Whilst recently travelling through the Champagne region in France, I was struck by the magnitude and success of just one of those businesses with the extraordinary story of Madame Pommery in the mid 1800’s who took over a fledgling champagne business after her husband (who founded it) died.
Madame Pommery as the sole owner, went on to build a vast empire exporting her Pommery champagne all over the world. Whilst this business was ultimately sold by her family midway through the last century, her legacy is still revered in the region and the industry.
As a single owner and a woman facing the unfathomable prejudices of her time, Madam Pommery was shrewd enough to surround herself with a core team of competent ambitious individuals with the passionate skills to achieve her clearly shared business objectives.
At the same time she was renowned for keeping a close watch on every aspect of the business operations from the sourcing of the highest quality grapes to producing the final product.
She always realised the value of her employees to the business and protected her workers from the (often) up to 30% of exploding bottles by introducing protective masks and clothing.
She went on to establish a pension plan for her workers who toiled deep underground in over 15 kilometres of caves and tunnels by candlelight in a constant 10 degrees C, long before the concept of superannuation was even conceived.
Madame Pommery asked her winemaker to devise a dryer product that could be consumed anywhere in the world regardless of the climate and this vision gave birth to the modern era of Brut Champagne which represents the majority of champagne varietals purchased today.
Through success she was able to make significant financial contributions to charity and the arts.
The Corporate Board
Your corporate board in the commercial environment is the replacement for the sole business owner; who these days could not possibly meet the complexities of the current laws and other compliance obligations.
Nevertheless the minimum legal standard requires today’s Directors to be very clear about what authority is to be given to others in the organisation through the CEO to the executive team and staff.
Delegation of Authority
The board must firstly set the specific strategy to achieve the overall vision of the organisation, with clear priorities to be achieved which can be measured and can therefore be monitored.
That delegation should be very deliberate as the law does not permit the Board to advocate the ultimate responsibility for what happens in the organisation other than in the very narrowest of circumstances.
This is why a board policy or a similar document should exist – to specify what aspects of the operations the board will delegate; either to the CEO or possibly to a sub-committee or an external contractor.
The precise scope of that delegated authority should be based on a risk management analysis that the Board has carried out and ascertained it is comfortable with.
This process should provide greater clarity for the executive team to know which decisions can be taken without the requirement for Board approval and which decisions need Board approval.
I suspect that whilst Madam Pommery neither picked grapes nor bottled champagne, she was intimately familiar with all the activities and all the stakeholders both within and outside her business and was very clear about the parameters within which she delegated her precious authority to her managers, her advisers and her other employees.
Madam Pommery personally managed the most critical relationships representing the largest risks to her business success.
Authority to Retain
The Board of an organisation in today’s world would also certainly reserve for themselves the careful management of the relationships with a key stakeholder such as a regulator or with the important stakeholders who are crucial to the organisation’s ongoing success.
One example would certainly be the careful management of the largest asset of the organisation, which is the collective contributions of the CEO and the other key executives in whom the operational knowledge of the business is largely concentrated.
This should be achieved with the Board establishing a robust succession plan to mitigate against the sudden loss of any key executive position along with their intimate knowledge of a large part of the business.
Another example of a function the Board might want to retain would be the management of the relationship with the majority shareholders or the ‘members’ in the NFP environment.
This key function should be implemented by the Board with a carefully established and agreed upon communication policy, designed to keep the members informed and involved in the organisation as well as to collect and to act on valuable feedback from or through the members and their satellites.
Well executed and well managed by the Board, this type of communication strategy should work to enhance genuine trust and collaboration in the organisation, based on a culture of transparency and a genuine commitment from both the Board and the members to important shared objectives that together can be achieved for the overall good of the organisation.
Another function the Board might retain is the management of their relationship with any major sponsor/s. Too often I have seen a sponsorship won on the back of hard work and dedication to the building of relationships based on trust over time; only for them to be lost because the relationship is not cared for and nurtured or the executive who established the relationship leaves and takes it with him or her.
Like the relationship with its members, the Board can positively engage with its largest sponsors in so many beneficial ways to strengthen the tie of those bonds, which must have been borne from some mutual corporate objectives worth exploring in order to have become involved with each other in the first place.
What unfortunately often occurs is that the only time the Board engages with sponsors is at the expected ