What is the role of the chair and how is it different from the role of the chief executive?
Rose: I think that's the first thing to understand — that they are completely different roles. The first thing for the chairman to know is that he or she is not the chief executive of the business. And the second thing is that the chief executive needs to understand that the chairman, by and large, is there to run the board and to support him or her. I chair three different types of companies. And the roles of chairman in each of them are all slightly different. Being a chairman is more of an art than a science.
If we cut to the chase, if something goes wrong, whose fault is it — the chairman's or the chief executive’s?
Rose: I always joke that when things go right, the chief executive gets the praise, and when things go wrong, the chairman gets the blame. But that's what you should expect, because you are the head of the company. You run the board, you are ultimately responsible for hiring and firing the chief executive. You're there to make sure — in the good times — that you give enough air and breathing space to the executives to do what they're there to do, which is to generate shareholder value and to grow the business.
How do you know if the board is doing its job well?
Hewitt: Are they making the right decisions? Do they make the proper decisions or if things go wrong, how does the board react? I think back to my first time as a chairman versus today and the thing that's shifted most significantly is the extent to which the board does or doesn't have an influence on shaping company culture.
Why has culture become more important recently?
Hewitt: Because we live in a world where change is happening much more rapidly than it ever has before, and it's much more public. For me, the responsibilities were much more distinct 10 years ago. But the fact of the matter is, if you are going to be a chair or a senior leader of a business that's in the public eye, you have much more ownership and responsibility for the leadership and the leadership style. So the culture is something that you have to take responsibility for. It’s quite difficult because of this notion that the executives run the business and you manage the board. Where those two worlds collide very definitely is the culture.
What should we tell boards to focus on over the next few years?
Rose: We all have to understand what we're there for, which is to drive success in our businesses and shareholder value, whether it's about private equity shareholder value, individual shareholder value or institutional shareholder value. And we must never lose sight of that.
The problem that we have today is that there is a hell of a lot going on. We've got too much space, we've got margin pressure, we've got all the old things we've always had to deal with, plus a significant number of new challenges. Executives are under a huge amount of pressure. At the same time, we've got a whole new layer of governance.
The role we have as chairmen and chairwomen, is that we must, first of all, lift the “governance” load off of the executives. We musn't let them get bogged down or take them away from their day job that drives the business. It's becoming increasingly difficult in in my view.
Equally, the relationship between the chief executive and the chairman is all about balance. There’s nothing as a chairman that I should be surprised about. The only time I want a surprise is on my birthday! It can be tricky because you've got to be counsellor to the chief executive, but you've also got to be the gatekeeper. It is very difficult, and boards are becoming more difficult to run.
Hewitt: I think one thing that boards can do very powerfully is to simplify things. Executives are dealing with so much complexity, so being able to simplify the agenda and prioritise is critical. What’s shifted, for me, is getting the board to think outside ourselves. Where boards get into difficulties is when they sleepwalk into their old strategy and they keep doing the same thing and, ultimately, the business implodes.
Most of my boards spend the majority of their time — and this certainly applies to boards that are more successful — trying to get executives to think outside the box and outside of their sector. Because nine times out of 10, your competitors are not businesses that are doing what you're doing today.
Higginson: The biggest challenge that all businesses are facing at the moment is they're being compared through digital and social media resources that consumers have never had before. The challenge is how to manage the resources that you have today, heading into this competitive, fast-changing and very flexible environment, where consumers have more choice than ever. Which bits of those customer journeys do we want to be a part of, which bits do we want to respond to, how do we defend the position that we've already got, while at the same time being flexible enough to change and adapt to new situations?
Sometimes in retail these days, it must feel like when the motorists appeared 120 years ago. People would have said at that time, “Well, the horses still need hay. We're still going to provide that.” And it's a good rallying cry, but the truth was the car was coming in and everyone was heading towards cars. So, in the retail world today, the world is changing and we've got to change with it.
Moderating the discussion with Andy Higginson, Debbie Hewitt and Lord Stuart Rose at Retail Week Live.
