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Sports Direct is facing heavy criticism in the press. Its board labelled as dysfunctional by the Institute of Directors (IoD) for failing, among other things, to check the powers of founder and executive director Mike Ashley. Apart from major decisions being made without board level consultation until the very last-minute; an atypical board structure; and unexpected decisions being made with no explanation, the Sports Direct board comes in for flack for its unusual governance. Have associations anything to learn from this example?

Dyfunctional by association

According to reports in The Guardian newspaper, Sports Direct`s chairman, Keith Hellawell, told a recent commons Scottish affairs select committee that non-executive directors were unaware of a plan to put part of the group into administration until the day before it happened, despite discussions with the administrator over nearly three months. Two hundred workers lost their jobs as a result. A handful of senior executives took key decisions without any discussion at board level, and one shareholder is facing legal action from Sports Direct after he sought access to the retailer’s shareholder register to gain support for a campaign on the use of zero-hours contracts.

Whilst the Sports Direct board may be an extreme example, I could name at least one membership association in a similar fix. So, with the effectiveness of a board and its members able to make or break an organisation, is it time to ask – how functional is my own board, and is it making good decisions? Membership boards aren`t exempt from failure after all!

Some forms of dysfunction may  be easily addressed but others can be much more difficult to resolve. In my experience, ninety percent of the time the problem is the wrong mix of people. They may have been  appointed board members because of their expertise, experience, great reputations and networks, and often due to their strong personalities. But this can sometimes prove a toxic mix!

There are numerous reasons why individuals sign up for board positions in the first place, and understanding these can go a long way to explaining dysfunction in the boardroom. Sometimes, its purely for ego’s sake, believing the role will look good on their CVs, rather than out of a true interest in contributing to the board and in doing their fair share. I know of boards where directors simply don’t turn up for regular, scheduled meetings. And others where they almost never read briefing notes. Plus, un-remunerated volunteers may give low priority to their duties.

Sometimes it is the inability of the chairman to keep order, prevent side meetings, and make sure all points of view are heard – curbing the bullying or garrulous, and encouraging the timid – so that the discussion flows and timely decisions are made. Postponement and procrastination are the enemies of decision-making. And failure to instil the principle of `cabinet government` – whereby the whole board puts its weight behind its collective decisions – can leed to a leaky and divided board. Directors must also leave individual self-interest at the door, acting only for the common good. Some trade association directors find this latter principle very hard to grasp.

So, a vital job for any board is to monitor  its own performance – with the help of an independent observer – to see if there is remedial work to do. The outward signs of board dysfunction should be easy to spot, and may include churn in the boardroom and among senior management; a CEO who struggles because of lack of support (a CEO running rampant can, conversely, be a sign of Board weakness); and constant failure to meet objectives in an otherwise healthy market.

The effects can be severely damaging. The business will undoubtedly lose good people and will make bad decisions. But there is no quick fix and severe damage can be done during the time it takes to remove and replace under-performing, dead-weight, or wayward directors. Nip the problems in the bud at an early stage. Don’t waste precious resources firefighting after the event – risking the loss of members’ confidence – with all that can entail in terms of lost revenue. Take action now!

Latest reports indicate that in the Sports Direct case, one result may be an AGM vote against the retailer’s executive deputy chairman by an influential shareholder. Where that will lead is not yet clear, but it’s a stark reminder that playing fast and loose with governance can have unhappy consequences for all boards – including associations!

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Michael Hoare FIAM

@mjhoare

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As the Labour leadership contest proved, the merest hint of uncertainty over the conduct or legality of a selection process can seriously damage the credibility of an election in the minds of the voters. Even a whiff of mismanagement will leave a bitter taste of dissent lingering amongst the electorate.

Cock-up or conspiracy all become one in the minds of those who have begun to question the validity of the process and therefore the result. My recent experience confirms that some associations’ procedures are in desperate need of independent scrutiny.  And history has shown us that governments adopted on the basis of a dubious selection process almost always fail to maintain the trust of the people. Except, of course, for dictatorships, and they just don’t care!

