Managing Complexity, Managing Change
The Paris Agreement of the UN Climate Change Conference, 12th December 2015, is a cause for Christmas cheer. It will also have profound implications for companies, as well as countries, and will almost certainly add another layer of complexity to Boards.
As we look back over Fidelio’s Executive Search and Board Development mandates in 2015, we see a clear theme emerge. Even the best Boards are challenged by increasing complexity and the dramatic rate of change as they endeavour to increase the value of the business. At Fidelio, we are increasingly working with companies undergoing dramatic transformation; both through Search mandates for roles that are changing, and developing Boards to handle complexity. It’s a powerful mandate for the year ahead!
Capital Markets Search Practice – Chairmen and CFOs up their Game
Fidelio’s origins as a Search firm are in the capital markets. We emerged from the Financial Crisis supporting our clients to become more effective in engaging with their shareholders and to thereby improve valuation. Key roles for Fidelio have always been Finance Director, Investor Relations (IR) Director and Independent Director.
We stayed true to our capital markets heritage in 2015, once again working with companies coming to market and their advisors. We also very much enjoyed participating in the “Going Public” discussion on BBC Radio 4’s business programme, The Bottom Line.
Beyond the IPO, quoted companies faced increasingly complex challenges in engaging with shareholders in 2015 and Fidelio has been pleased to respond through Search and Development.
The IR Community, for example, frets that the IR role is becoming less strategic. In response, Fidelio and Citi conducted a European roadshow to understand what the Chairman and CFO require from IR and how this is changing. In London, corporates with a combined market cap of almost GBP 350 bln engaged in our debate; in Germany DAX 30 IR Directors demonstrated how the function can support the Chairman in developing a healthy, vibrant and aligned corporate culture.
Boards too were under pressure from shareholders. Fidelio was able to support Chairmen through Board Search mandates addressing Board composition. And critically we also promoted Board effectiveness through Development assignments. These focused on key challenges such as the Board’s role in handling activist engagement, as well as best practice in consulting with shareholders on sensitive governance issues.
From our clients we see two clear trends emerging for 2016:
1. Chairmen taking a much greater interest in the IR function recognising its contribution to valuation and risk management.
2. Increasingly structured thinking about the composition and calibre of the CFO cabinet. Getting this right significantly increases the effectiveness of the CFO and is a major influence on the successful outcome of corporate transactions.
Communications Search Practice – Disruption in Demand
Good shareholder engagement is tough. Effective stakeholder engagement is tougher with major disruptive influences at play, including digitisation, increased regulation and stubborn anti-business sentiment.
It is an enormous learning curve as no-one has been trained for this but you have to be careful that you do not get involved in a million things […] but ensure that the issues you do take on link to your business model and that you stay focussed
Paul Polman, CEO Unilever (The Guardian, 2015)
Since inception Fidelio has recognised the importance of the Communications function in restoring trust in business and in 2015 we strengthened our search capability in this area. As we work on senior communications roles both on behalf of corporates and advisors, we see very substantial changes in the skill sets required. Print media is no longer king; but how should a Board begin to think about the range of issues and channels that have to be mastered if key stakeholder groups are to be satisfied?
Fidelio argues that the insight and intelligence of a world-class Corporate Affairs Director belongs not just in the Executive Committee but also in the Boardroom. Indeed we were delighted to conduct a successful Board search in 2015 in which the Board prioritised reputational issues and appointed a world-class Communications professional accordingly.
Meanwhile at the Executive level Communications and Corporate Affairs Directors preside over a huge degree of complexity and change. The remit can include:
- External Communication
- Corporate communication
- Brand Communications
- Regulatory Engagement
- Employee Engagement
- Media Relations
- Digital Media
- Reputational Risk Management
- Sustainability
- Financial Communications
- Public Affairs & Government Relations
Communication is self-evidently a function that reaches all areas of the business. But now we find that the Communication function itself is becoming part of corporate disruption. The application of new technologies in both employee and customer engagement is one example; the inescapable link between reputation and the licence to operate is another.
Perhaps the most profound disruptive influence is, however, Sustainability. For Boards assuming the responsibilities laid down in the Paris Agreement, the organisation’s ability to innovate, implement, as well as to communicate and report on Sustainability progress becomes imperative. In recent research conducted by Fidelio across leading international companies, we already see evidence of CEOs inverting the established hierarchy and appointing a direct report Chief Sustainability Officer to the CEO Cabinet.
