Otago to be with her partner, a sheep and beef farmer, she was prepared to make some major lifestyle changes. Having considerable governance experience, she was also prepared to make a meaningful contribution to a business she admittedly knew little about.

First introduced to governance as a corporate lawyer for a large insurance company, Giselle says she felt like she’d found her niche at the boardroom table. Keen to help her develop her skills, the company paid for her to attend the Institute of Directors’ (IoD’s) Director Development programme, including the Company Directors’ Course, in 2002. As well as confirming her interest in developing a career as a director, the programme introduced her to aspiring and experienced directors she is still in regular contact with today.
“It was a very intimate, but stimulating environment – formal but informal at the same time. There wasn’t nearly the amount of corporate nonsense I thought there’d be.”

Appetite whetted, Giselle founded her own consultancy firm, Clear Counsel, in 2007 specialising in leadership and governance. A year later, she was appointed chair of the charitable New Zealand Gynecological Cancer Foundation, which she describes as “challenging yet rewarding … and a major learning curve”!
Eager to boost her skills and support network, she enrolled in the IoD’s short course on chairing a board. Taught by experienced Chairs and providing plenty of room for discussion, she says the course helped her work through issues she was grappling with on behalf of the foundation. She emerged feeling far more confident, she says, in her ability to guide a team of people with diverse backgrounds, areas of expertise and personalities. 
“One of the most important teachings for me was how important it is to actively seek input from all members of the board. Everyone has their own style of working and communicating, and as Chair you need to ensure everyone feels comfortable contributing.”

In 2009, Giselle took on another two directorships: as a member of the government-owned Earthquake Commission and as an independent director for the Institute of Financial Advisors.
When she met Graham, who co-owns one of the largest certified-organic sheep and cattle farms in the country with his Wellington-based brother, Ian, she was keen to help out on both a practical and governance level. 
Sprawling 3,000 picturesque and pesticide-free acres in Waipahi, northeast of Gore, Marama Organic Farm was already an established business, with 6,000 sheep and several hundred cattle.
Well-aware she had a huge amount to learn about the business and wider industry, she did her research and asked “a million and one questions”, believing her broad career base and governance experience would stand her in good stead.

She concedes it was a challenge, to say the very least, but one she was ready for.
“I’d been working pretty flexibly for the past five years, using my legal profession as a base to earn income while keeping my eyes peeled for other opportunities. I was very keen to develop my career as a director, which my work with Marama has enabled me to do.”
She soon persuaded Graham of the benefits of setting up an advisory board and together they assembled what has proven to be a focused and supportive team with combined expertise in farming, banking, business development and law.
They have developed a clear, long-term business strategy, which a year and a half down the track has returned major rewards for the farm and associated business ventures.

Under the brand Marama Organics, they launched a new range of certified-organic lamb products and gourmet, gluten-free sausages that quickly won favour with those who seek out quality, wholesome ingredients.
Marketing has been a key part of the business’ strategy and has seen the team take out stalls at popular food shows nationwide, promoting the message that they are “all about improving human health through food, farming and friendship”. It certainly seems to have been received loud and clear. In the past year, Marama has featured in an array of regional and national newspapers, glossy food and lifestyle magazines and on a popular radio programme. A highlight for Giselle and Graeme was scoring a high commendation in Cuisine magazine’s hotly-contested 2011 Artisan Awards.

Since moving permanently to the farm at the end of 2010, Giselle has divided her time between Marama, Clear Counsel, her directorship roles and her family (she and Graham have four boys between them). While 2011 has been a difficult year for them personally, Giselle is optimistic about the future.
“I’m thoroughly enjoying working on and in our business – it’s challenging, rewarding and extremely diverse. I’m also looking forward to taking on more Chair roles so I can continue to learn and contribute, ideally representing or servicing the South Island.”

Stories of entrepreneurial success are relatively common in New Zealand, which has proven a breeding ground for new businesses of miscellaneous descriptions. Big red sheds, Academy Award-winning special effects studios, 100 percent pure beauty products and a very straight-up brand of vodka are just a few more high-profile examples.
Small to medium enterprises (SMEs) are in fact the lifeblood of our economy, generating nearly 97 percent of all business activity. It’s a phenomenon many Kiwis proudly attribute to a distinctive set of national traits borne, in large part, from our unique positioning on the globe.  Self-reliance, egalitarianism and that old number eight wire mentality are among the qualities we assert, enabling us to establish businesses with truly ingenious products and services.

Yet, these same traits may actually be preventing our businesses from reaching their full potential. New Zealand Trade & Enterprise research suggests many quintessentially Kiwi characteristics, including a ‘she’ll be right’ attitude towards almost everything, can put us at a distinct disadvantage in the world of big business. 
“The country has been ranked second in the world for entrepreneurial activity, but our SMEs don’t perform as well in high-growth business activity,” says IoD Chief Executive, Ralph Chivers. “Our most cherished values aren’t enough on their own to drive success in the international arena.”
Our SMEs’ relatively small size can turn competition with overseas counterparts into a David and Goliath-type battle.    