So, electing governments is one thing, what about day-to-day decision-making?  How many times have you, as a trade association manager, been asked your membership’s view on a particular issue, policy, or piece of legislation, only to realise that you are completely in the dark? And, in all honesty, how many times have you responded to such an enquiry – possibly from the press – with your own best guess; hoping that the majority would tow the party line and follow you over the barricades into the thick of battle?

We’ve all done it, and because we’re all seasoned campaigners – with our ears to the ground – we generally get away with it. But what if your judgement call goes awry? Second-guessing the mood of your constituency is a risky business, and careers can be seriously dented by getting it wrong. Why not limit the risk by asking your members what they really think? Most often, the answer to that question is that to do so would be costly, time-consuming and possibly wasteful. But what if it was none of these? Enter the digital democracy!

A couple of years ago, during a fascinating IofAM discussion,  – which utilised SMARTvote devices to take quick polls from the floor and encourage discussion around various points – Electoral Reform Services (ERS) asked participants to consider if digital technology could be applied to democracy. Along the way they demonstrated that online voting is an effective way to reduce an association’s printing costs, provide wider communication choice for members and be more environmentally friendly.

However, not everybody is comfortable with computers and it is vital in a democracy to ensure that no voter is disenfranchised: the right mix of communication methods need to be employed. Maximising communications and using social media within an election context is a powerful way to raise its profile and foster engaging discussion with the electorate. But unfettered it can also backfire badly leading to the dissemination of half-truths, falsehoods, and even character assassination.

So digital democracy is about much more than just social media. There are other barriers to voting online. These include lack of trust in the security of the process; technophobia; and voter fatigue or cynicism. However, as more commercial transactions take place digitally, and security improves, electorates may become increasingly comfortable with online voting. And if the effective capture and use of data allows for targeted communications it may also increase the ‘buy-in’ to online polling and elections.

But where does that leave Association management skills? Will there be any further need for judgement and experience once all options can be tested – Swiss style –  by referendum and all decisions can be digitally ‘crowd sourced’?  Can we really trust the wisdom of crowds to get us through? Or is a wily CEO with his / her ear to the ground still the best barometer of member opinion?

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Michael Hoare FIAM

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Association executives will all have experienced difficulties with presidents, chairmen, or directors. They are a mixed bunch and over the years the good, the bad and the ugly come and go. Never-the-less, as professionals you have to get on with them, accept their peculiarities and petty likes and dislikes whilst the serious business of governance goes on.

In my twenty-odd years’ working my way up through membership bodies, trade associations, and charities, I’ve discovered that Boards come in many shapes and sizes. Each adopting a different attitude to the responsibilities they have taken on – sometimes unwittingly. They range from the indolent to the hyperactive, the distant to the micro-managing, and all shades in between. Their attitude to the chief executive and secretariat can also vary wildly.

Some directors see the association as their personal fiefdom, with the staff as serfs to do their bidding; the chief executive’s prime functions – in their view – to ensure the success of the golf day and the quality of wine at the annual dinner. Such attitudes stem from the days when association secretaries ruled; when finding a place on a Board or committee was one way for family firms to distract patriarchs who refused to step aside; when a culture of amateurism prevailed; and directors’ focus was sometimes blurred.   In my time I’ve met them all – the commanding, the conniving, the conceited, and the committed – but when it comes down to it there are two distinct types of association Board. One meddles and micro-manages in the mistaken belief that as business people themselves they must be able to do better than their ‘employees’. The other understands their strategic role but accepts that the secretariat are professionals – experts in their field – with the CEO taking operational responsibility on a day-to-day basis. Only the chairman can determine which route they take.

But don’t let’s fool ourselves, chief executives can be a mixed bunch too.  Perhaps best described as entrepreneurs, showmen, and diplomats all rolled into one, they have to juggle the often conflicting interests of their members to achieve consensus, and they can be complex characters. Nevertheless the key relationship is that between the chairman and the chief executive, and trouble follows where this fails. As well as a shared commitment to the cause, relationships must be based on mutual respect and trust. They must be frank and open, with problem areas being addressed amenably. Empathy, communication, humility, and self-awareness are the key differentiators.

