Leadership vs Management

Leadership vs. Management

• Management focuses on planning, organizing, and executing processes for efficient day-to-day operations.
• Leadership involves setting direction, inspiring people, and guiding change, especially for directors, the Chair, and the CEO.
• Peter Drucker stated, "Management is doing things right; leadership is doing the right things"

Key Distinctions Between Leaders and Managers

• Leaders set the vision, outlining the company's future with meaning
• Managers set targets, breaking the vision into concrete plans
• Leaders inspire and influence, motivating teams and stakeholders through communication and example
• Managers control and administer, ensuring compliance and solving routine problems
• Leaders focus on change, embracing and rallying others around it
• Managers focus on stability, minimizing disruptions and maintaining performance

Effective Directors

• Effective directors need managerial acumen to make credible decisions
• Effective directors require leadership skills to seize opportunities and motivate people
• Companies need leadership at the top for vision and ethical guidance
• Managerial boards may focus on compliance and short-term metrics, but may fail to steer the organization or respond to paradigm shifts

Leadership Styles and Theories

• Directors should know multiple leadership styles when evaluating CEOs or shaping board culture
• Autocratic leaders make unilateral decisions, which is useful in crises but can demotivate
• Democratic leaders seek input to build consensus, increasing buy-in but slowing decision-making
• Chairs should avoid being autocratic but also decisive and timely
• Laissez-faire leadership is a hands-off style that gives freedom to the team but can lead to lack of direction if unchecked
• Boards are expected to provide guidance and monitoring rather than laissez-faire
• Transactional leaders use exchanges like rewards and punishments and manage using incentives and KPIs for baseline performance
• Transformational leaders inspire values and creativity to elevate the organization, leading by example and driving change
• Transformational leadership in a board encourages new visions, motivates with mission, and fosters innovation

Situational Leadership

• Situational leaders adapt their style based on the maturity/competence of followers
• Directive style: useful for new or underperforming CEOs
• Delegating style: useful for high-performing CEOs who need autonomy
• New CEOs might need coaching and mentoring
• Experienced CEOs might need support and occasional course correction

Additional Leadership Styles

• Servant leadership prioritizes the team and organization, fostering growth and ensuring every member contributes
• Emotional intelligence (EI), coined by Daniel Goleman, is critical and includes self-awareness, self-regulation, empathy, motivation, and social skills
• Directors with high EI navigate boardroom discussions more effectively, manage conflicts, and build relationships
• Understanding these styles helps assess CEO fit, shape leadership approach, and plan succession
• Board discussions may use terms like "transformational leader" or "transactional executor," indicating these concepts

The Chair's Leadership

• The Chair is a central leader of the board, leading meetings productively
• A Chair should ensure debates are rigorous but collegial and ensures the viewpoints of quieter members are heard to guide the board to a decision
• Acts as a liaison between the board and management, mentoring or providing feedback to the CEO requiring trust to have tough conversations
• Represents the board to stakeholders and the public during AGMs or crises, reassuring them the board is competent and in charge
• Champions good governance by ensuring processes are followed, committees function well, directors have the info they need, and the board evaluates itself
• Sets the ethical tone at the top with the CEO, promoting integrity and intervening if unethical practices were to occur

Leadership by All Directors

• Committee Chairs lead their governance areas effectively and report back
• Non-Executive Directors should show moral courage and independent thinking, steering the board towards ethical paths
• Executive Directors align the board with operational realities and integrate board guidance into the company
• The CEO must lead the organization to execute strategy and lead upward to the board

Senior Independent Director (SID)

• The SID leads when the Chair is conflicted or underperforming, gathering board members and addressing concerns
• In emergencies like sudden illness, the SID steps in temporarily - requiring leadership agility

Tone at the Top

• Directors set the tone at the top, influencing the company's culture through values and behaviors like setting codes of conduct
• A board that respects integrity and transparency in its operations also makes it clear these attributes are expected of everybody

Crisis Leadership

• The board steps up to steady the company during crises like scandals, takeovers, or CEO deaths
• Well-led boards have crisis roles, succession, and communications plans, and handle crises calmly

Emotional Intelligence (EI)

• Emotional intelligence (EI) is linked to effective leadership, particularly at the board level where relationships and judgment are key

Key Traits of Emotional Intelligence

• Self-Awareness is about knowing one's strengths, weaknesses, triggers, and biases
• Self-Regulation involves controlling impulses and emotions, responding rather than reacting, and avoiding ethical lapses
• Motivation in EI is driven by inner values and goals, like caring for the company's mission
• Empathy is critical for understanding others' perspectives, relating to both employees and customers
• Social Skills cover communication, conflict resolution, building networks and teams
• Understanding group dynamics includes trust, respect, and open communication
• The IoD Leadership for Directors course can improve a director's leadership effectiveness