The world is changing rapidly. How do you make sure that you've got the right skills for your businesses — whether you’re putting your board together or recruiting a CEO?
Higginson: It's an art and a science. What you're trying to do is to have a better conversation as opposed to just being a bunch of executives. What you're looking to do is bring onto the board a range of skills and a variety of different experiences — but skills and experiences that are relevant to the industry. For example, in retail, we are essentially people-driven businesses. Board directors who have not been in people-driven businesses struggle to come to terms with the pace and the change that retailers require.
Hewitt: I tend to think of it from the perspective of the task, the team and the individual. What is that business facing: Has it stalled? Is it growing? Is it mature? What's the particular task? I think that relevant experience is important. But then I think about the team and the individual, and occasionally it’s beneficial if you bring someone on who is not quite so relevant, but who thinks about things differently and comes from a completely different industry.
How do you define diversity and why do you think it's important?
Rose: I'm certainly one of the oldest people in this room. The reason that I mention it is that in my middle working years — when it was quite unusual to work for a woman — I worked twice for female bosses, and they were two of the best bosses I ever had. I have to say, it's the women on the boards I have worked with that have made them better boards. I still fundamentally believe that anyone should be part of the board purely based on what they can offer the business. But, at the end of the day, we must do our best to have more diverse boards because you get better conversations.
Higginson: I agree completely that diversity is a good thing. If you accept that diversity is positive and if you're working with that engrained in the business, it's actually a relatively easy place to get to. But because diversity is sometimes narrowly defined, its importance can be undermined. You have boards that will tick the boxes in terms of gender diversity, ethnic diversity and certainly different nationalities on the board. But actually, the people are all the same. They all have the same views, they all read the same magazines, they all go to the same conferences and listen to the same radio programmes. As a consequence, they all sit around and agree with each other! So, diversity isn't just about statistics. It's actually about differences in opinions, differences in approach, differences in perspectives.
Sadly, it's so unusual to have a female chair. Debbie, can you tell us a bit about your story?
Hewitt: I got the same letter that Stuart got this week, which said, "Dear Chairman, we are very concerned because you only have one woman on your board. We will vote against the chairman if there are no nominations to rectify this by 2021." So, I wrote back, "Thank you very much, indeed. But if you vote against me, we're going to have no women on the board!"
I've never found gender discrimination ever. I have been discriminated against more for lack of experience. If I had a pound for every time when I was going for a role, particularly in my executive career, where somebody said, "Well, we can't go with her because she doesn't have the experience." That's when I found myself wondering, "How do you get experience unless someone takes a risk on you?" In my journey, people took risks on me. For me, diversity means diversity of thought. As long as you get diversity of thought, it doesn't matter if it's all women or all men, or a mixture.
What's the greatest challenge you face as a chair?
Hewitt: It’s the people challenges, actually. As Stuart said, you shouldn't be able to get a piece of paper between the chair and the chief executive. And I agree with that, publicly. Privately, you should be able to get an awful lot between the two because that's when you do your real thinking. You support that individual until you don't, and then they go. The biggest challenge is making those people calls not too soon or too late. The answer isn't firing everybody in sight, because that's not helpful. And the answer isn't staying loyal to people. When it comes to making those calls, they're big, public decisions, and they're pivotal.
Rose: I'm a glass-half-full guy, so at the end of the day, it’s a bit like being prime minister. It always starts off all fine and full of enthusiasm but it can end in tears. A chief executive needs a chairman, by and large, to make sure that the executive team is empowered to do what they're there to do, and that the board has confidence in them. Otherwise, he or she shouldn't be there.
We talked about all the pressures that are around these days. Some people may think it's a bit frivolous when I say this: You should have fun on a board. Because you're having fun, it doesn't mean that you're not running a successful business. Sometimes, the job of the chair is to lighten the load and to make things work smoothly.
Higginson: I have lots of fun! I also think boards are the people who make the most difficult decisions. I think they're the people that my executive team turns to in crisis. You need to have the right group of people to face the crisis — and finding that type of talent remains the biggest challenge for all businesses today.