RIM Boy Goes Public

In an interview published in Saturday's Globe and Mail, RIM's high profile Director Roger Martin took on setting corporate governance back a thousand years and clarifying for the world why RIM is in trouble.  As one commenter posted:

his point of view is no different or any more informed than the yeehaw one finds chewing the cardboard cup at a tim's. if this is a director no wonder the company has been in decline.

With apologies to yeehaw's everywhere.

Martin does make some seemingly shallow comments for someone who is a) dean of a business school b) a recognized governance thought-leader and c) a New England Patriots fan. A couple of examples:

“So we’re supposed to hand it over to children, or morons from the outside who will destroy the company?"

“If we were to say to Jim and Mike, ‘Well, we’re the board and you should go away now,’ they would have laughed at us.” 

People were saying we can’t make powerful phones like Apple. Yes, we can, but we couldn’t believe consumers would put up with that kind of battery inefficiency and that kind of network inefficiency.

The tricky aspect, he says, was the former bosses deciding what they wanted to do. They decided to stay on as directors

Mr. Lazaridis, he says, “is a genius – so having him off the board would be a good idea?” 

The two former CEOs are about more than RIM. Mr. Balsillie founded a global policy institute and pursued hockey teams; Mr. Lazaridis built a physics research hothouse. Had they become distracted when the company needed their full attention?

“I just don’t buy that,” says Mr. Martin, arguing that the outside interests energized the two. “We’re all human beings – they’re not automatons.”

The majority of commenters - surprisingly, even I couldn't resist - weren't impressed.

Sad reflection of the future of Canadian business if this hand puppet actually reflects the quality of business education at UofT.

 This guy sounds like he is just part of RIM's critical mass of arrogance which got them in this mess in the first place.

Martin is in cloud cookoo land if he thinks two CEOs who are busy doing Perimeter Institute, hockey teams, global affairs and other things can succeed.

What doesnt quite ring true here. A touted Harvard business major, keen on sports as a model of business situations; associated for many years with the principals of RIM, doesnt carry the clout to have the captains alter course when he signals iceberg ahead

This guy is quite a load.

One gets the sense from this article that Martin is feeling the heat. He should be. RIM comes off as a high profile screw up and he and his fellow governors come off as sight-seers on the Costa-Concordia (take that Titanic!).

One wonders what fellow Board members, employers and other clients think, if anything - but one poster did go so far yesterday as saying

I will be getting an MBA and I can now safely say that UofT will not even be on my long list. Too much hubris from the dean.

Governance: The Directors on RIM's Board

The failure of RIM isn't just a failure of management, strategy and execution. It's also a massive failure of governance.

While it's likely there's a phone call or two going on behind the scenes, RIM's Director's have clearly failed to influence the failed trajectory of this once-great company. Even by RIM's own definition of the role of the Board, it's easy to argue that RIM's Directors have been MIA.

So who are these people? Are they just a bunch of Mike and Jim's buddies - maybe a hockey player, a cyclist and a mad-scientist or two? Maybe they are a couple of local machine shop operators from Waterloo's past who stumbled onto the RIM rocket ship and don't know what do now that the gyros have gone loopy?

Well actually not.

Barbara Stymiest is the ex-CEO of the TSX. According to the RIM information circular, Stymiest serves as a member of the Group Executive of the Royal Bank which is responsible for the overall strategic direction of the bank! She's a member of the George Weston Board.

Roger Martin is a Dean and Professor of Strategy (!) at the Rotman School of Business! He also sits on the Board of Thomson Reuters.

According to RIM's info circular, Claudia Kotcha is "an independent consultant to Fortune 500 companies on innovation, strategy and design".

Innovation, strategy and design! That's like the triumvirate of doom for RIM.


So. Is there any governance experience on the RIM Board?

Well, there's John Richardson. This isn't exactly his first rodeo. From the RIM info circular:

"He was appointed Chairman of the Ontario Pension Board in July 2004 and retired from that position at
the end of his three year term in June 2007. Mr. Richardson was Deputy Chairman of London Insurance Groups Inc., Chairman, President and Chief Executive Officer of Wellington Insurance, and Chairman of
London Guarantee Insurance Company. He was a past board member with The Insurance Bureau
of Canada and the Facility Association. In addition to the public board memberships indicated
below, Mr. Richardson is currently the Chairman of Boiler Inspection and Insurance Co."

Others on the RIM Board have similar great experience.

John Wetmore is the former President and CEO of IBM Canada. He currently sits on the Board of Loblaw.

Antonio Viana-Baptista is an ex-McKinsey consulting guru and sits on four other Boards in the telecom space.

And then there are the two co-CEO's.

It's obviously difficult to believe that a Board with this much experience is simply sitting around and watching things pile down on top of them. However, shareholders must be wondering what the Board is up to, especially now that it's clear there may be no bottom for the share price.

One also wonders about the impact on personal reputations given what's already happened or what might happen to RIM's business. What does it say for a Dean of the Rotman Business School? Or a Director of Loblaw? Or someone tied so closely to the Royal Bank? Many people didn't realize that Stymeist and Martin are even on the RIM Board. Just from a self-preservation perspective you might think they would find a way to either step up - or away - from what's happening.