The two roles must be complementary. The chairman is responsible for leading the business of the Board while the chief executive manages the association’s business. The chairman and the chief executive must be aware of each other’s activities and work together as a team. The duties of the chairman – a non-executive role – arise from their position as the chief elected officer of the association and their responsibility for presiding over its official business and the Board. The chief executive is responsible to the chairman and the Board for directing and promoting the operation and development of the association consistent with its primary objectives. In so doing they exercise executive stewardship over the association’s physical, financial and human resources.

There used to be a joke along the lines of, ‘what’s the similarity between a non-executive director and a shopping trolley?’ Answer: ‘They both have a mind of their own, but you can get more food and drink in a non-executive director!’ It may be an old chestnut, but it illustrates that the fault line between executive and non-executive responsibilities is often where most tension develops. Some secretariats are resentful of the oversight of a largely non-executive Board that they sense doesn’t share their vision or commitment – or jeopardy to their income – or appreciate the skills and professionalism they bring to a difficult job.

Therefore, not-with-standing their fiduciary responsibilities, and duties to members, every Board must remember that the lively-hoods and well-being of all those employed by the association are at stake and the consequences of ignoring this fact can be enormous. Believe me, I’ve been on both sides of the fence, as director, chief executive, trustee, and humble foot-soldier, and I know how morale suffers when internecine warfare sours relations or the Board appears to lose the plot!

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Michael Hoare FIAM


Please Note:

Members of The Gemmological Association of Great Britain can log in and find details of the 2015 Council elections on the Gem-A website, including a proxy voting form for those wishing to caste their vote online.

The Gem-A Manifesto by Ronnie Bauer, Kathryn Bonanno, John Bradshaw, Guy Clutterbuck, Michael Hoare, Alan Hodgkinson,  Alberto Scarani, and Greg Valerio is available from info@michael-hoare.co.uk


             
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OK, so retailers have got face scanning technology, and the self-service checkout, what next? Zooming right to the top of the list of stuff we didn’t know we wanted – but we soon won’t be able to live without – is what the boffins call the ‘Internet of Things’.

Internet of Things

The idea is that inanimate objects – like fridges, boilers, kettles – are connected to virtual networks and can communicate with each other and their owners. The concept isn’t that new, and it has been possible for security cameras, heating systems and the like to be activated and monitored remotely for some time. Once upon a time the ultimate application predicted by scientists was the ability for fridges to sense they were running low on some essential commodity and simply add it to your shopping list, or order it themselves online. When this was first mooted I had nightmarish visions of fridges developing a craving for cheese and creating a world shortage by clubbing together and buying massive quantities. But I digress!

It’s not cheese consuming fridges that are going to turn retail on its head, it’s the latest point of sale technologies! Some say they will be more revolutionary than the introduction of online shopping, or credit and debit cards for purchasing, and that they have the potential to be totally transformative. futurologists predict that one day soon a woman will be able to walk into a store, grab what she wants and simply leave. No need for the checkout, nothing! Today we call them shoplifters, but tomorrow ‘grab and go’ may become legitimate thanks to the ‘Internet of Things’! It may seem extreme, but IoT presages dramatic change in the customer experience.

How will it work? A population of sensor technologies placed strategically within stores, will allow retailers to recognize customers when they walk in the door through their smart devices or other means. Stores will have payment cards on file; customers will be billed when they leave the store with the merchandise, bypassing the checkout.

Store-side, sensors can be placed on shelves to indicate when stock is low and trigger replenishment. Meanwhile intelligent product displays that detect who is around them will deliver customized content via video screens and booths. Video cameras will gather analytic data on store traffic or as part of RFID systems to speed up checkout queues, or even total up the content of your shopping trolley as you wait.

