â€œThe Winmark C-Suite networks are diverse and stimulating. They offer fantastic opportunities to meet senior execs and address the business challenges that we all face.â€? Jaimie Patrick, Global Sales & Marketing Director, Unilever Prestige
QUARTER ONE 2017
WHAT BUSINESS LE ADERS THOUG HT OF THE L A S T ISSUE:
“An excellent report.”
YETUNDE HOFMANN, NON-EXECUTIVE DIRECTOR, CHARTERED INSTITUTE OF PERSONNEL AND DE VELOPMENT (CIPD)
“This is a really excellent, well-written and insightful document.” J O HN TIMPE RLE Y, M A N AG IN G D IREC TO R , THE RE SU LT S CO N SU LTA N C Y
Editor John Jeffcock, Chief Executive, Winmark on + 44 (0) 20 7605 8000 email@example.com
CO N T E N T S
Includes insights from:
THOUGHT LEADERSHIP FROM WINMARK – CHAIR OF PENSION
Bank of England,
STUFF YOU NEED TO KNOW
THE CHAIRMAN’S VIEWPOINT
CIO Connect, Clearswift,
PA N O R A MI C C-SU ITE V IE W, THE C-SU ITE CHE AT S HE E T
TH E C-S U ITE R E P O R T
NON-EXECUTIVE DIRECTORS (NEDs) & THE BOARD
• PLC Board Effectiveness Reviews
Facebook, GE, IBM, Information Commissioner’s Office, Investor Relations Forum, PA Consulting Group, Pearson,
5 6 –7
• Investment & Investor Relations CHIEF EXECUTIVE OFFICER (CEO) & DIVISIONAL CEOS
• Social Enterprise Leadership • Life Journeys & Capability Planning CHIEF FINANCIAL OFFICER (CFO) & TA X DIREC TOR
• Finance as a Shared Service • Base Erosion & Profit Shifting (BEPS) CHIEF LEGAL OFFICER (CLO) & CHIEF RISK & COMPLIANCE OFFICER
• Create a Tech-Savvy Legal Function
• EU General Data Protection Regulation (GDPR)
The Investor Forum,
CHIEF M ARKETING OFFICER (CMO) & SALES DIREC TOR
The Jockey Club,
• Managing Dispersed Teams in a Digital Age
CHIEF INFORM ATION OFFICER (CIO) &
and other leading organisations
• Digitalisation Governance
CHIEF DIGITAL & DATA OFFICER
• The Digital CIO CHIEF HUM AN RESOURCES OFFICER (CHRO) & LEARNING DIRECTOR
2 0 –2 1
• HR in the Age of Automation, Digitalisation & Robotics CHIEF OPER ATING OFFICER (COO) & S U P P LY & P R O C U R E M E N T D I R E C T O R • Operational Transformations in Resistant Cultures
W I N M A R K C-S U I T E
2 2–2 3
W I N M A R K C - S U I T E R E P O R T is a unique report in the field of business leadership. It is designed for time-poor, senior business leaders (C-Suite) of large organisations. Its focus changes in every issue and reflects the current challenges being addressed by over 2,000 C-Level executives today. Its aim is to address these key challenges through sharing key learnings, methods and ideas from the most prestigious and innovative organisations in the world. As a result, every issue should cause the reader to reflect, rethink and change.
OBJECTIVES: • To give board directors, the chief executive and senior business leaders a panoramic view of business, enabling them to ensure their own organisation stays ahead. • To enable key C-Suite leaders to add greater value to their organisations, through understanding how their area interacts and adds value to others. • To create a common understanding and vocabulary within the C-Suite, to reduce conflict and wastage, and increase performance and shareholder value.
PA R T N E R S
With special thanks to the following organisations who partner Winmark Networks, Research & Academies:
BAKER MCKENZIE CANON EUROPE CAPSTICKS CARILLION ADVICE SERVICES CHARTERED INSTITUTE OF PERSONNEL AND DEVELOPMENT CHARTERED INSTITUTE OF TA X ATION CHARTERED INSURANCE INSTITUTE CIO CONNECT CITY WOMEN NETWORK EVERSHEDS FERRIER PEARCE FLINT HYDE
GAZING INSTITUTE OF CHARTERED SECRE TARIES & ADMINISTR ATORS INSTITUTE OF PRACTITIONERS IN ADVERTISING INVESTEC ASSET MANAGEMENT LEWIS SILKIN MARKET RESEARCH SOCIETY MHA MACINT YRE HUDSON OMOBONO PA CONSULTING G ROUP
PROCUREMENT LEADERS PUNTER SOUTHALL QUEEN MARY UNIVERSITY OF LONDON ROTH E S AY L I FE RSM RUSSELL INVESTMENTS SACKERS SAUNDERSON HOUSE SOVEREIGN TA X AUTOM ATION TROWERS & HAMLINS WHITE & CASE
COPYRIGHT © 2017 WINMARK LIMITED All rights reserved. The information in this Report is confidential to Winmark Members, Clients and Partners. It is intended solely for them or the addressee. The views expressed in this Report are summaries of meeting notes from network meetings, and are therefore out of their original context. It is strongly recommended that before taking action on any of the enclosed you consult the Winmark network lead. Any opinions or advice contained in this Report are subject to the terms and conditions expressed in Winmark Terms & Conditions. Access to this Report by anyone else is unauthorised. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without written permission.
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T H O U G H T L E A D E R S H I P F R O M W I N M A R K I N PA R T N E R S H I P W I T H F L I N T H Y D E
TRUSTEE EXP EN SE S COV E R E D BY E X P E NS E S P O LIC IE S
98% | 96%
75 % | 8 2%
2 0 % | 18%
1 7% | 10%
1 1 % | 10%
TR AV EL
PH ON E USAG E
I N T ER N ET USAG E
OT H ER
20 14 –15 2 0 16
C HAIR RE MUN ER ATI ON BY G EN D ER
£5 8 ,0 6 2
2 0 1 4 –1 5
F E MALE
M AL E
% OF SC HE MES TH AT R EMUN ERATE
C H A IR R E M U NE R AT IO N BY DAY S WO R KE D IN MO N TH 1 OR 2
£ 31,82 3 £ 34 ,870
3 OR 4
£ 36,195 £4 3,630
5 OR M OR E C HA IR S
£47 ,2 24 £49,905
SUB COMMI T TE E CHAIRS 3 4%
2 014 –15
C HAIR RE M U N ERATI ON BY F UN D SI Z E
C H A IR R E M U NE R AT IO N BY Y E A R S IN A R O L E
£34,702 £35,318 <5 £58 ,500
10 OR M OR E
<£100m £100m – £1bn £1bn – <£5bn £5bn+
£4 3,4 00
£42 ,2 58
WINMARK THOUGHT LEADERSHIP
2X FA S TE R
W I N M A R K C-S U I T E
½ X PRICE
10X MORE IMPAC T
S T U F F YO U N E E D TO K N OW AR is a live, direct or indirect view of a physical, real-world environment, the elements of which are augmented by computer-generated sensory input such as sound, video, graphics or data. VR is able to transpose the user into a different place or world. A real-world pilot’s headset would therefore be AR, but a fighter-pilot computer game would be VR.
BEPS = BASE EROSION AND PROFIT SHIFTING
AUGMENTED REALIT Y (AR) & VIRTUAL REALIT Y (VR)
A tax-avoidance strategy, in which profits are shifted from jurisdictions that have high taxes to those that have low taxes. BEPS can be achieved through ‘transfer mispricing’, contracting between subsidiaries in different jurisdictions at distorted prices that are not at arm’s length. See the CFO section of this report.
Extremely large data sets that may be analysed computationally to reveal patterns, trends, and associations, especially relating to human behaviour and interactions. At Imperial College London, they track and visualise global bitcoin transactions, Mars Rover data and passenger movements on the Shanghai Metro rail network.
Circumstances in life can cause genes to be silenced or expressed over time. They can be turned off or turned on. This impacts what we look like, how we behave and what diseases we are most susceptible to. Human beings can therefore influence their own genetics and workplace behaviours.
The GDPR comes into law on 25 May 2018. It gives consumers new rights, such as ‘the right to erasure’, and protects ‘physiological markers’. See the CLO section of this report.
IOT = THE INTERNET OF THINGS
GDPR = EU GENER AL DATA PROTEC TION REGUL ATION
In 2013 the Internet of Things Global Standards Initiative (IoT-GSI) defined the IoT as ‘the infrastructure of the information society’. The IoT allows objects to be sensed and/or controlled remotely across existing network infrastructure such as physical devices, vehicles and buildings. This creates opportunities for more direct integration of the physical world into computer-based systems, resulting in improved efficiency, accuracy and economic benefit.
