Board Intelligence in FT Non-Executive Directors’ Club

FT Column

5 min read

Dina Medland has written an article for the FT Non Executive Directors' Club on 'Intelligence For The Boardroom' which draws on the work Board Intelligence do to drive board effectiveness for plc boards.

Editorial: November 2011 
Intelligence For The Boardroom 

The quest for better company boardrooms in the UK frequently produces a great deal of discussion, most recently around gender diversity, for example. But, important though they are, such debates cannot be allowed to disguise the fact that non-executive directors can only be as good as the information provided allows them to be. 

Dina Medland reports on the board pack. 

Even a cursory glance at UK company boardrooms reveals a startling lack of comprehension as to how to make information ideally suited for its vital task of informing debate, questions and challenge around the table. 

Jann Brown, finance director and managing director of Cairn Energy, a FTSE 100 business, and a senior independent director of Hansen Transmissions International, a Belgian engineering company listed on the London stock exchange, says: "To be truly effective, a non-executive has to develop quickly an understanding not just of the relevant sector and the market in which the company operates, but also of the culture of the company, its key strengths and how it looks to optimise these. This involves investing time and energy in getting to know the board, the managers and key staff. But the role of the company secretary is also important in helping to ensure that board papers are clear, include relevant background information, and provide an audit trail to enable the board to make appropriate decisions efficiently." 
Clarity in board papers might, however, be elusive. Evelyn Bourke, chief commercial officer for Friends Life, the UK life assurance company, and a non-executive of The Children's Mutual and IFG, says: "The key thing to remember when writing a board paper is to understand the likely perspective of a non-executive. Try standing in the shoes of one of your newest non-executives who doesn't have a depth of background in the sector and consider what he or she needs by way of context to help them understand the issue or proposal. Then write the short, but focused paper." 
There is little indication that the bulk of FTSE 100 companies have been following such advice. JRBH, a board consulting firm, launched Board Intelligence ( a few years ago. Founded by Jennifer Harris, it offers services to improve the effectiveness of company and management boards. It does this in part by working to improve the quality of materials boards receive, ensuring that both executive directors and non-executives have access to the information and insight they require for them
to supervise and steward their business. 
Board Intelligence does not mystify its offering. "Without access to the right
information to base decisions on, directors are essentially blindfolded to the
issues at hand," says Ms Harris. Alongside fellow director Pippa Croney, she identifies the results of a recent research project undertaken with the Judge Institute of the University of Cambridge (of which they are both graduates). 

The research, which explored the perceptions among board directors as to how well their boards function, identified two major issues – lack of time with the board and ineffective briefing materials. "Our research highlighted that even though time is limited, high quality board papers remain surprisingly rare. The problem with board packs is two-fold: their readability and their content," says
Ms Harris. 

They found that the average FTSE 100 board pack is 288 pages, with a FTSE 250 board pack around 149 pages, but they also came across board packs of more than 600 pages. "When we investigated the amount of time a FTSE 100 director spends reading the pack, they are spending just over a minute reading each page," she adds. 
The implications are worrying, and 69 per cent of those surveyed felt that their board packs could be more relevant and useful. 
Board Intelligence is currently working with a FTSE-100 utility provider, a FTSE-250 financial services firm, a FTSE-250 airline and a private equity owned pharmaceutical client to develop their board packs and help make more efficient
and effective use of their directors' time. Its work for EasyJet has resulted in a rejuvenated board pack. 

Ms Harris says: "As a result of our work, EasyJet has a board pack that is shorter, simpler to follow and easier to digest. It is wider in scope, addressing the broader operational and strategic issues, and provides greater visibility of
the company's performance and its operating environment." 

Board Intelligence has also used its proprietary software to create a digitally
interactive pack for the iPad, "allowing more efficient and effective use
of executive and non-executive time and ultimately, more informed and strategic boardroom debate". 

Carolyn McCall, EasyJet’s chief executive, says: "This is a step change in the way we report to the board." John Browett , a non-executive director on that
board, who is also chief executive of Dixons, says: "This is the future of
board reporting". 

One of the reasons for slow action on this front has been that companies themselves have been reluctant to seek external advice on improving board information – seeing it as a "nuclear option", according to Jonathan Day, a partner at the chief executive and board practice at international search firm Heidrick & Struggles. Top consultancies have also often shied away from such work because they want to build a relationship with the chief executive, and don't want to risk damaging that relationship, he adds. 

Non-executive directors must view the outside help now on offer as a welcome trend, even if it is in its infancy. Vanda Murray chairs VPhase and is a non-executive director with Manchester Airport Group and Carillion, one of the companies quick to embrace the potential of iPad technology for use in the boardroom.

She says: "It is critical that board papers provide the relevant information on
performance and key business issues in a format that is easily understood and
digested, such as monthly and annual performance graphs on key numbers against budget/target and the previous year to enable an understanding of what is happening. After all, the most important job of the non-executive is to ask the right questions. This is difficult without the right information.” 

Boardroom checklist: 

If any three of the following describe your board pack, it's in urgent need of attention:

      • It reads like a presentation that makes no sense without narration
      • It is a ‘data dump’; a collection of raw data in spreadsheets and tables
      • The structure changes each month as ad hoc issues are thrown in with regular reports
      • It is heavily weighted towards internal, backward-looking financial data
      • There’s an unduly heavy burden on management to produce the pack
      • It gives little mention of factors such as customer experience or external
      • The company secretary has to spend hours chasing contributors, before printing, binding and couriering the document.

Ten Tips for creating dynamic Board packs: 

1. Create a coherent narrative. Each page should tell a story, and form a logical part of the wider whole. 

2. Consider what questions you are trying to answer for the reader, to help you decide what data is really important. 

3. Use tabs and trackers to make the structure explicit and help readers know where they are. 

4. Keep it short. 

5. Don’t include every detail every month – make sparing use of 'deep dives' and exception reporting, so that such information has more impact when it is included. 

6. Include commentary next to every table and graphic, so that directors can easily extract the 'so what'. 

7. Look forward, as well as back. 

8. Go beyond the numbers, to include a wider picture of the health of the business. 

9. Aim for snappy and effective, not overbearing and sluggish. 

10. Consider cloud hosting. Ease the burden of distribution by providing access to a secure online portal, to download both a print copy and a digital board pack.

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