 For shareholders it can't be too soon for someone to do something.

Canadian Board Index - CEO Facts Canada

Every year, Spencer Stuart sends me a copy of their 'Canadian Spencer Stuart Board Index - Board Trends and Practices of Leading Canadian Companies'. Yesterday's mail brought the 2009 study.

This years theme: 'The Route to the Top and Company Performance in CEO Transition' is and interesting look at how Canadian CEO's get to the stop, how long they stay and what they accomplish.

Some interesting facts from the study:

Internal Promotion: The rate of internal promotion to CEO has remained unchanged in the past decade (70% - which seems like a pretty good #) despite increased focus on succession planning.

Industry Background: in 2009, 83% of CEO's recruited from outside the firm came from the same industry grouping as the firm. That's up from 50% 10 years ago. One in four companies now go abroad to get that industry experience up from one in ten a decade ago.

Turnover: 13% is the 2009 # for annual CEO turnover, vs. 10% ten years ago. However, forced departures is at 44% of all turnovers, vs 27% - 30% in the past.

Tenure: the median stint for CEO's who survived successfully is 5 years. Only 10% survived seven to nine years.

Performance/Backgrounds: Interesting. In every case where a new CEO was brought in, the companies led by externally recruited CEO's performed better. Also, finance types performed the best. Sales/marketing types didn't. Period.

I'm not sure there's any real surprises here given trends in governance, performance and the economy. Thoughts?

Value vs. F'ing around

Last night over dinner, a friend of mine was enthusiastically filling me in on the progress her company is making. New this, new that. Invest here, invest there. Getting listened to, doing stuff, making stuff happen.

I like this person. One one hand I appreciate her enthusiasm. It's good.

On the other hand, I believe she is naively misguided....and (surprise) I told her so.

Two questions. First, how are sales? She knew the answer. Marginally down.

Second: How is profitability? I knew the answer. It's not what this organization has ever worried about.

I pointed out to her, that (in my humble opinion) spending lots of money, in fact more money than ever before to tread water or even sink below it is not progress. It's failure. Raw, ego centered botching of business basics. Profitability, of which I'm sure there's still some, is in the toilet.

It's the kind of predictable failure that enables not-so-sharp people like me to go ahead and predict the future. What she doesn't see....but soon will....is inevitable.

There will be lay-offs. By Christmas, January at the latest. Crazy perks, like bringing your neighbours pet to the Children's groundhog day party will be gone. Other expenses, like travel and meetings which this company overdoes on a grand scale will be cut back to nothing. Then there will be the inevitable search for ever-greater efficiencies. Why does a company with only a limited number of products need a head office of 100 people? There will be more lay-offs.

Then one day, the investors in this company will really wake up. Where is the value in this organization? In it's product? In it's back office and administrative capabilities? It's distribution network? Probably not. In fact, it's probably no where.

So now what? There's nothing like being stuck in an investment. Sure the lifestyle is good...and f'ing around, playing manager is fun. But no business is an island. When the recognition sets in that there is no value in the business and none has been created despite millions and millions in investments, then the fighting between the investors and finger-pointing on the management team will be spectacular.

Trying to be helpful, I suggested to my friend that given her capability, enthusiasm and desire to grow, she should start trying to influence a more thoughtful, business-like direction for the organization before the inevitable happens.

You know, she's good. I think she gets it. I don't think she'll be one of the ones laid off.

Role of the Board - Part III

Part I describes the importance of the Board's governing role. See Part I here.

Part II describes the qualities of a good Board Chair. See Part II here.

Part III looks into the natural tension that exists between governing and operating.....

.........so how should organizations deal with the quiet disconnect between management and the Board over the Board's role? Does it even matter?

I have a few thoughts.

First, if there is an underlying tension between the Board and management it is natural and healthy. While overall goals of the Board and management are aligned - success of the organization - at the end of the day management's role and the Board's role are different: management operates and the Board judges management's performance.

Second, Boards and Board Chairs need to be more explicit about their roles - with themselves and with management. By being more explicit - "our role is to govern and to assess management's performance" - Board's set expectations for their role that don't set directors or management up for disappointment.

Third - and Boards seem to be doing this - Board's need to get better at their governance roles. Governance in particular is not simple. While some issues are black and white, many require in-depth knowledge of law, business, policy, and decision making process. Only by stocking Boards with diverse, independent and experienced directors can consistent, timely and correct governance decisions be made.

Typically, larger business organizations are more advanced in performing their governance roles. Smaller organizations, and too many not-for-profit organizations appear to struggle with governance and seem destined to continue doing so.

Board composition is a key factor. Small company boards are frequently over-stocked with self-interested parties: investors, service providers, friends and family. Not-for-profits, even the ones that attract strong, experienced board members, frequently also attract, or are mandated to include, representatives from stakeholder groups who may have little or no Board experience.

In summary, I believe it DOES matter that Board's explicitly identify that their primary role is governance, and what that means. By explicitly defining their role, Board members and management teams get more satisfaction from their Board involvement. Everyone quickly comes to see that by providing strong governance, the Board IS making a significant contribution to the organization.