A centrally hosted subscription licensing and delivery model. It is sometimes referred to as ‘on-demand software’ and utilises thin-client web browsers.
SA AS = SOF T WARE AS A SERVICE
E S S E N T I A L B OA R D V I E W I N G BLOCKCHAIN – DON TAPSCOT T
TOP 10 GRE ATEST CEOS – JIM COLLINS
BORING BUT IMPORTANT
Demystifying this world-changing, trustbuilding technology, which may prove to be the second generation of the internet.
Three trained as lawyers. Why? Because The Anti-Corruption Ethics and Compliance MBAs are trained to give the best answer and Handbook has been developed for lawyers are trained to ask the best question. companies, with assistance from the OECD, UNODC and the World Bank.
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THE CHAIRM AN’S VIEWPOINT This has been a momentous year. We all talk about the pace of change but 2016 feels like it has been on fastforward, as huge world events have whizzed by with barely time to register their impact. Changing times always create new acronyms and VUCA is one we’ll be living with in 2017. It’s going to be Volatile, Uncertain, Complex and Ambiguous, or as the Harvard Business Review put it: “Hey, it’s crazy out there!” But my phrase of 2016 is ‘post-truth’. We are living in a post-truth world, ‘a place where objective facts are less influential in shaping public opinion than appeals to emotion and personal belief’. Against Brexit, Trump and the rise of populism, how can boards make sure they are ready to meet the challenges they face? Here are my thoughts on the key issues to consider in the year ahead. VA N DA MU R R AY O B E
CORPOR ATE GOVERNANCE The government is keen to reform corporate governance and is seeking views, via a green paper, on three important areas. • Executive pay. What influence can shareholders exert over executive pay, which has grown faster than average pay and corporate performance? • Stakeholder measures. Could there be greater connections between boards of directors and other interested groups, such as employees and small suppliers? • Corporate governance reach. Could features of corporate governance from listed companies be extended to privately held companies? PRIORITIES FOR THE BOARD There will be changes to how boards operate and changes to how we work. • Diversity, particularly gender diversity, remains a key issue. Research demonstrates that companies perform better on every metric – including financial ones – when there is a diverse balance of individuals leading the business. This entails nurturing and developing talent throughout the organisation and addressing the ‘leaky pipeline’ of female talent. Confidence can be shattered if talent is not cherished, supported and celebrated. We cannot continue to allow women to earn less than men and to miss out on the higher leadership roles they deserve. • Stakeholder communications need to be consistent and clear, and boards need engagement strategies that keep staff and all stakeholders on side. We are all working towards the same targets: growth, high performance and a good return. Happy staff make happy customers, which leads to better performance and happy shareholders. • A board is a high-performing team. The chair should encourage a healthy level of debate, challenge and discussion, and should always be passionate about the next phase of growth and getting the right people in the right jobs. The focus should always be on asking: ‘Are we doing the right things?’ Constantly looking at people, strategy, performance and risk is vital. • Culture has to be managed by the whole team for the benefit of the organisation. We need to look at how we can best engage, develop and support employees at and beyond work. Sustainability is driven through culture and corporate social responsibility (CSR). • CSR impact is a given and goes far beyond the environment. It involves the whole supply chain, customers, employees and the communities impacted by the business, at the local, national and international level.
C H A I R M A N O F FE N N E R P LC , N O N - E X E C U T I V E D I R E C TO R O F B U N Z L P LC A N D E XOVA P LC , A N D P R O - C H A N C E L LO R OF MANCHESTER M E T R O P O L I TA N UNIVERSIT Y
E V E RY DAY I S A S CH O O L DAY I love the phrase ‘every day is a school day’. We learn throughout our lives and we need to make sure that our employees are up to date with all the latest thinking, technology and best practice – as well as business opportunities and risks. Staff engagement and performance are so much better when we get this right. There are always changes on the horizon on issues from tax and audit regulation, to cyber risk and data protection. We all have to work hard to understand the opportunities and the threats they present. We need to be aware of current best practice and utilise the Winmark networks to help to source the best advice available. FACING THE CHALLENGES AHE AD Set against what is happening in the UK and around the world, the role of executive or non-executive director is now much more demanding than ever before. To succeed in these challenging times, we need an organisational culture that is agile and flexible and we need to open our minds and anticipate change rather than simply reacting to it. We have to think differently, look forward and be ready to adapt. We should always ask: ‘How will changes impact on us, our business, our staff, our strategy?’ Boards need to assemble a diverse but complementary mix of skills, experience and backgrounds, matching those skills with the needs of the business and its future strategy. Board members need to get out of the boardroom regularly and be visible on site to all staff. How else can you have a view on the company’s culture or on health and safety unless you have met the people working in the company in their own environment? Above all, it is a privilege to serve on a company board, hugely stimulating and rewarding. It is also a great responsibility and one not to be taken lightly. These may be tricky times as 2017 dawns, but we should look forward with confidence in our ability to navigate the challenges ahead of us.
W I N M A R K C-S U I T E
PA N O R A M I C C-S U I T E V I E W
The C-Suite Cheat Sheet
“In the old culture, managers got their power from secret knowledge: profit margins, market share, and all that... In the new economy, the role of the leader is to express a vision, get buy-in, and implement it. That calls for open, caring relations with every employee, and face-to-face communication. People who can’t convincingly articulate a vision won’t be successful. But those who can will become even more open – because success breeds selfconfidence.”
Everything as a Service (EaaS) A phrase coined by Nick Kirkland, CEO, CIO Connect.
JACK WELCH, FORMER CEO, GE, IN A LETTER TO SHAREHOLDERS
• Carillion Advice Services (CAS) – part of the Carillion legal function, which has become a managed legal services provider employing 50 people in Newcastle upon Tyne. • Jockey Club Services (JCS) – the Jockey Club centralised its services for the 15 racecourses it owns and now provides ticketing, financial, procurement and technology services to other sports bodies.
“At Telefónica UK the head of tax sits down annually with the head of media to discuss annual tax objectives.” TELEFÓNICA (UK)
LEGAL & RISK
“35% of staff would sell their company’s IP for the right price, and a third of those would sell it for £1,000 or less.”
“We embrace digital technologies to make our global business structure feel local.”
JAIMIE PATRICK , GLOBAL SALES & MARKETING DIRECTOR, UNILEVER PRESTIGE
“23% of external legal spend originates from HR and using external lawyers is typically 1.5 to 3 times more expensive than doing it in-house.” BJARNE TELLMANN, SENIOR VP & GENERAL COUNSEL , PEARSON PLC 6
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“Your principal moral obligation as a leader is to develop the skill set, ‘soft’ and ‘hard’, of every one of the people in your charge to the maximum extent of your abilities. The bonus: this is the #1 mid- to long-term profit maximisation strategy!” TOM PETERS (US)
“Business has to give people enriching, rewarding lives – or it’s simply not worth doing.” RICHARD BRANSON (UK)
Are your support functions cost or profit centres? Could they offer sector or specialist services? • The Scottish Government – its IT function provides chargeable services to independent NGOs. • BT Law – it originally offered claims-handling services to support BT’s fleet of 45,000 vehicles. It now provides external legal and claims services from its team of 75 people in Sheffield. • Kent Legal Services – originally the legal function of Kent County Council, it now provides legal services to 600 public-sector
“WTTMSW: Whoever tries the most stuff wins.” ROSS PEROT, FOUNDER OF ELECTRONIC DATA SYSTEMS (EDS)
“Move fast and break things!” became “Move fast with stable infra!” MARK ZUCKERBERG, CO-FOUNDER AND CEO,
F A C E B O O K . The mantra changed
in 2014 as the original approach caused too many software bugs.
• Start with the business case. • Create a minimum viable product within nine months. • Test it with consumers. • If you are going to fail, fail fast. • Invest in it or move on. MARC DECORTE, VP CONNECTED DIGITAL TECHNOLOGIES , SHELL INTERNATIONAL
“Cybercrime as a term seems distant to most staff and therefore renaming it ‘Information Loss’ makes the issue more graspable.” BANK OF ENGLAND
The 1980s “Culture eats strategy for breakfast.” E D S C H E I N , P R O F E S S O R , MIT SLOAN SCHOOL OF MANAGEMENT
The 1990s “Who says elephants can’t
dance?” L O U G E R S T N E R , C E O , I B M The 2000s “Change before you have to.” JACK WELCH, CEO, GE
What next? 7
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N O N - E X E C U T I V E D I R E C TO R S (N E D s) & T H E B OA R D
With special thanks to Sue Scholes, Chair, Investor Relations Society; Andy Griffiths, Executive Director, Investor Forum; and Joëlle Warren MBE DL, Founding Director, Warren Partners. THIS ISSUE
• PLC Board Effectiveness Reviews
• Nomination Committee & Succession
• Investment & Investor Relations
The BBC has blamed a lack of technical skills and knowledge within its upper echelons for wasting £98m of licence payers’ money on a failed digital IT project.