“Our businesses often lack the resources and specialist skills needed to deal effectively with global change and to make the most opportunities,” Ralph says. “We need to leverage our national determination for international sporting success into the business arena.”
In his view all company directors should consider investing in governance-related training and recruiting the services of at least one independent director. 
“The energy and entrepreneurship of a new small business can translate into healthy returns at first. But professional governance expertise, including strategic ability, is usually needed to take things to the next level.”
“Businesses tend to develop more quickly and in a better direction when they have formal governance structures in place.”
Those who attend the IoD’s Director Development programme – which includes short courses tailored for everyone from senior managers and aspiring directors to those with many years experience – are, Ralph says, as diverse as Kiwi businesses themselves.

“They enable directors at all levels to stay current and deepen and widen their governance skills. For many, the opportunity to network with other directors, compare notes and exchange ideas is another major draw card.”
Of course, there’s only so much even uber-accomplished and efficient directors can do on their own. Ralph says businesses of all descriptions and sizes – including small single-person and family operations – can benefit from having one or more independent directors to develop their strategies and ensure they remain on course.
Ralph is keen to stress that involving independent directors or setting up a formal board doesn’t mean relinquishing the freedom that comes with running your own business. To the contrary, it enables the owners to focus their attentions on whatever they wish, whether it be governance, the day-to-day running of the business or elsewhere entirely.

“The main aim for most people going into business is to get the best possible return for all their hard work. It maybe the lifestyle they want, taking an idea global or both. Establishing an effective corporate governance structure helps you clarify your thinking, grow your business and continue to move between your dual roles [working in and on the business] successfully and with confidence.”

Ralph advises businesses looking for a more formal way of protecting shareholders’ interests and ensuring it meets its strategic objectives, to consider setting up a full board.
By ‘board’ he means a team of directors responsible for the strategic and overall direction of the organisation, including the development of policies to achieve its goals. Good governance, he stresses, is about providing the organisation with the “big picture” information that enables good management decisions. The key is to have a group that can separate itself from the day-to-day and have a proper debate about ways of adding value to the business and generating growth.”
“Boards are usually a far better and more cost-effective way of tapping into expert advice than employing a series of consultants,” says Ralph.
He says it is never too early to consider setting up a board. Many businesses do so, he explains, when they are growing and need to be able to prove they are run well. Capital markets, he points out, favour businesses with sound governance structures.
Others set up boards to help them deal with succession planning. In Ralph’s view, they are one of the best ways of ensuring a successful transition – and fair price – when the time comes to sell all or part of the business.

So, where to begin?
The first step, Ralph says, is to have a long, hard think about where the business is headed and the outside expertise it would most benefit from. Conventional business wisdom that strategy should drive structure is as true today, he stresses, as it was when it was coined in the 1960s.
“You need to give a lot of thought to the skills that will make the most difference. Look for directors with knowledge and skills you lack, and sound knowledge of how a board works, preferably based on real experience.
“The best independent directors will have experienced adversity, risk and even had to fight to survive. They have the scars and war stories to show and tell. ‘Independence’, of course, is imperative and I mean that in every sense of the word – intellectually, financially and politically. A truly independent director must never compromise loyalty for sound business judgment or vice versa.”  

Self-described “serial entrepreneur” Annah Stretton is living proof that even very successful businesspeople can benefit enormously from professional governance training and bringing in independent directors.
Growing her business from a small, farm-based fashion label into a multimillion-dollar enterprise now known as the Stretton Group, Annah is undoubtedly an overachiever in the entrepreneurial stakes. And she has the accolades to prove it. In 2008, she received a New Zealand Order of Merit for Services to Business, Fashion and the Community, and the following year became the first Kiwi recipient of the prestigious Verve Clicquot Businesswoman of the Year Award.
She was determined to expand her business still further but felt she had hit a plateau.
“In many ways, it was a bit like groundhog day,” she reflects. “There were the same challenges and the same revenues but very little growth. I seemed to have maxed both my own capabilities and those of the team around me.”

Invited to become a member of New Zealand Global Women, a diverse network of female leaders in 2009, Annah realised how much she could learn from those with different experience and expertise.
Enrolling in the IoD’s Company Directors Course, Annah embarked upon “a full-on five days of focused and relevant learning”.
Emerging with an entirely different view of what constitutes a good company director, she set about making fundamental changes to her Waikato-based business.
“I realised I had been far too operational, and willingly so, as I had thought great leadership was about jumping in and getting the job done. But that’s a huge handbrake for any growing company.  Real leadership is about vision and strategy; steering the ship in the right direction and recruiting capable first mates who possess different skills.”
Annah now believes businesses should consider establishing formal structures and strategies as soon as possible. Doing so, she stresses, greatly increases the chances of achieving goals sooner rather than later.
“Good governance is about creating success by implementing excellent structures and charting an achievable visionary course.”

For Annah one of the best things about having independent directors on board is the increased sense of accountability it brings.
“In the past it was easy to wish for growth and endeavour to make it happen, but I had no formal yardstick to measure progress.”
In her view all business owners – as well as aspiring and existing independent directors – can benefit from professional governance training.
“Owner managers come away with the knowledge and skills to transform their businesses, while directors increase the value they can add to the board. In both cases, you learn to contribute in a far more meaningful way.”