Conflict. Scandal. Derailment.
These are the last words shareholders, board members, or the CEO of any organization wants to hear, especially if they expected corporate governance to prevent these crises. But the business world is volatile and complex. As humans, we are volatile and complex. The mechanisms of corporate governance alone are not enough to insure us—or our business—against inevitable change and challenges.
Isabelle Nüssli wrote Beyond Corporate Governance to show why the processes we rely on are a flawed safety net, and how we can learn to navigate change, no matter the ambiguities or uncertainties we face. Isabelle provides the tools to identify the red flags and hidden dynamics of organizational and personal derailment to push beyond the concept of corporate governance as our best—and only—solution. I recently caught up with Isabelle to learn what inspired her to write the book, her favorite idea she shares, and how that idea has impacted her life.
What happened that made you decide to write the book? What was the exact moment when you realized these ideas needed to get out there?
It started with personal experiences, which, as a young chairperson of an international company, were diverse and involved leading through change and crisis management, based on business and market related challenges but also based on organizational power plays that could be traced to basic drivers of human behavior and organizational dynamics.
My learning curve was almost vertical. After successfully weathering the storm, I was left with burning questions: why would some people go far to achieve or hold on to power, especially in the face of clear corporate governance? What could I have done differently?
As I spoke with other people in leadership positions, I learned that I was far from alone. Most of them had suffered similar turmoil but never spoken about it. It seemed that admitting issues of this nature was viewed as taboo. But once the discussion started, I observed a need for exchanging experiences. Questions such as ‘how to prevent’ and ‘how to learn from experiences’ were not just bugging me but seemed to be widely spread.
I wanted to understand at a deeper level. Already equipped with an MBA from Kellogg School of Management, I went on for master studies in corporate governance at the University of St.Gallen and in change management at INSEAD. Suddenly, things fell into place.
As I learned about the falling short of Corporate Governance because of change, human nature and leadership, I realized that while the business world is constructed as a rational system, its practical functions are full of irrational behavior.
This is when it clicked: The combination of my personal experience with the one of others, mixed with acquired knowledge from education in business, law and social science allowed me to investigate the background of widespread derailment and explain it in scientifically based but easy to read business books. I wanted to contribute to responsible leadership.
What’s your favorite specific, actionable idea in the book?
If you are caught in a high-level relational power play, a toxic spiral of a conflict and maybe find yourself on the verge of walking out the door or even if you are an observer to such conflict-laden relationships heading into a negative direction, there’s good news: leaders and organizations can get a handle on this pattern of compounding conflict drivers to improve such relationships, which will positively impact the organization’s culture and productivity.
An effective tool for any two leaders to improve their relationship is to enter a “Leaders’ Oral Collaboration Contract”. The LOCC can be considered as a type of psychological contract – a verbal agreement between two or more individuals that work together, e.g. chairperson/CEO or CEO/CFO. A LOCC is not written down but rather a process that is discussed and acknowledged by the involved parties. As a non-transactional agreement, the LOCC focuses on building trust, reframing instincts, and building a common language between the parties.
Key discussion points are role clarity (how roles shall be assumed and executed) trust (definition and meaning), and power (what shall the division of power be like). In brief: how should the relationship be lived so that trust can be built.
I recommend that an independent moderator facilitate the process.
If one party is unwilling to form a LOCC, it might be a warning sign. Who would not want to develop, improve, and grow a relationship, if only for the benefit of the organization?
Following the end of the formation of a LOCC, it is left to the parties whether they want to share their process with their colleagues and, if so, what information to share.
Consequently, trust can be re-established and relationships strengthened, which helps foster a healthy work environment, increases productivity and performance.
What’s a story of how you’ve applied this lesson in your own life? What has this lesson done for you?
Quite a few similar cases that come to my mind, each exhibiting the same issue and dynamic related to business partnerships.
In some cases, the partnership was already operational and in others, the individuals were about to form it. Lacking a clear corporate governance system, they all planned to introduce one. I asked the partners about the hats they wear in meetings (shareholder, board member, managing director) and about the dynamic in their relationships. I quickly realized that the need for a corporate governance system was rooted in the need for clarity. They were all facing relational (power) issues between partners.
Corporate Governance is not a ‘magic tool’. Firstly, it needs to be regularly adjusted and secondly, it needs to be ‘lived’. While it describes the ‘what’ of a role, the ‘how’ (a role is assumed) needs to be defined as well. Relationships not based on trust will not improve with corporate governance. They might even get worse.
I recommended that they first solve the relational issues before they introduce a governance system. I helped them define a LOCC to establish role clarity, discuss the meaning of trust and define the division of power – ahead of a potential challenge.
In most cases, I served as facilitator myself, in others it made sense to pick a known and trusted advisor. Where the partnerships were already formed, trust could be re-established and relationships strengthened. In a couple of other cases, one of the (potential) partners backed off and the remaining individuals formed the business partnership. Although the decision in the latter cases was challenging given all the preparatory work, in hindsight, it was the right one. A potential blow-up was a matter of time and the value destroyed would have been multifold.
Once the relational foundation was built, a corporate governance system could be implemented.