“Directors had neither the technical knowledge to oversee the project effectively nor access to technical advice.”
BOARD EFFECTIVENESS REVIEWS • Board effectiveness reviews add value only when they identify potential ‘material weaknesses’, things that can derail boards. • Nearly all material weaknesses have at their heart ‘faulty’ dynamics. • “63% of directors find the board evaluation process akin to a check-thebox exercise.” (PwC 2014 survey) • “To achieve value from a board effectiveness review, a rote compliancefocused approach must be avoided.” (Warren Partners)
MARK THOMPSON, FORMER DIRECTOR-GENERAL , BBC
In 2010 The Financial Reporting Council (FRC) announced the new UK Corporate Governance Code, which applies to all companies with a premium listing of equity shares, regardless of whether they are incorporated in the UK or elsewhere. The principles in the code, on a ‘comply or explain’ basis, are as follows: • the company’s annual report should state how performance evaluation of the board, its committees and its individual directors has been conducted; • board evaluations of FTSE 350 companies should be externally facilitated at least every three years, and any other connections between external consultants and the company should be disclosed; and • NEDs, led by the senior independent director (SID), should be responsible for performance evaluation of the chairman, taking into account the views of the executive directors.
THE TOP TEN M ATERIAL BOARD WEAKNESSES 1. The chair lacks influence or is a bully. 2. The CEO is unchallengeable, either from above or below. 3. The NED cohort is substantially stronger than the executive cohort, or vice versa. 4. The CEO and the chair do not get on and everyone knows it. One has to go! 5. The board has blind spots because its members think too similarly. 6. The board is unclear about the culture it wants to achieve and about how to measure its progress towards this. 7. The board does not track how and whether concerns and issues are properly escalated. 8. The board pays insufficient attention to its stakeholders, on whom it relies for success. 9. After being in recovery mode, the board has become too inward-facing. 10. T he board does not have a habit and discipline of anticipating future trends and developments that will impact its business.
The role of the board of directors; governance and decisionmaking; board composition and succession; evaluating board performance The process by which the board organises the running of the business and ensures it comprises qualified, effective individuals who are clear about their individual and collective roles and how they are performing
The board’s purpose and strategy WH AT ?
CO R E LE A R NING Reflecting, learning, integrating
I N SI DE T H E B OA R D Board dynamics How the board works together, the way it leads and how it sets culture for itself and the organisation. The balance between challenge and support, and ensuring robust and constructive dialogue takes place. Awareness of the importance of diversity
H OW ?
Having a clear and well articulated vision, strategy and purpose which reflects stakeholder requirements and expectations. Ensuring vision, strategy and purpose stay current over time
O U T S ID E T H E BOA R D Relationships with stakeholders Does the board role model how it wants business to be done when it connects with all the critical stakeholders inside and outside the organisation? How does the board keep its radar active for what is emerging?
S O U R CE: WA R R EN PA R T N ER S
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B OA R D R E V I E W S T Y P I C A L LY COV E R : PROCESSES
B E H AV IO URS
Chairman’s leadership and discussion
Numbers of and balance between executive and non-executive directors
Testing and independent
Skills and experience
Collaborative and collegiate
Information and security
No domination of debate
Board papers (reporting)
Sector and customer insight
SUE SCHOLES C H A I R , I N V E S TO R R E L AT I O N S S O C I E T Y
ENHANCING STEWARDSHIP DIALOGUE The Institute of Chartered Secretaries & Administrators (ICSA) and the Investor Relations Society (IRS) launched their Enhancing Stewardship Dialogue guide in 2013. It states that a “key principle” is that there should be “a regular and consistent process of engagement, over time, between a company and its main investors, in order to establish, develop and maintain relationships”. FOUR KEY MESSAGES FOR INVESTOR REL ATIONS 1. Develop an Engagement Strategy
• Schedule an engagement programme for the year. The board should be involved in the company’s engagement strategy and approve it annually. The chairman or senior independent director (SID) should be available to meet major shareholders once a year and should attend company-hosted results presentations. • Ensure a regular and consistent process of engagement. An annual meeting should take place with the investors
to discuss the company’s strategy and long-term performance, as well as the governance arrangements in place to sustain that performance. Company attendees should include the chairman, the SID, chairs of board committees and NEDs. • Do not assume there is no need to communicate or engage. NEDs should be able succinctly to describe company investment propositions, remain aligned with corporate messaging, be alert for tricky issues and know when to deflect a question to executive management. • Identify supportive investors; consider collective meetings; explain your approach. The chairman, the SID and the relevant NEDs should have informal ‘roundtable’ discussions with the investment directors, portfolio managers and corporate governance heads from their leading shareholders to discuss significant live issues (on which one-to-one discussions may be required). • Make better use of the AGM. For example, as well as providing straight results content, consider presenting on wider issues such as strategy, appetite for risk, values, corporate responsibility and overall approach to governance. 2. Get the Housekeeping Right
• Invite the right organisations. • Invite the right people. The company should consider at which meetings the involvement of NEDs is appropriate. • Keep clear records of the relevant outputs. There is no point in arranging negotiations between investors JOËLLE WARREN MBE DL 9
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and boards if no record is made or circulated. • Review governance arrangements. There is a need to help investors to understand the roles and responsibilities that have been agreed within the organisation – involving the executive and NEDs, the company secretary and the investor relations (IR) team. 3. Strengthen the Focus on Strategy and Long-Term Performance
• Agree the key issues for discussion. The aim is to achieve a more balanced dialogue on relevant topics – including remuneration – in a wider context of value creation. 4. Provide Feedback
• Be aware of key issues and market sentiment. Ensure that there is a mechanism for regularly feeding back investor views, for example through board reports; presentations from the IR team/corporate brokers; and independent perception studies. THREE CS FOR NEDS Shareholders have a right to expect the ‘three Cs’ from NEDs. 1. Courtesy. Be courteous to the executive members of your board. Cultivate a good relationship with them so that you can serve effectively as the shareholders’ ambassador. 2. Curiosity. Do not accept at face value the policy of your fellow board members as it affects investors. Probe and keep on probing any proposal that does not make sense or feel right. 3. Courage. If you decide that there is something amiss in the strategy, confront and challenge your board on the shareholders’ behalf, at whatever cost to yourself. Unfortunately, this is a key part of an NED’s job.
C H I E F E X E C U T I V E O F F I C E R (C E O) & D I V I S I O N A L C E O s
With special thanks to Dame Mary Marsh, NED of HSBC Bank plc, Governor of London Business School and Chair of the Royal College of Paediatrics and Child Health (RCPCH); Clore Social Leadership; and PA Consulting Group for their contributions and support. THIS ISSUE
• Social Enterprise Leadership
• Life Journeys & Capability
• Business Continuity
Chief Executive Officer
WHAT IS SOCIAL LE ADERSHIP? Social leaders are people who lead change and who do this with a social purpose. This could be as leaders of an organisation or a team, but does not have to be. People at all levels, not just those ‘at the top’, can engage in leadership. Social leaders are people who drive forward ideas and change to help to solve the social challenges of the 21st century.
K N O W YO U R S E L F, B E YO U R S E L F, L O O K A F T E R YOURSELF Personal qualities and self-awareness are key to strong leadership. Social leaders have: • passion for the cause, integrity, values; • authenticity, confidence, humility; • communication skills; • curiosity, creativity and ability to innovate; • determination, energy and drive for improvement; • courage, including the strength to take risks and make tough decisions; and
AT EXT – SITU O H WI UG TH & THRO NT
G OV ER N A N CE & COMP L I A N C E ACCOUN TA BI L I T Y SOURCE: CLORE SO CIAL LE ADERSHIP
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• physical and emotional resilience, with the ability to self-manage and retain a lifework balance. ASSESSING YOUR CONTEX T Given the changing nature of the business sector, having the ability to understand where you are and what could lie ahead has never been more important. Strong leaders: • read and seize the future; • understand the bigger picture (as well as the detail); • have vision, purpose and focus; • have a readiness to learn and are open minded; • are resourceful; • are politically astute; and • are determined in their pursuit of results. WORKING WITH (AND THROUGH) OTHER PEOPLE None of us exists or succeeds in isolation. Strong leaders: • inspire, motivate, empower and enable others; • respect and embrace diversity, and celebrate difference; • develop leaders and build teams; • collaborate, form partnerships and negotiate; • are effective and strategic influencers; • deliver outcomes; and • hold others to account, both supporting and challenging them. THE SKILLS AND UNDERSTANDING YOU NEED On top of the framework, social leaders must develop solid skills and understanding of some core areas crucial for the social sector, including: • governance, compliance and accountability; • outcomes and impact; and • efficiency, business capability and risk.