So far, so good, but why? One reason is that with the rise of online shopping, retailers have some self-inflicted problems to solve. Like, how to iron out clashes between their in-store and online offerings, how to look consistent across all platforms, and how to give added value and variety to an arid environment. OK, there is some disconnect between what consumers find online and what they get when they walk into the store, and the march of the mundane and the ubiquitous gathers pace. But, aren’t the futurologists proposing to use a technological sledge-hammer to crack a very small nut?

Just because something is technically possible, must we do it? Couldn’t we put all this technology to better use? These and other questions make me a little uneasy. What about security? Would we be asking customers to sacrifice their anonymity just to conform to the needs of machines, or adapt their behaviour to accommodate technology? Surely that’s the wrong way around! Will these developments inevitably lead to less employment, fewer people providing service, security, and human contact? Would the disconnected find themselves disenfranchised; would the connected have their data protected? And on the most banal level, how would a store detective separate the legitimate customer from the shop lifter in a shop where you just pocket the goods and leave?

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It’s a seductive idea, but isn’t this yet another example of inventing a complex answer to a non-existent ‘problem’ of our own making, and wouldn’t it just be simpler to employ more people? They at least are a resource that is in endless and ever- increasing supply!

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An item by crime correspondent Martin Evans in yesterday’s (3rd July) Daily Telegraph newspaper highlights the unforeseen hazards of using Twitter. According to the paper, burglars monitor social networks and pick up useful information that helps them target empty homes whilst their owners are on holiday. ACPO burglary spokesman, Assistant Chief Constable Gareth Morgan, is quoted as saying “Users of social networking sites need to use caution when telling people where they are or posting messages about valuables in their possession or in their homes.” The tactic apparently forms part of the plot of upcoming film release The Bling Ring, due out later in the year, but the risk isn’t just to the rich and famous, it also applies to lesser mortals, to retail business, and encompasses more calculated crimes too.

Social media can provide business with extraordinary tools, both for marketing and for their original use in keeping in touch with friends, colleagues, and those that share interests. Small retail businesses in particular can use social media to their advantage, building up contacts with potential clients and satisfied customers alike. However there may be unforeseen consequences from sharing the wrong kind of information, particularly where employees work in sensitive or vulnerable environments. As you can imagine jewellers are generally security aware, but social media have opened up a potential chink in their armour. During my twelve years as a spokesman for the retail jewellery sector, and co-founder of SaferGems, I saw all sorts of information shared on Facebook, and some of it would have helped a criminal track staff movements or indentify times when a shop would be vulnerable. And proprietors aren’t exempt either! It’s not just junior staffs who make slip ups, and it is all too easy for anyone to innocently share information on social media sites that could be extremely useful to fraudsters or potential kidnappers; the essence of Tiger Kidnap being to build up a picture of the potential victims movements through stealth, stalking, and secret surveillance.

Coincidentally, only a couple of days ago managing director of Training For Success, Ian Kirke, informed me that they have developed a highly participative workshop that provides pragmatic advice to members of staff who work in vulnerable roles and high-risk organisations, for instance within the financial sector. After recently providing a number of workshops for a leading UK financial organisation they balanced an overview of current threats – how to mitigate the risks posed from social media (e.g. Facebook, Twitter, etc.) – with discussions and analysis of police case studies. Facilitated by a serving Detective Superintendent (and Facebook user) the programme also got to grips with a scenario-based exercise exploring what to do if a demand/threat is received and how to work alongside the police.

As a direct result of the intervention staff immediately corrected existing deficient security settings and conducted a review of potentially hazardous content. Whilst there is as yet only a small, but growing, threat of Tiger Kidnap, exactly the same techniques could apply to the jewellery sector, and my intuition tells me that jewellers need someone with the right balance of theory and ‘real life’ experience of law enforcement to analyse their weaknesses and help build up their defensive strategy.

MICHAEL HOARE Note: TFS works with organisations to minimise threats, providing training courses and consultancy to help companies and workers deal with business risks and threats. They can be contacted via www.tfsuccess.com
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