DISCUSSION A fresh perspective for the board

by Mark Goyder _______1st November 2016
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“Ignorance is underrated. People like me ask difficult questions by accident. That’s the best thing you can find on your board.”

These were the words of entrepreneur Josh Valman, Founder and CEO of RPD, who was designing robots at the age of 10, and getting his designs manufactured in China in his early teens. Now in his 20s, he has a business that runs R&D and supply chain activities for companies large and small around the world.

Valman is formidable for his directness, his confidence and his simplicity. He defines innovation as ‘the process of executing new ideas’. He says the best innovators fail fast, rejecting the parts of the innovation that prove impractical but revisiting the problem from a new angle once they have experienced the failure.

Customisation, he says, is not a fad, but current ideas of collecting and understanding customer feedback are primitive. When asked by an airline to redesign seats in Economy, he was presented with thousands of completed customer questionnaires, filled in by weary travellers halfway through a long flight. Useless, he says. Technology allows real, reliable feedback at the moment of truth. No customer feedback would tell you that some airline passengers choose to sit almost upside down. The sensors did!

We explored this theme in my interview with him (which will be available in due course), and developed it with equally inspiring speakers Geoff Mulgan (CEO of NESTA) and Rohan Silva, former technology advisor to David Cameron and co-founder of Second Home, at the BCS event on Britain post Brexit. All stressed the need to be positive post-Brexit: entrepreneurs always thrive on disruption. Rohan talked about the coming wave of job disruption, and the thousands of van drivers and 40 year old paralegals whose jobs could be taken away by technology. With BCS members we discussed the paradox. We need government investment in re-skilling – Silva argued that government should pay a salary to those undergoing retraining – and yet government has proved itself so bad at delivering training. Experienced IT professionals suggest we needed a ‘pull’ not a ’push’ model, with individual learning accounts.

But to return to Josh Valman’s words in praise of ignorance: as I write, Tomorrow’s Company is preparing to publish a provocative response to UK Prime Minister Theresa May’s call for Employee Directors.

Ringing in my ears are the different arguments. On the one hand, the Norwegians, Swedes and Germans who have told Tomorrow’s Company that having an employee on the board was a shock at first; that it took years to acclimatise; that it only worked when the employee(s) involved truly accepted that they owed their duty to the company, not to fellow employees, their union, or any other stakeholder group. And the testimony of Martin Gilbert, former Chairman of First Group, the operator of the train on which I am travelling as I write. Gilbert says…“The presence of employee directors on the FirstGroup board is invaluable. The few drawbacks are greatly outweighed by the benefits and having this two-way channel of communication has positively impacted on the running of FirstGroup.”

On the other hand, the arguments of those who say, equally convincingly, that it takes huge sophistication to be a board member and understand the business model of the pharmaceutical, or engineering or services company  on which you might be an employee director. They argue that it is an unfair pressure on an employee to expect her or him to take up the full responsibilities without the knowledge. And, they add, the employee will suffer a conflict of loyalties.

In our paper we will argue for flexibility, and against the imposition on companies of any rigid formula. We want to provoke a constructive debate but to achieve this we need to start by asking what lies behind the call for employee directors. There are two, connected arguments. One is about the growing gap between the company’s leadership and the society which grants its licence to operate, symbolised by ballooning executive rewards at a time of wage stagnation. The other is about the contribution that the board makes to the process of value creation, and the part employee directors might play in getting the board to look at problems in a different way.

To evaluate any proposals for employee directors, we need to decide what we think about the minimum level of understanding needed. We need directors to understand the business model, the strategy, the direction of the company. But we don’t want them to think as insiders. We need what governance experts like Bob Garratt have called ‘intelligent naiveté’.

So, whatever the other arguments, we should be careful not to dismiss the employee director idea on the grounds of sophistication of business understanding. As Josh Valman says, sometimes ignorance leads people to ask the best questions by accident! But equally Government would be wise to hear the warnings of BCS members about the inefficiencies of government imposed formula on disparate people or organisations with different needs and circumstances. Lets’ have a ‘push’ not a ‘pull’ model.

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