ASSE SING S
KNOW YO U RSEL F B E YO U RSE LF LO O K A FTER YO U RSEL F
S T ES AC EN P IV & IM CT FE ES EF OM TC
F CA ICIE PA N C BI Y LI BU TY S & INE RI SK SS
THE CLORE SOCIAL LEADERSHIP FRAMEWORK There is no one simple model for what a social leader looks like, but there are some attributes which we think all aspiring leaders in the social sector should have. Based on initial research in 2009 mapping the sector, this framework sits under everything we do. Although we know that no single individual will have all of these attributes, each person will need a fluency in many of these areas if they are to succeed as a leader.
There is no one simple model for what a social leader looks like, but there are some attributes which we think all aspiring leaders in the social sector should have.
ACC E S S ING INT E R NA L O P P O R T U NIT IE S
B E ING PA R T OF THE E X T E R NA L TAL E N T CO M M U N IT Y Planned external moves
DAME MARY MARSH N E D O F R OYA L CO L L E G E O F Internal job posting
PA E D I AT R I C S A N D C H I L D H E A LT H (R C P C H), G OV E R N O R O F LO N D O N
External talent pools
Social media network
BUSINESS SCHOOL, AND NED OF HSBC B A N K P LC
SUCCESSION PLANNING “Imagine if you are going to live to 100, which the majority of people born in 2017 will achieve. This gift will mean that most people will work until they are 80, you might live with four generations of a family at home, and your working life will be 60 years. Careers become life journeys.”
We need to: • stop thinking about linear careers; • start thinking about portfolio career development and life plans; • stop thinking about succession planning; and • start adopting capability planning. PORTFOLIO CAREER DEVELOPMENT The first issue is to align strategic workforce planning with portfolio career expectations.
• Only 5% of CEOs turned to line managers for effective career advice. Even the advice of family members was sought more often. • Less than 10% of organisations regularly move talent around the business, even though 48% of CEOs say that this is the career intervention with the biggest impact. • 75% of HR directors say that line managers’ skills in developing others still need to be improved. • 91% of millennials expect to change jobs every three years. This implies that they will have 15 to 20 employers during their careers. INVEST IN CAREER ANGELS • Talent scouts use their network to identify people with the potential to take on new or bigger roles. • Talent brokers use their knowledge of individuals and of future likely vacancies to suggest internal candidates, who may not be immediately obvious contenders. • Mentors build a relationship with high-potential individuals in their business area and meet them regularly to discuss aspirations, development opportunities and potential career moves. They also stay connected with alumni. KEY QUESTIONS IN PORTFOLIO CAREER DEVELOPMENT • How can we embrace – rather than resist – external secondments to build experience? • Are we spending enough money on alumni networks, compared with spending on graduate/search agencies? • What is it reasonable to expect from line managers? Is this enough for our most valuable employees? • How can we redress the ‘cradle to grave’ mentality and enable more adult conversations about portfolio careers? 11
Internal network events
S O U R C E : P A C O N S U LT I N G G R O U P
C APABILIT Y PL ANNING The value of focusing on future capability requirements, rather than on current jobs. • 45% of CEOs saw succession planning as an area where more impact is needed. • 48% of organisations feel that they do not have the right people and skills to succeed in a digital age. • 65% of the jobs that people will be doing in ten years’ time have not even been thought of yet. KE Y QUES TIONS IN C APABILIT Y PL ANNING • What will your organisation look like in the future? • What types of skills or capabilities will you need in the future? • Where will these come from? • When might you roll off current skills? • When do you start the process of acquiring new skills? • How can you adopt a longer-term view to managing people? • How can you use analytics and data to provide fast solutions to unexpected talent situations?
S T R AT EGIC CA PA B IL IT Y P L A N N ING SUCC ESSI ON PL AN N I N G R ESOUR C E PL AN N I N G
TIMESCALE: (Typically 1–3 years)
TIMESCALE: (Typically 1–3 years for medium term and 3+ years for long term)
TIMESCALE: Short term (typically within a budget cycle of up to 12 months)
H EAD COUN T R EPOR T I N G
C H A R ACT E R IS T ICS
TIMESCALE: Current or past
C H AR AC T ER I ST I C S
Anticipating business change in a moving market based on securing capabilities needed for future success while also addressing the need for flexibility
Addresses need for continuity in leadership in regulated/ stable parts of the business
C H AR AC T ER I ST I C S C H AR AC T ER I ST I C S
Rapid response to current vacancies while building future pipeline
Records the number of employees and other data
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S O U R C E : P A C O N S U LT I N G G R O U P
C H I E F F I N A N C I A L O F F I C E R (C F O) & TA X D I R E C TO R
With special thanks to Nevin Truesdale, Group Finance Director, The Jockey Club; and Jennie Rimmer, Group Head of Tax, Aspen and Chair of the Chartered Institute of Taxation Commerce & Industry Group for their contributions and support. THIS ISSUE
• Finance as a Shared Service
• Managing Uncertainty
• Base Erosion and Profit Shifting (BEPS)
Chief Financial Officer
THE JOCKEY CLUB The Jockey Club is the UK’s largest commercial horse racing group, it now operates on a purely commercial footing and owns 15 leading racecourses, with annual turnover in 2015 of £183.3m and operating profits of £21.9m. PROJECT THAMES The 15 racecourses owned by the The Jockey Club had operated independently, with a low level of central or shared services until 2010, when Project Thames was delivered to centralise the business, create a powerful brand in sport and significantly improve efficiencies across its range of activities. The project required investment in people, technologies and processes. Each racecourse had to give up a certain amount of control to central operations. The next stage in terms of evolution of the business was the creation of a regional management structure. Four regions were created, with three or four racecourses in each. This was a time of significant cultural and structural change across the organisation. The Jockey Club brand was successfully integrated into all individual racecourse branding and was rolled out across all parts of the business, internal and external. The centralisation of staff from the racecourses into a shared service centre was quite demoralising for some of the teams. Although the new offices were much smarter, staff felt that they were being cut off from the business they had served. This was an issue the group had to address before they went to market; inevitably, it led to some changes of personnel. An effective shared service centre has well-defined processes, good systems and strong management controls. Many individuals working in these centres work on a single part of the process, whereas before they may have been involved in the process in its entirety, even running it in their area of operation. This change in role, culture and management style had a significant impact
Resistance usually comes for one reason. Organisations often have a ‘not invented here’ mentality, and many have not changed for so long that there is a general lethargy towards new ways of working. and The Jockey Club needed to bring in new management and improve skills to ensure that the new operation succeeded. JOCKEY CLUB SERVICES (JCS) In 2014 Jockey Club Services (JCS) was launched. It was felt that the central shared services functions were scalable and could provide outsourced support to other professional sports. A breakthrough came in the form of an invitation from the England and Wales Cricket Board (ECB) to give a presentation at its CEO forum. Following on from this event, a number of direct meetings took place. The first conversations with the chief executives were general ones, touching on each area of the shared service offer. Ticketing management was found to be a major challenge for one county that staged international cricket but did not believe that its ticketing platform was capable of managing a significant rapid volume of sales. The JCS solution seemed to meet the county’s requirement: it was able to offer a very robust and resilient ticketing system, in the first instance managing ticket sales for an Ashes Test match. For other counties, the issue was getting more fans back more often. JCS leveraged the highly successful Rewards4Racing loyalty programme to launch Rewards4Cricket, which three county cricket clubs have already adopted. JCS has become a strategic partner to a number of national governing bodies in various sports, with a particular focus 12
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on finance and accounting. Table Tennis England and England Squash are both partners on this platform, with the latter also taking payroll and IT services. THE SALES PROCESS JCS usually starts by meeting the CEO, the chief operating officer (COO) or the chief financial officer (CFO). Once there is an initial interest in one or more services, JCS conducts a customer audit, comprising a list of questions developed through its own experience. The audit usually involves the senior management team only, because of process sensitivities arising from a likely impact on existing business infrastructure (such as a potential reduction in headcount). Resistance usually comes for one reason. Organisations often have a ‘not invented here’ mentality, and many have not changed for so long that there is a general lethargy towards new ways of working. However, once the CEOs are on side and recognise the positive financial impact or greater efficiencies created by the new platforms, the projects are usually initiated. Once they are signed off, the important next step is to demonstrate the benefits to the business. Some people will be concerned that they may lose their jobs, and also that technology will bring greater transparency and more accurate reporting. However, the overwhelming business logic should ensure that implementation is successful.
Under increased scrutiny, boards of multinational groups need to ensure that tax risks have been identified and are being managed to avoid reputational or operational challenges.
