Conformance v performance

Professor
Vic Dulewicz, head of the HR management and organisational behaviour faculty at
Henley Management College believes the only potential drawback of the  Higgs Review on corporate governance  is the possibility that organisations will
actually stifle creativity in the boardroom

Boards
are finally getting their teeth into the more difficult issues raised by the
Higgs Review, and in particular, the unfamiliar issue of performance appraisal of
individual directors. I have had several board members come to me to discuss
this, as most boards still are not in the habit of appraising their
performances either as individuals or groups.

A
positive element of the combined code is the recommendation for increased focus
on the HR issues of appraisal and development and selection. That should
certainly suit HR consultants working in this area and give HR a more prominent
role at this level. It’s probably too early to highlight any real problems.

Some
executives have spoken about the difficulty of finding non-executive directors
(NEDs) and having to increase the size of the boards. This is largely because
they have to find a commensurate number of NEDs to ensure that at least 50 per
cent of the board is non-executive, and if they don’t want to drop any existing
executives, there can be some real challenges.

Larger
company boards will comply with some of the fairly non-contentious principles
of the combined code, while turning a blind eye to some of the more contentious
ones – for instance, when a chief executive is promoted to the role of chairman
in the same company. Some of these companies have suggested they will explain
why they are not complying – Barclays, being one name that keeps coming up –
and it will be interesting to see the reasons.

The
nature of the talent or gene pool for NEDs is another issue and one that could
lead to a greater demand for HR and facilitation skills. The DTI is clearly
trying to encourage more diversity among NEDs, and HR experts who are not
directly involved in business decision-making would have different and
important insights to offer.

Finally,
will the code deliver? It is fair to say that in many areas it will help. But
there is a big dilemma – what I call ‘conformance versus performance’ – and
there is a risk that an increasing emphasis on the policing of structure and
behaviour will actually stifle boardroom efforts to add value and improve
business performance.”

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