Building a High-Performing Board

• A board is a team that influences the performance of the executive team
• High-performing boards have trust, with directors acting in good faith
• Trust enables open dissent and can be built through informal interactions and reliability
• Diverse boards perform better, but diversity requires inclusion and respectful hearing
• Clear roles and expectations ensure that lines are not stepped on and gaps are avoided
• Feedback and continuous improvement can be achieved through board evaluations which mirror good managements
• Cohesion is about working towards the goal of best interest, while groupthink involves suppressing critical thinking to maintain peace
• The board can combat groupthink by bringing in external perspectives and ensuring differing opinions are noted

Leading the Executive Team and Organization

• The board gets the correct CEO in place to have a good team to begin with, and interacts during presentations
• Board might observe the chemistry of executives and advise privately if there are concerns

Importance of Succession Plans

• High performance will include succession planning and talent development for upcoming leadership
• This will involve implementing leadership, mentoing new execs, and implement/review HR strategies
• A culture of accountability and performance is driven by the CEO holding the team accountable and the board holding the CEO accountable

Key Considerations for Balancing a Performance Culture

• Do not pressure with unrealistic goals that will create unethical behaviour
• Recognizing good performance boosts morale via attendance of internal award events or delivering congratulatory notes

Models of Team Development

• Tuckman's Team Development features the stages of Forming, Storming, Norming and Performing
• Storming involves working past conflict and giving people the space to address new points of view and setting expectations for roles to be efficient
• There must be a deep impact on ethical leadership and organization culture as it derives from the values and beliefs from the top

Defining Purpuse and Values

• The board should initialize or endorse the purpose and values
• This will involve reflecting the values throughout the organization, as well as zero tolerance of poor behaviour

Factors Influencing Ethics

• Tone from the top must show these factors
• Decision-making processes must ask if "this the right thing to do"
• Ethical delimmas must be answered properly, with transparency to avoid more damage later
• People must be treated fairly, and people must be seen to be reprimanded for wrongdoing to create a precedent

Codes of Conduct and Ethical Decisions

• Leaders must model codes of conduct, respecting work life balance, speaking up about concerns, etc
• Ethical decisions must be considered, and these are:
  • Ensuring to follow legal regulations and proper protocol
  • Rejecting actions that would allow numbers to be "fudged"
  • Fair lay-off options that will offer retraining and severance
  • Ensuring that executive pay is justified by performance

Importance of Stakeholders

• Modern leadership calls for consideration of impacts on all stakeholders
• Impact on all must be weigthed
• A leadership mindset of stewardship includes improvement to company and society
• This can allow transition to green power, recognizing ethics

Key Objectives

• These should be taken to consider
• Having climate targets with clear dates
• Having diversity and inclusions goals in measurable amounts
• Forming committees where appropriate and ethical leadership when discussing the Company’s overall strategy

Case - Johnson & Johnson (Tylenol crisis 1982)

• Due to ethical leadership, bottles were immediately recalled at immense cost, this saved trust in the brand
• Prepare for ethical standing for financial burdens in such cases

Case - Wells Fargo scandal (2016)

• Unrealistic sales targets that drove misbehaviour in employees and pressure cooker attitude
• A culture of bad news travelling upwards should also be encouraged

How to Gauge Organisation's Culture and Implementation

• Attending company events and engaging with employees
• Checking the employee numbers
• Performing risk and internal audits
• Meeting with union and repesentatitives

Leading Change

• Directors must be able to lead through change (digital transofmration - restructing) by;
• Championing the change
• Monitor management plans
• Addressing the barriers
• Showing patience and persistance

Leadership in Crisis

• Implement leadership during situations involving; financial crisis, PR scandal, natural disaster
• This involves;
• Timely responses
• Assessing the scenario
• Single voice with a spokesperson
• Setting ethical core
• Supporting management
• Learning from decisions

Case - Boeing 737 Max crisis

• Due to lack of safety overisght and the board being complacent, crashes drove the CEO to be fired
• Boards must create safety committees to build back trust

Engaging and Influencing

• Engage through the company both internally and externally
• Directors influence managements, stakeholders, media, government via questions and support

Key areas to engage

• Shareholders via IR programmes
• Employee forums
• Being cooperative with government
• Building high standards can drive regulation
• Networking with partners to strengthen alliences
• Supporting media via conferences

Directors' Role

• To benefit their networks for the company from an outside perspective, in high levels
• Stakeholders must not be meddled with on individual level
• Be diplomatic where necessary to avoid high levels of influence

Methods to Assess Stakeholder Strategies

• Engage with engagement plans provided for stakeholders
• Be sure there is correct protocol (community support)
• Ask appropriate ethical questions