JENNIE RIMMER G R O U P H E A D O F TA X , A S P E N, A N D CHAIR OF THE CHARTERED INSTITUTE O F TA X AT I O N CO M M E R C E & INDUSTRY GROUP
This business logic is ultimately about resilience, cost and efficiency savings, and bringing the organisation into the modern world.
available only to tax authorities. The US has been supportive of most aspects of BEPS, including CBCR, but has strongly resisted the move to make this information publicly available. However, the EU proposals may necessitate the disclosure of information about certain US groups, depending on their business structure. The UK government has introduced a new requirement for large businesses to publish a UK tax strategy by the end of 2017 (the exact date will depend on the relevant accounting period). The government hopes that, by making boards consider their attitude to risk and approach to tax, it will drive improved governance and more compliant behaviour. Other key areas of change under BEPS include restricted tax deductions for interest payments under certain intra-group financing arrangements, and the use of some types of hybrid entities to obtain tax advantages. Many groups have been restructuring their financing arrangements and/or their group structures in response to changes under the anti-BEPS initiative. One area of concern is the lower threshold for activity in another territory deemed to be a ‘permanent establishment’ for the business and therefore subject to tax in that jurisdiction. Groups may need to revisit how they provide intra-group services to ensure that they are not caught out. Under increased scrutiny, boards of multinational groups need to ensure that tax risks have been identified and are being managed to avoid reputational or operational challenges. They must also ensure that systems are capable of delivering increasing demands for detailed information and that their finance and tax functions are sufficiently resourced. There is more change to come, but, in the words of ancient Chinese philosopher Lao Tzu: “A journey of a thousand miles begins with a single step.” Best foot forward!
BASE EROSION AND PROFIT SHIFTING (BEPS) Tax has become a regular feature of the boardroom agenda. Board interest in tax is no longer confined to considerations of the effective tax rate (ETR). Boards are now required to consider tax risk management, corporate responsibility and the wider public transparency agenda. What does that mean in practice and what do directors need to be aware of? In 2013 the OECD launched its anti-BEPS initiative to address actual or perceived ‘international tax avoidance’. Its final report was published in October 2015, with recommendations on 15 separate ‘actions’. All large UK and multinational businesses are affected by the changes and should be addressing the requirements now. The UK has been keen to be seen as a leader in taking forward the OECD recommendations, and was one of the first governments to start enacting them into domestic law. Even before the OECD had finalised its anti-BEPS recommendations, the UK government announced a new ‘diverted profits tax’ designed to repatriate tax on profits generated by activity in the UK on which no UK tax was being paid. The OECD’s recommendations are consistent with increased demands for data and transparency of tax information. In April 2016 the EU published draft proposals requiring large businesses to publish earnings and tax data by jurisdiction. The EU proposals go beyond that required under the OECD’s Action 13 – country-by-country reporting (CBCR) – by requiring groups to make their information publicly available, rather than 13
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C H I E F L E G A L O F F I C E R (C LO) & C H I E F R I S K & CO M P L I A N C E O F F I C E R
With special thanks to Bjarne Tellmann, Senior VP and General Counsel, Pearson; and Jonathan Bamford, Head of Strategic Liaison, Information Commissioner’s Office for their contributions and support. THIS ISSUE
• Creating a Tech-Savvy Legal Function
• Operational Execution
• EU General Data Protection Regulation
• Future Proofing
Chief Legal Officer
WH AT I S A TECH-S AV V Y LEG A L FUNCTION? Creating a tech-savvy in-house legal function is not about technology, but about how to remain relevant at a time of exponential change. The corporate world can get fixated on the minutiae of technology –instead, it needs to concentrate on the philosophy of change. Change is an end in itself; technology is not. Technology is relevant only insofar as it is a tool of change.
Chief Risk & Compliance Officer
CRE ATING IN-HOUSE ‘HARDWARE’ • It is essential to identify the four or five core risks (weighted according to likelihood and their financial/reputational impact) before the in-house function can devise the right ‘hardware’ to repel them. This is more difficult than many assume. One example of such problems relates to General Motors (GM), where a ‘silo’ culture divided the GC from his staff and meant that the company’s in-house legal function failed properly to liaise with its technical departments over an ignition flaw before a vehicle recall was initiated in 2014, after an 11-year delay. • ‘Group thinking’ can also present an obstacle. Over time, this makes a pattern of thinking that is specific to a particular community ‘normal’ to its members, even if it contains blind spots. The group therefore becomes desensitised to threats and problems that an outsider unburdened by its acquired myopia would quickly grasp. • It is obvious, therefore, that companies need to ‘think outside the box’ to perceive core risk. In the absence of recruiting perceptive outsiders, they should ask their business contacts or the external lawyers they retain to lend them ‘fresh pairs of eyes’, so that their scrutiny can help to identify systemic threats at an early stage.
HARDWARE , SOF T WARE & TECHNOLOGY If an in-house function wants to meet the challenges of change, the general counsel (GC) must perfect the following instruments: • the in-house ‘hardware’ (the risk analysis and the organisational structure appropriate to countering the company’s main business threats); • the in-house ‘software’(the right departmental culture and the right people); and • the cost- and labour-saving technological tools that will help you to implement both the above.
BJARNE TELLMANN SENIOR VP AND GENER AL
CRE ATING IN-HOUSE ‘ SOF T WARE’ • Your ‘software’ are your people, who fight against your four or five core risks. • First, however, you must define the entity you are defending. What is your corporate ‘culture’, the untested assumptions that bind all your colleagues together, the unprompted beliefs that you share? • Ideally, your culture should accord with your stated company values, although often this is not the case. This is why firms such as Facebook, Yum! and Amazon meticulously screen out potential employees who do not share their ‘family values’, or ruthlessly dismiss them if they display ‘non-native’ ideas or behaviours once hired. • Once the corporate culture and the key risks have been defined, the staff who keep the business afloat are the ‘generalists’, who create and maintain your relationships with clients. • For each of the core risks, there should be at least one ‘specialist’. Each should have extensive specialist experience in the threat for which they have been hired. • Recruit permanent in-house staff to fill these posts, rather than contracting out the work to professional services firms. Their workers will invariably prove less knowledgeable about your business – and less discreet – than your employees. They will also be much more costly.
CO U N S E L , P E A R S O N 14
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Google has established a system through which the consumer can choose which part of their data they can erase, as total erasures would be problematic. The Information Commissioner’s Office (ICO) is expected to adopt it in its entirety.
FINDING THE RIGHT IN-HOUSE TOOLS • Business is currently living through what has been called ‘the fourth Industrial Revolution’. The first involved steam, the second electricity, and the third information technology (IT). The fourth incorporates artificial intelligence (AI), machine learning, network technology and big data. • Professor Richard Susskind OBE is the technology adviser to the Lord Chief Justice and the author of the book The End of Lawyers? In April 2016 he said that AI will replace [external private] lawyers within five years. What does he mean? • Although it has been said that lawyers are trained to ask the best questions and MBAs are trained to give the best answers, it is far from certain that MBAs give the best answers to lawyers any more. In the US legal industry a ‘thinking computer’, IBM’s ROSS, the business world’s most advanced example of AI, can harvest millions of pieces of legal big data worldwide in seconds to give in-house counsel better legal advice than any external lawyer and at a tiny fraction of the price. That is the future. EU GENER AL DATA PROTEC TION REGUL ATION (GDPR) The GDPR comes into law on 25 May 2018. It gives consumers two important new rights: ‘the right to erasure’ and the protection of ‘physiological markers’ (such as a record of a person’s face). In response, Google has established a system through which the consumer can choose which part of their data they can erase, as total erasures would be problematic. The Information Commissioner’s Office (ICO) is expected to adopt it in its entirety.
‘Group thinking’ can also present an obstacle. Over time, this makes a pattern of thinking that is specific to a particular community ‘normal’ to its members, even if it contains blind spots. 15
THE ICO’S 12-STEP GDPR PROCESS • 1. Awareness . Make sure that decision-makers and key people in your organisation are aware that the law is changing. They need to appreciate the impact this is likely to have. • 2. Information you hold . Document what personal data you hold, where it came from and who you share it with. You may need to organise an information audit. • 3. Communicating privacy information . Review your current privacy notices and put a plan in place for making any necessary changes in time for GDPR implementation. • 4. Individuals’ rights . Check your procedures to ensure they cover all the rights individuals have, including how you would delete personal data or provide data electronically and in a commonly used format. • 5. Subject access requests . Update your procedures and plan how you will handle requests within the new timescales and how to provide any additional information. • 6. Legal basis for processing personal data . Look at the various types of data processing you carry out, identify your legal basis for carrying it out and document it. • 7. Consent . Review how you seek, obtain and record consent, and assess whether you need to make any changes. • 8. Children . Start thinking now about putting systems in place to verify individuals’ ages and to gather parental/guardian consent for the data-processing activity. • 9. Data breaches . Ensure you have the right procedures in place to detect, report and investigate a personal data breach. • 10. Data protection by design and data protection impact assessments . Familiarise yourself now with the guidance the ICO has produced on privacy impact assessments and work out how and when to implement them in your organisation. • 11. Data protection officers . Designate a data protection officer, if required, or someone to take responsibility for data protection compliance. Assess where this role will sit within your organisation’s structure and governance arrangements. • 12. International . If your organisation operates internationally, you should determine which data protection supervisory authority is relevant to your business.
