Why Talent, Strategy and Risk Should be at the Forefront of the Board Agenda

 

Listen to Episode 62 on Apple Podcasts

  Guests: Dennis Carey, Vice Chairman of Korn Ferry, Ram Charan, world-renowned business adviser, author, teacher, and speaker, and Bill McNabb, former Chairman and CEO of Vanguard, all authors of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

In this episode:

  1. Why Now?: Carey, Charan and McNabb take us inside their inspiration and timing behind the decision to write their latest book.
  2. Talent as a Foundation: Carey, Charan and McNabb discuss key takeaways from their book and how boards should be thinking about talent, strategy and risk.
  3. The Importance of Diversity: Carey, Charan and McNabb explain the connection between strong talent and diversity in the workplace and the boardroom.

Summary:

In this episode, hear from Dennis Carey, Vice Chairman of Korn Ferry, Ram Charan, world-renowned business adviser, author, teacher, and speaker, and Bill McNabb, former Chairman and CEO of Vanguard, as they take us inside the key takeaways and impetus behind the publication of their latest book: Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR.

Why Now?

Our guests begin by explaining the book's original conception: 'We all agreed that this period of time has no real precedent. We're continually faced with the collision of short-term activists with the blossoming of long-term players,' says Carey. He goes on: 'All three of us are captivated by the growing imbalance here, and the need to rebalance. So, we wrote this book as a way to guide boards and C-Suites about how to manage the competing interests of short-term and long-term players in your organization.' McNabb gives a bit of his perspective: 'At Vanguard, we'd begun to get disappointed with state of corporate governance over the last ten years or so. The real driver was a result of what Dennis described: this tension between short and long term.' He elaborates on this tension: 'While a short-term oriented investor should have a voice, that voice should not be outsized. I saw that some investors with small holdings were forcing changes that would be detrimental to long-term value creation. The book concept was a catalyst to get people to think about this differently.' Charan highlights the urgency behind this needed shift in perspective: 'The world has changed radically. Increasingly, we see the focus and incentives being put behind short-term financial performance. This will be detrimental in the long-term. Focusing so completely on the short-term means the short term gets shorter and shorter, and before you know it, you'll be acquired.'
'As we wrote this book, we agreed that this period of time had no precedent. We wanted to guide boards and CEOs on how to think about competing interests between short- and long-term players.' -Dennis Carey, author of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR

Talent as a Foundation

In their book, our guests describe talent, strategy and risk (TSR) as the three most important focus areas for boards. Carey explains, 'The board needs to integrate development across these three vital areas instead of dealing with them in vertical silos. For example, 'Talent' isn't even named in the compensation committee. Talent needs to be foundational and part of the board's work. When Steve Jobs was developing the iPhone, he raided top talent first.' Carey compares TSR to a stoplight: 'Your green light is talent. Talent starts the foundation for a new idea or strategy. You can't move forward without it. Your yellow light is then strategy. You have an option to take different paths here. You have to make sure you've developed the right strategy for the talent that you have. Then, your red light is audit and risk. You have to stop and assess the strategy and make sure you meet financial, legal, and regulatory criteria.' Carey reiterates, 'Often, these three things are talked about in isolation. This is not the right way to achieve long term sustainable value. They talk about these things in isolation. This is not the right way to achieve LTSV. You've got to harmonize and integrate these activities, and make sure the board is involved.'
'You won't always get the strategy right, but you can trust the talent of your people. That's why talent is so foundational.' -Bill McNabb, author of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR
Charan expands on this idea: 'A board will often look beyond talent and look at strategy. It's important for the board to also look at who comes up with the strategy and oversees risk. A great board has talent that produces and executes strategy and risk management. This goes for the members themselves as well: What is their talent? How do they harmonize the focus? What issues are relevant? Each individual's suggestions need to be heard and considered in order to properly guide a board's focus. You need to have a value-adding board.'

The Importance of Diversity

In order to have foundational talent that provides your organization with the right strategy and risk management avenues, diversity is crucial. Charan touches on this: 'Everyone has raw talent: Find it, train it and shape it. The idea that diverse talent does not exist is a common misconception. Diverse talent exists in abundance. Common sense is a value, asking the right question is value and possessing unique specialties and backgrounds is a value. Shout these people out, encourage them and teach them.' In ten years, Carey believes that boards will continue to become more diverse: 'We are in the midst of a pendulum swing now that investors are on par about diversity creating performance and value and are advocating for more diversity on boards and leadership teams. We need strategically correct directors who understand the nature of the business they're being asked to oversee. Part of this means that the board should reflect the customers you serve. Investors will continue to push this notion for valuation of their investment, not just for politics or niceties.'
'Embracing diversity is essential to finding the right talent. These diverse candidates exist, they are talented, and they are ready. Find them, support them and encourage them.' -Ram Charan, author of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR

Also in this episode...

McNabb discusses his current passion project: 'Right now, I'm involved with the development of documentary called The Most Beautiful Thing. It's a film about a group of young men in Chicago coming out of a difficult neighborhood who become the first black rowing team at the high school level in the city.'