As such the 2016 trends we see emerging in the Communications function include:
1. Stronger reputational risk management skills in the Boardroom
2. Sustainability disrupting how the organisation communicates and more fundamentally operates
Fidelio’s Board Commitment – Diversity Mitigates Complexity
Complex and seemingly intractable problems facing today’s Boards are seldom susceptible to silver bullet solutions. Instead, Fidelio has argued repeatedly in favour of focussing on who is at the top table. An organisation clearly benefits from having excellent people with a range of experience and perspectives in both the Boardroom and the senior executive layer. This is the case for diversity, including gender diversity, and in 2015 Fidelio has been proud to contribute to both the debate and much more importantly the solution.
Certainly gender diversity featured prominently on the Boardroom and political agenda in 2015. In the UK, the final Davies Report concluded that UK FTSE 100 Boardrooms had met the target of 25% women (just) but substantially more work needs to be done to increase female representation in the executive layer. In Germany, the Government introduced a quota at the Supervisory Board level and clear guidelines to enhance diversity at the Management Board level. In Canada, the new Prime Minister Justin Trudeau has delivered on his promise that women will make up 50% of the Cabinet.
It is becoming popular to argue that progress in gender diversity at the Non-Executive level is not so important. Fidelio disagrees.
Boards vote and are being held increasingly accountable to set the tone and culture. Women have an important role to play here. Moreover, based on our Board work across Europe, we see no evidence that there is a shortage of good women. If Boards approach the challenge with openness, good will and intent, they will be able to meet the gender targets – hard or soft – that governments are imposing.
At the Executive level, we do recognise that there are impediments to diversity, both structural and psychological. Fidelio does not consider these impediments to be insurmountable.
Fidelio’s “Seat at the Table” Programme for Senior Female Executives is testament to our firm belief that women can and should aspire to the most senior executive roles within the organisation. In our September Programme held at the Royal Military Academy at Sandhurst we welcomed women at Executive Committee level from a range of global companies. Within the group we achieved diversity of sector, expertise, geography and also started to lay the foundations of a formidable and yet supportive network of extremely talented female executives.
…A Seat at the Table … quite remarkable and thought-provoking … a heady combination of new friends and contacts, immediately actionable insights and rich seams of thought … bringing clarity around the role of the Board and Executive…
Feedback from “A Seat at the Table” Programme, Sandhurst (2015)
In 2016 Fidelio will continue to champion this cause:
1. In March 2016 we will welcome participants to our second Seat at the Table Programme to be held at Leeds Castle.
2. We will continue to be a leading voice in the debate including on topics such as the Frauenquote and women in leadership roles in technology.
3. And critically, Fidelio will continue to approach every Search at Board and Executive level with an openness and transparency that ensures our clients are presented with long-lists and short-lists that are rich in diversity, expertise and potential.
New Year Cheer
Increasingly our role is to help clients deal with complexity as they face unprecedented change driven not only by shareholders but, also, stakeholders and geo-political uncertainty. In 2016 we look forward to doing this through Search and Development and across all three of our Search practices – Board, Finance and Communications.
And we take this opportunity to wish you a peaceful, happy Christmas, as well the resilience, energy and insight to take advantage of the opportunities that lie ahead in 2016.
FIDELIO HIGH NOTES
Fidelio – adding value through Search and Development.
- Fidelio’s Board Practice is committed to building the layer of Senior Female Executives. We hold our second “A Seat at the Table” Programme on 15th-16th March 2016 at Leeds Castle.
- Fidelio to co-host with the German-British Chamber of Industry & Commerce, the German British Forum, and Nabarro LLP a Seminar entitled “Die Frauenquote and other routes to Board diversity”. Keynote speakers are Lady Barbara Judge, Chairman of the Institute of Directors, and Mrs Edelgard Bulmahn, Vice-President of the German Bundestag.
- Fidelio’s Communications Search Practice sees Sustainability disrupting business models and the communications function; new skills in demand
- Fidelio’s Finance Search Practice focuses on CFOs Cabinet
Fidelio and Citi DR Services co-hosted European roadshow debating “The IRO is a Strategic Advisor to the Board – True or False”.
To discuss your Search and Development requirements, please contact us at info@fideliopartners.com.