Privacy by design • • • • • • •
Pro-active, not reactive; preventative not remedial. Privacy as the default setting. Privacy embedded into design. Full functionality: positive-sum, not zero-sum. End-to-end security: full life-cycle protection. Visibility and transparency: keep it open. Respect for user privacy: keep it user-centric.
Source: Information and Privacy Commissioner of Ontario, Canada
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C H I E F M A R K E T I N G O F F I C E R (C M O) & S A L E S D I R E C TO R
With special thanks to Jaimie Patrick, Global Sales & Marketing Director, Unilever Prestige, for her contribution and support.
• Managing Dispersed Teams in a Digital
• Sales Leadership
• Customer Acquisition
Chief Marketing Officer
Anyone who has managed a field sales team in the UK, or anyone leading a global sales and/ or marketing department from an international hub such as London is by definition managing a ‘dispersed’ team. Digitalisation and the millennials who are now entering every workplace have recently added a new level of ‘dispersal’ that needs to be carefully managed. In every part of the world, millennials expect a much better work-life balance, which effectively means greater dispersal. They expect employers to use technology to facilitate this, but millennials tend to be more proficient in digital technologies than their colleagues, and even their superiors. Some 71% of American workers are reportedly unhappy at work. In many cases, their disengagement actually arises from strategies – including digital and ‘dispersal’ strategies – that have been devised to foster engagement. This is because digital and dispersal have too often been used to ‘weaponise’ a strategy that remains defiantly mired in the pre-digital, pre-dispersal age. For instance, the principle that governs individual interaction on social media such as Facebook and Twitter is that everything should be shared apart from that which is explicitly defined as private. This openness could inspire a wave of collaboration and innovation that would enhance morale and staff engagement. The problem is that in the business world, in many cases the prevailing ethos is that information should be concealed. This is the exact opposite of digital and dispersal etiquette, where the greatest possible mutual exposure is vital. Digitalisation and dispersal in the context of a no longer relevant business ethos can therefore produce conditions opposite to those they are meant to create.
Some 71% of American workers are reportedly unhappy at work. In many cases, their disengagement actually arises from strategies – including digital and ‘dispersal’ strategies – that have been devised to foster engagement. This is not a new phenomenon. When open-plan working was introduced, it was meant to produce collaboration, integration and transparency. Unfortunately, because it was not accompanied by the abolition of hierarchical office structures, it frequently produced tension, isolation and a desire to conceal and hide, as every employee became aware that their managers could now view their PC screens and analyse how they were working. In just the same way, the dispersed, digital sales force often fails because staff do not trust their colleagues. They assume that a colleague who is using digital to work outside the office in a coffee shop is pursuing their private interests. In other words, a corporate culture rooted in the idea of ‘bums on seats’ has not been able to keep pace with technology. As a result, there is division and resentment instead of the warm and frictionless collaboration that digital and dispersed working makes possible. Guilt-ridden dispersed staff end up bombarding the office with superfluous emails and phone calls, just to prove that they are not pursuing their own personal agendas. This negates the streamlined practice and greater productivity that digital and dispersal can bring. 16
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For the last five years, Unilever has tried to ensure that digital, dispersed sales teams strike gold by ensuring that its company culture reflects the openness inherent in the technology.
B E H AV IO U R S A ND CU LTU RE TO M A KE DISPERSAL THRIVE • Openness regarding availability and location. • Flexible working hours. • Honesty and trust. • Driving autonomy and ownership by the individual. • Delivery of presentations/updates on time and in full. • Regular weekly connections via technology that suits the individual. • Group updates on performance. • Monthly team meetings via Skype for Business. • Quarterly face-to-face meetings.
For the last five years, Unilever has tried to ensure that digital, dispersed sales teams strike gold by ensuring that its company culture reflects the openness inherent in the technology. It has found that, as long as the corporate culture embodies the connectivity of digital and dispersal, ‘agile working’ – allowing sales staff in every part of the world to use devices to work where, how and when they choose – can be an immensely positive step, catalysing unforeseen levels of collaboration and leading to reduced costs and much higher growth. In IT terms there is just one global computer drive and one big global cloud, which contains everything and which everyone can access and grasp at a glance. Previously unattempted levels of teamwork across countries and continents have been especially fruitful, and innovation has grown out of the collision of different cultures and perspectives. Services such as Lync enable the ‘head office’ instantly to communicate with everyone anywhere in the world at any time, as long as they are online. Skype for Business is even more useful because it is vital to analyse the face of the colleague with whom you are interacting. An astute manager can then gauge if sales people are stressed or unhappy, and unearth the reasons why. TECH N O LO G Y TO DAY M A KE S COM MU N I C ATI O N MORE EFFECTIVE
The only logistical problems that have arisen are how to synchronise London’s lines of communication with diverse individuals, given the globe’s shifting time zones. There is also a need to be sensitive to colleagues during periods of the week or the year when the local culture or religion may dictate a different way of interacting than is normal in the West. 17
Also, it is important to emphasise to dispersed staff in a technological bubble that makes it easy to slip into 24/7 working that no one, wherever they are on the planet, should be selling for longer than five days at a stretch. Every member of staff must take two days off each week, even if these days are not Saturday or Sunday. Agile working naturally leads to enormous reductions in air travel costs. However, senior managers based at head office should occasionally board planes to establish a personal face-to-face relationship with important staff members (just as they should with major clients). In each case, digital interaction can work only if it has been entrenched by a strong personal relationship. Senior figures long remained attached to the idea that the only way to engage and incentivise staff or to induce them to compete or collaborate was to place them all in one office under the eye of an inspiring manager who could reward or sanction them. However, running a dispersed sales team does not preclude the manager in the global hub from rewarding or sanctioning staff. Strict ground rules need to be laid down before any dispersed sales team is granted autonomy. These rules can include, for example: • getting back to customers within 24 hours by telephone; • getting back to the manager within three hours; and • if staff have to give a presentation, a ‘pre-read’ document and an agenda must be available at least two days beforehand. Advice like this may strike UK business leaders as obvious, but the dispersed diversity of culture and business stream that an international sales director needs to address means that caveats of this type need to be continually restated. The sales head in London needs to hold digitally facilitated weekly catch-ups, monthly meetings and quarterly seminars with staff. Each salesperson, whatever their location, should bring three key weekly priorities to each Skype for Business or WhatsApphosted ‘tutorial’. TEN TIPS TO ENGAGE A REMOTE AND DIVERSE WORKFORCE • Lead and drive the behaviour you want. • Build face-to-face relationships in the first place. • Create exciting and unmissable regular team activities (either quarterly or six-monthly). • Invest in and embrace technology. • Invest time in setting up processes and communication plans. • Set clear roles, responsibilities and expectations. • Communicate regular updates on performance. • Bring trust and honesty. • Encourage competition and feedback. • Respect local cultures and holidays.
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C H I E F I N F O R M AT I O N O F F I C E R (C I O) & C H I E F D I G I TA L & DATA O F F I C E R
With special thanks to Jon Wrennall, former Chief Technology Officer, Fujitsu; Andrew Marks, former CIO of Tullow Oil; and Alistair Russell Senior Vice-President, Advisory Services, CIO Connect for their contributions and support. THIS ISSUE
• Digitalisation Governance
• Digital Era Skills
• The Digital CIO
Chief Information Officer
The primary C-Suite concern is ‘disruptive technologies’. These can take various forms, for example self-drive vehicles, Uber or Airbnb. The majority of this disruption is enabled through digitalisation, which C-Suite members continue to report as their single biggest concern. So, what can the CIO do to help? An increasingly important aspect of the CIO’s role is the ability to work closely with C-level colleagues to focus on and develop the appetite and the capability of their organisation to deliver digitalisation. Digitalisation can be deployed in many contexts, within every C-suite domain. It can transform the customer experience, join up previously disjointed parts of an organisation and demand people transformations as old skills become obsolete and new skills are required. Initially it can result in a 20–30% perceived peak in risk, as the transparency it drives makes the management and the organisation in general very quickly aware of what was not working. As digitalisation can be expensive, deciding on the focus of your resources is critical. Few companies will achieve the hyper returns of Uber. The digital process model outlined here is designed to help the C-Suite in this task – the model is not far removed from that of a normal technology investment process. The key is to start ‘outside in’, with internal innovation, before adding to the mix.