Resources from this episode:

A Different Kind of TSR: The Importance of Talent, Strategy and Risk

08/06/2021
Kira Ciccarelli

A Different Kind of TSR: The Importance of Talent, Strategy and Risk

Listen

Why Talent, Strategy and Risk Should be at the Forefront of the Board Agenda

Listen to Episode 62 on Apple Podcasts

 

Guests: Dennis Carey, Vice Chairman of Korn Ferry, Ram Charan, world-renowned business adviser, author, teacher, and speaker, and Bill McNabb, former Chairman and CEO of Vanguard, all authors of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR

Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

In this episode:

  1. Why Now?: Carey, Charan and McNabb take us inside their inspiration and timing behind the decision to write their latest book.
  2. Talent as a Foundation: Carey, Charan and McNabb discuss key takeaways from their book and how boards should be thinking about talent, strategy and risk.
  3. The Importance of Diversity: Carey, Charan and McNabb explain the connection between strong talent and diversity in the workplace and the boardroom.

Summary:

In this episode, hear from Dennis Carey, Vice Chairman of Korn Ferry, Ram Charan, world-renowned business adviser, author, teacher, and speaker, and Bill McNabb, former Chairman and CEO of Vanguard, as they take us inside the key takeaways and impetus behind the publication of their latest book: Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR.

Why Now?

Our guests begin by explaining the book’s original conception: “We all agreed that this period of time has no real precedent. We’re continually faced with the collision of short-term activists with the blossoming of long-term players,” says Carey. He goes on: “All three of us are captivated by the growing imbalance here, and the need to rebalance. So, we wrote this book as a way to guide boards and C-Suites about how to manage the competing interests of short-term and long-term players in your organization.”

McNabb gives a bit of his perspective: “At Vanguard, we’d begun to get disappointed with state of corporate governance over the last ten years or so. The real driver was a result of what Dennis described: this tension between short and long term.” He elaborates on this tension: “While a short-term oriented investor should have a voice, that voice should not be outsized. I saw that some investors with small holdings were forcing changes that would be detrimental to long-term value creation. The book concept was a catalyst to get people to think about this differently.”

Charan highlights the urgency behind this needed shift in perspective: “The world has changed radically. Increasingly, we see the focus and incentives being put behind short-term financial performance. This will be detrimental in the long-term. Focusing so completely on the short-term means the short term gets shorter and shorter, and before you know it, you’ll be acquired.”

“As we wrote this book, we agreed that this period of time had no precedent. We wanted to guide boards and CEOs on how to think about competing interests between short- and long-term players.”

-Dennis Carey, author of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR

Talent as a Foundation

In their book, our guests describe talent, strategy and risk (TSR) as the three most important focus areas for boards. Carey explains, “The board needs to integrate development across these three vital areas instead of dealing with them in vertical silos. For example, “Talent” isn’t even named in the compensation committee. Talent needs to be foundational and part of the board’s work. When Steve Jobs was developing the iPhone, he raided top talent first.”

Carey compares TSR to a stoplight: “Your green light is talent. Talent starts the foundation for a new idea or strategy. You can’t move forward without it. Your yellow light is then strategy. You have an option to take different paths here. You have to make sure you’ve developed the right strategy for the talent that you have. Then, your red light is audit and risk. You have to stop and assess the strategy and make sure you meet financial, legal, and regulatory criteria.” Carey reiterates, “Often, these three things are talked about in isolation. This is not the right way to achieve long term sustainable value. They talk about these things in isolation. This is not the right way to achieve LTSV. You’ve got to harmonize and integrate these activities, and make sure the board is involved.”

“You won’t always get the strategy right, but you can trust the talent of your people. That’s why talent is so foundational.”

-Bill McNabb, author of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR

Charan expands on this idea: “A board will often look beyond talent and look at strategy. It’s important for the board to also look at who comes up with the strategy and oversees risk. A great board has talent that produces and executes strategy and risk management. This goes for the members themselves as well: What is their talent? How do they harmonize the focus? What issues are relevant? Each individual’s suggestions need to be heard and considered in order to properly guide a board’s focus. You need to have a value-adding board.”

The Importance of Diversity

In order to have foundational talent that provides your organization with the right strategy and risk management avenues, diversity is crucial. Charan touches on this: “Everyone has raw talent: Find it, train it and shape it. The idea that diverse talent does not exist is a common misconception. Diverse talent exists in abundance. Common sense is a value, asking the right question is value and possessing unique specialties and backgrounds is a value. Shout these people out, encourage them and teach them.”

In ten years, Carey believes that boards will continue to become more diverse: “We are in the midst of a pendulum swing now that investors are on par about diversity creating performance and value and are advocating for more diversity on boards and leadership teams. We need strategically correct directors who understand the nature of the business they’re being asked to oversee. Part of this means that the board should reflect the customers you serve. Investors will continue to push this notion for valuation of their investment, not just for politics or niceties.”

“Embracing diversity is essential to finding the right talent. These diverse candidates exist, they are talented, and they are ready. Find them, support them and encourage them.”

–Ram Charan, author of Talent, Strategy, Risk: How Investors and Boards Are Redefining TSR

Also in this episode…

McNabb discusses his current passion project: “Right now, I’m involved with the development of documentary called The Most Beautiful Thing. It’s a film about a group of young men in Chicago coming out of a difficult neighborhood who become the first black rowing team at the high school level in the city.”

Resources from this episode: