Institute of directors chairman Neville Bain tells E&T why effective business management is all about people.
The people advantage
Once described as a 'truly bright and outstanding leader', Neville Bain is also a truly international company director. A New Zealander, he was educated at Otago University where he graduated with degrees in accounting and economics. He started his commercial career with Cadbury Schweppes in his home country and subsequently he has worked in Australia, South Africa and the UK where he was chairman of Consignia plc (formerly the Post Office).
He is currently chairman of the Institute of Directors (IoD), an international members' association that provides a professional network reaching into every corner of the business community, from the largest public companies to the smallest private firms. He is also a non-executive director of Scottish & Newcastle plc, as well as Biocon, an international company registered in India with a market cap of $1.2bn. He was also group chief executive of Coats Viyella plc and chairman of Hogg Robinson.
Keenly interested in business education, Bain has published several books on the topic including 'Successful Management', 'Winning Ways Through Corporate Governance' and 'The People Advantage'.
His most recent book is 'The Effective Director' in which he argues that the real levers of success lie beneath technical competence and business ability. To succeed, he says, we need to behave more ethically both with our clients and the people who work for us.
Nick Smith: One of the core values of 'The Effective Manager' is ethical corporate behaviour. How important is it in today's commercial environment for companies to behave ethically?
Neville Bain: I think it is hugely important and it's not just my personal view, but it is also the view of the Institute of Directors in terms of the development programmes that it has got. If you want to delegate and get the best from your people you've got to give them a sense of the strategy and an understanding of the organisation's values. In other words how we do things around here. There's a chapter about ethics in which I discuss the underlying things embedded in the organisation that are hugely important.
NS: The nature of work today is different from how it was a generation or two ago when you might have expected to join a company in the drawing office and work your way up to the board. Now people work for shorter times and they move more. Does this provide a charter for companies to behave less responsibly toward the people they employ and their customers?
NB: I think this is a greater challenge of increased importance. The reason for this is that if you get the right people and adopt the right strategy you will have a winning combination. You will outperform your competition, and there's lots of evidence to support that. If you can do that in an environment where the governance is right and the values are right then you are really going to achieve. You've got to accept that some of these good people will move on because the opportunities aren't inside the organisation.
NS: Is there a need for greater transparency at board level about a company's corporate social responsibility and environmental policies and the way they are presented?
NB: It's not just about transparency. It is also about how the board satisfies itself that the values it subscribes to are actually being practiced in the organisation. There's an example in my book where I refer to a company called Enron, where the chief executive had absolutely perfect values, which were written down, only nobody took any notice of them.
Now the board should be aware of the checking mechanism that makes sure that the values of the orgasnisation are being practiced. You can do things such as monitoring employee and customer feedback. That should be fed to the board. I am certain that the board must have as one of its fundamental processes coherent succession management where you look at your stock of senior people every year and decide how they are being developed. At all of the boards that I work on, including the IoD, we do that now.
NS: In your book you say there is a moral imperative for businesses to behave sustainably. Have businesses got this yet or are we still working in a 'compliance culture'?
NB: The difficulty here is that there is no universal measure by which we can say this is how a company is 'greening'. And so there is no way of saying if the good things companies claim to be doing are actually offsetting the bad things. For example, you hear industry talking about power saving and waste management. When it comes to green issues it is a good thing that we are responding to pressure, but we have to do better in my view. The thing I object to when it comes to good practice is everyone ticking, ticking and ticking. Everyone is covering their arse (that's a technical term) in relation to whether they are exposing themselves legally. That's a huge disappointment, especially as a lot of SMEs think that these values are just for big companies.
NS: What do the new directors now have to look out for?
NB: The first thing a director must be is a good citizen, and good citizenship covers a whole range of issues including the green agenda. Our stance at the IoD is that we very much support sustainability across the globe at board level. But we have to be careful that the politicians don't legislate ahead of us so that we then get a competitive disadvantage to other countries. We don't want to find ourselves in a situation where we are losing jobs and that the greening savings made here are offset by other countries such as India, Indonesia and China.
NS: So we want economic development but it has to be through sustainable business practices…?
NB: The only reservation I've got is that competitively we mustn't put ourselves at a disadvantage. We have to remind our politicians that 'more is less'. In other words, the less the incompetents in government get involved, the better it is for the community as a whole.
NS: In your role as chairman of the IoD what is the one piece of advice you would give to a director?
NB: Most of the books on governance, business and so on focus on your legal obligations and technical requirements as a director. Only about 20 per cent of my book is about that stuff. The rest is about issues that over many years as a director I have found to be really important. So if you press me I'd say 'remember that it's about people and the utilisation of people within an organisation'. It's all about motivating people and much of my book deals with just that. Hanging onto that central theme are concerns such as ethics, proper practice and being a good community person.
NS: But many people would say that the reality of running a business - cash flow, production scheduling, recruitment etc - leaves little time for anything else. What would you say to somebody in that high stress situation?
NB: I've been running businesses for 30 years and so I know what these pressures are. But I also know the difference between doing what's important and doing what's urgent. It's a bit like this: I'm downstairs trying to work out my household budget, but I've forgotten that I'm running a bath and so the water's running down the stairs. So I think 'I can see the water coming down the stairs, and I've got to turn the water off, but it's really important that I get this budget right'. So you have to do both.
NS: You have said that the core of a business is its people…
NB: They're the difference between average and superior performance. If you've got a good team, properly motivated with a clear idea of the strategy you are working towards, and with an understanding of the values the organisation has, you've got a big chance of success. I started off as an accountant, and for years I thought you could fix problems by attacking the numbers, but actually you can only fix problems through people. I don't want to be in the front, I want other people to say 'look what we have done'.