Digital Strategy, fully integrated with the Corporate Strategy with a culture that allows experimentation
Focused Disruption, that boosts the existing business and/or enables new business development
Market Watchtower, identify successful market developments early, keeping a watch on parallel markets
Chief Digital & Data Officer
Decide Fast, 'fail fast' and if it works, 'reallocate resources fast' to take digital market share
DIGITAL RE TURN ON INVESTMENT Each member of the C-Suite must be tasked to identify where digital can have the greatest return, which typically is in one of the following areas. • Customer – digital customer experience (DCX). • Leadership – digital management experience (DMX). • Staff – digital employee experience (DEX). • Operations – digital operations experience (DOX).
As the C-Suite may not be the best people to source the opportunities from, it is worth communicating with staff throughout the organisation and encouraging them to become involved and to put forward ideas and business cases. This process of engagement can also help with the cultural changes that digitalisation will inevitably drive. The CIO must prioritise where to focus in the digital value chain. The focus can be at the front end, on the customer experience, or internally, in transforming the operational processes that integrate and deliver services or in developing the digital employee
“Business leaders can be engaged through creating an investment heat map. This is where the CIO plots the cost and effort of each digital investment and their potential benefits and ROI. The key stakeholders are then brought around a table, debate the investments and then a collective decision is made. This method delivers clear decisions, ensures buy-in and reduces internal conflict.” C I O, F T S E 10 0 18
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experience. Having decided on the focus of digitalisation investments, the CIO should work with C-Suite colleagues to ensure that they have a balanced portfolio that balances scale of benefit, risk of delivery and scale of investment. BENEFITS
Happier customers and/or more of them
DCX Creating greater choice, faster and more flexible services (including response to customer complaints)
Customer knowledge and participation
Better and earlier management decisions, with higher returns and lower risks
DMX Transparency, data-empowered decision making and digital audit trails
Lack of understanding about ‘why’ and insufficient communications
Mundane and repetitive work taken off staff, resulting in higher productivity, more interesting work and greater satisfaction
DEX Automating processes that work (never digitalise a poor process) and connections inside and outside the organisation
Resistant organisational culture as workers face a change in behaviours/skills and, at worst, redundancy
Faster processes, fewer errors and less bureaucracy
DOX Setting new standards and updating and improving internal processes
Legacy systems, supplier resistance and cultural differences
DIGITALISATION GOVERNANCE AND THE L AW Having focused the investment, governance processes need to be up to ensuring delivery. While not constraining experimentation, governance needs to deal with issues such as when to kill experiments, when to scale and how to enable delivery across national, regional and enterprise levels. Digitalisation impacts both process and content, each of which can have different legal and or copyright implications. Therefore, the organisation should set out policies to facilitate the new processes, including the following priorities: • the selection process for digitalisation; • the digitalisation process itself; • the framework and data relationships; • access and social media; and C I O, F T S E 10 0 • adherence to standards (where required).
“The key USP all CIOs should have is global oversight of the business and the knowledge to join it all up.”
THE CIO’ S ROLE IN DIGITALISATION Digitalisation is good news for CIOs. It enables them to focus on value-adding activity and hence increases their influence with the leadership of their organisations. CIOs have an important perspective. They are able to look across the business and to see how it could collaborate more efficiently and effectively. This view across functions, together with the capabilities that CIOs have to integrate and to deliver programmes of scale, for example, positions them as key leaders in deciding their companies’ future. Once the appetite for digitalisation is tested and at least an orange light is showing, an appropriate approach for the CIO is to begin experimentation and prototyping. Prototyping is often far cheaper and can erode internal resistance. Once prototyped, you can show what the digital product could look like and get people to experience it. These small successes develop trust, generate interest and eventually enable cross-organisational take-up and benefit delivery. Digitalisation can and often does lead to a change in the business model, as it can free up considerable resources, eliminate resource requirements and enable the business to respond much faster to changes in consumer behaviour. This change in the model can be particularly relevant to the supply chain. For example Rolls-Royce created a closed-loop supply chain system, Merlin, that had significant commercial benefits. 19
Digitalisation is much easier to deploy when no existing system is in place. Legacy systems can create complexity and are often closely linked to cultural issues, such as established patterns of behaviour that can be difficult to change. However, part of the early value in a digitalisation process can be the pulling together of previously unlinked legacy systems and the improvement of these. The Digital CIO is a business leader and, like all business leaders, they need a broad portfolio of skills, as set out in the model below.
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Collaborator & Influencer
Strategist . The CIO must operate at the
C-Suite level, demonstrating understanding of the core business drivers and the business models. They need to understand the organisation’s life cycles; how the organisation creates and protects value; and have a good knowledge of the competition and how to disrupt it. Business engineer. Most CIOs have been trained as systems architects and so are well placed to answer the ‘how?’ question. This platform, supported with big data analytics, digital content management and search engine optimisation, enables them to test, manage and lead the organisation through change. Collaborator and influencer. These key skills relate to the ability of the CIO to collaborate with and influence their board, their team and their organisation as a whole. They need to know what questions to ask and how to judge the response. They also need to understand subtle changes in staff attitude, for example, the move away from important job titles to genuine greater autonomy. Even in digital companies there is an increasing convergence between the scientists, the business operations and the leadership. As always, the focus should be on business outcomes.
C H I E F H U M A N R E S O U R C E S O F F I C E R (C H R O) & L E A R N I N G D I R E C TO R
With special thanks to Max Blumberg, Blumberg Partnership, and Research Fellow, Goldsmiths, University of London, for his contribution and support. THIS ISSUE
• HR in the Age of Automation,
• GE and GAP on progressive HR
Digitalisation & Robotics
Chief HR Officer
The pace of automation in business has picked up. Electronics manufacturer Foxconn has replaced 60,000 factory workers with digitalised alternatives (perhaps unsurprisingly, given that the US manufacturing industry has replaced 33% of its workers by robots since 2001). Of more significance may be the 30,000 Barclays banking employees who, as a direct result of automation, are set to leave work for the last time in the next 12 months.
A R E W E R E A L LY O N T H E C U S P OF WORKING ALONGSIDE ROVER? Although we still consider the image of a robot sitting in our office as fantastical, the combination of the rapid evolution of technology and the timeless focus on business growth should not be underestimated. Moreover, what is currently possible in terms of automation has yet to be realised.
AUTOM ATION BUSINESS DRIVERS • Cost savings on human resources. • Potential to drive efficiencies unilaterally. • Reduction in risk and protection of IP. • Advancement of products. • Revolutionised potential for growth.
“About 60% of occupations could have 30% or more of their core activities automated”.
“45% of work activities could be automated using already demonstrated technology... Yet fewer than 5% of occupations can be entirely automated using current technology”.
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When (rather than if) robots are adopted en masse, the following challenges will loom large on the horizon for those tasked with HR processes. • Performance management . Performancebased management – comparing one employee to the next – is the traditional means of assessing workforce progression. As robotics increasingly enter our workforces, just how can a scale be defined between the two? This may well be a question that HR departments have to answer. A potential solution may come in the form of a definitive split between people analytics and robotic analytics. • Corporate culture. Just what does a culture where artificial intelligence, robotics and humans intermingle represent? This is a particularly relevant question, given the
M C K I N S E Y & CO M PA N Y
Even industries deemed to have been untouchable by technology-induced redundancy have not escaped its effects. One example is the disruption to the taxi industry caused by the ‘crowd’-powered taxi app Uber. This has led to a workforce demanding fresh legislation to counter this brave new world. 20
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presumed hostility that many workers may exhibit to the increasing number of robotic replacements working beside them. Furthermore, a natural extension to corporate culture is the tricky challenge of public image. As automation is a naturally divisive topic – businesses consider the efficiencies it brings as positive, but the wider public is naturally inclined to think otherwise – the identity of corporations may be severely shaken up by its introduction. • Employee relations . The example of Uber should serve as a stark warning to HR professionals as to how technology can lead to a wave of disgruntled workers who rail against increasing automation. The question of how businesses harness advancement amid such a context may well prove a relevant one to address sooner rather than later. • Motivation and rewards . Some experts believe that robotics will naturally drive down wages – a classic example of supply and demand in action. Others, however, argue that, at least in the West, legislation will ring-fence incomes. Nevertheless, the correlation between hourly wages and the upsurge of automation is undeniable. If automation has a major impact on wage levels, businesses will need to implement revolutionised reward systems. A crucial question will be how to motivate employees who have to work alongside the automated technology that has depleted their wages.
Create a strategy for skills redeployment. Draw up a plan for harnessing skills that can only be provided by human capital (such as emotional or social tasks) and roles where human interaction is required.
Ultimately, the future of commerce looks set to adopt automation on an ever more significant scale and in increasingly sophisticated ways. These may be the only things that we can say with certainty when it comes to business automation. Businesses must stay up to date with the evolution of automation and continually assess its potential as it relates to them – choosing wisely when to invest and adopt – if they are to retain their position in the market. Alongside this, due diligence must be undertaken as to how robotics will integrate into a business. The consequences of failing to do so can be grave, as the potential of harnessing automation is impressive.
H R S TE P S TO TA KE TO DAY TO PREPARE FOR TOMORROW For HR professionals, preparing for automation should already be part of their role. • For each type of job in your organisation, assess the extent to which individual job components can be automated and which cannot. This will reveal the potential extent of the transformation task ahead, and where significant career development plans for ‘under-threat’ roles will be required. This
Comparison of wages and automation potential for US jobs Ability to automate, % time spent on activities1 that can be automated by adapting currently demonstrated technology 100 File clerks 80 60 40 20
Chief executives Landscaping and groundskeeping workers r2 = 0.19
Hourly wage, $ per hour2 Our analysis used “detailed work activities”, as defined by O*NET, a program sponsored by the US Dept of Labor, Employment and Training Administration.
2 Using a linear model, we find the correlation between wages and automatability in the US economy to be significant (p-value <0.01), but with a high degree of variability (r2 = 0.19).
Sources: O*NET 2014 database; McKinsey analysis
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assessment should include the percentage of job components that can be automated, the cost impact and the cultural impact. • Engage with the C-Suite. Ultimately, for initiatives of this type the entire C-Suite and board should be engaged, as detailed below. • CIO: on helping with the technology assessment and realistic automation plans. • CMO: on the reputation risk and the impact on the employee brand. • CFO: on the financial impact, the cost of transition and long-term financial impact. • CEO: and the board: on investment opportunities and priorities, the competitive landscape, key risks and mitigating actions. • Create a strategy for skills redeployment. Draw up a plan for harnessing skills that can only be provided by human capital (such as emotional or social tasks) and roles where human interaction is required. This should be used as a key input to the medium-term workforce planning process. The argument for retaining human capital in the face of automation should be based on good business sense and pragmatic public relations (as robots are viewed as a source of cheap labour). • Automation assessment should become HR ‘business as usual’. The extent to which automation will change the HR landscape will be largely sectordependent. However, at the very least, HR executives should stay abreast of automation developments (for example, as regularly detailed in research by McKinsey & Company) in order to explore the latest data in this sphere and identify the newest job roles entering the ‘underthreat’ list.
C H I E F O P E R AT I N G O F F I C E R (CO O) & S U P P LY & P R O C U R E M E N T D I R E C TO R
With special thanks to Arnaud Madelin, former Group Operations Director, Exterion Media for his contribution and support.
• Operational Transformations in Resistant
• Operational Excellence in a Digital Age
Chief Operating Officer
Supply & Procurement Director
CH A LLE NG ES IN A FA S T-PACE D E N V IRONME NT With the current rate of change and the challenges this brings, the operations function leadership has become more demanding. In such a turbulent corporate environment, the COO role takes on a far greater scope than in the past and requires stronger-minded individuals to fulfil it.
Sudden changes in the marketplace and the necessity of new business models require the operations function to be fully positioned as a customer-oriented business partner. This calls for the rejection of a ‘silo mentality’ and the adoption of a culture of transformation. Fast and complex business development and transformation have become so critical to organisations that they require a new way of working across the entire scope of operations to achieve business goals. This means fundamentally changing the way people think, based on challenging targets, a rapid pace of implementation, pro-active communication and a customer-oriented focus. TOP M ANAGEMENT M ANDATE In such an environment, the operations function leadership needs to be reinforced. The COO must play a direct role in shaping the business strategy and therefore needs support from the entire board to empower the operations function to achieve the required business development and transformation.
However, full support can be given only to a COO with a clear vision, positioning and selling his or her contribution to the business strategy through close relationships and trust. In exchange, the COO should be considered as an extension of the CEO and should be fully integrated into the executive team, demonstrating top management commitment, accountability and backing. This gives the COO the mandate to challenge the business – upwards as well as downwards – and to make changes in order to achieve the objectives of the business strategy. STAFF ON BOARD A committed, agile and flexible organisation is required to deliver ambitious development and transformation objectives. Leadership is essential to ensure that the organisation understands the vision and is convinced of the need for the changes associated with its implementation. Staff will seek consistency between their convictions and their actions. Reinforced team building, workshops, relationships and communications are important to secure acceptance of change, as well as the necessary adherence, belief and involvement, in order that everyone is ‘on the same page’.
ARNAUD MADELIN F O R M E R G R O U P O P E R AT I O N S D I R E C TO R , E X T E R I O N M E D I A A N D I N T E R N AT I O N A L O P E R AT I O N S D I R E C TO R , C B S O U T D O O R I N T E R N AT I O N A L 22
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... full support can be given only to a COO with a clear vision, positioning and selling his or her contribution to the business strategy through close relationships and trust
On top of this, leading by example is essential for the organisation to move at a faster pace. To ensure continued momentum, the resources, structures, processes, training and systems in place need to be in line with the objectives pursued. Employees need to see that the organisation supports the required efforts and changes. THE IMPORTANCE OF OWNERSHIP The associated structure must have clear roles and responsibilities. The RACI model is a straightforward tool to achieve this. Welldefined responsibilities and roles enable people to take ownership, make decisions and know when they should exercise their personal judgment.
Accountability is key, starting with the COO and other key roles. There is no excuse for lack of clarity on accountability. This is a particular challenge in a matrix organisation, as there may be a mistaken belief that matrix management is similar to group decision-making or a sort of executive ménage à trois, a triangular arrangement where a manager has two reporting lines, with full accountability to neither. SETTING GAME-CHANGER GOALS Ambitious targets not only set development and transformation goals, but also have an important emotional impact, fundamentally changing ways of thinking and allowing the organisation to excel. Pushing people out of their comfort zone and liberating them from the practices of the past can bring major benefits for the business.
Full clarity on how the targets will be reached is not necessarily essential, but the approach in setting the targets should not be incremental. It is important to start from what is theoretically achievable. After assessing if certain actions are unrealistic (and only after this stage), some elements can then be discarded. Moving away from the traditional incremental approach can be difficult and requires the COO to have a certain distance from and an independent view on the existing practices – a ‘blue-sky’ approach. One solution can be to bring in fresh views from third parties and similar industries/sectors. In addition, thinking out of the box, beyond the operations function and including other parts of the business, as well as suppliers, partners and customers, can discover opportunities in unexpected or neglected areas. A limited number of high-value objectives should be set at any one time, in order to ensure a sufficient focus and achieve delivery. A transparent ‘single source of truth’ evaluation method is essential to identify the starting point, the targets and the stakeholders and to track progress and define the success of achieving the objectives.
COOs should take a factbased, independent approach, putting themselves at a distance from the decisions of the past. It is useful if they have had experience of similar turbulent corporate environments in their earlier careers PLANNING AND EXECUTION Successful planning and execution depends on a new fast-paced culture of delivery, based on standardised, weekly action-oriented meetings. Attendance by all stakeholders should be mandatory, meeting agendas should be firmly defined and action items should be attentively tracked.
Presentations should be short, fact-based and action-oriented to encourage decision-making and remove bottlenecks and roadblocks. Time-consuming debate and bureaucracy should be avoided. Any problem-solving discussions should take place in advance – the meeting should be presented with the options of how to solve the problem. Throughout both planning and execution, the COO needs to challenge each initiative owner to make sure all options have been considered, leaving no stone unturned. Clear communication from senior management is crucial to secure optimal response from the rest of the organisation. COO PROFILE To fulfil the complex COO role, a capable experienced leader is required to drive the organisation forward, showing passion and acting as a role model for the sort of behaviour required to encourage and embed change. The COO must also have the ability to challenge and hold his or her management team accountable, making sure they deliver ambitious results quickly, with sustainable long-term outcomes. In addition, COOs should take a fact-based, independent approach, putting themselves at a distance from the decisions of the past. It is useful if they have had experience of similar turbulent corporate environments in their earlier careers. CONCLUSION In an increasingly fast-paced business environment, the COO’s role has become much more complex. Not only does the COO need to run normal business operations (and continuously improve these, based on operational excellence principles), but he or she also needs to design, build and transform operations with breakthrough ideas and the implementation of changes in a timely manner. This is a challenging remit, but also a highly rewarding one.
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Editor John Jeffcock, Chief Executive, Winmark on + 44 (0) 20 7605 8000 firstname.lastname@example.org Winmark Global 7 Berghem Mews Blythe Road London W14 0HN United Kingdom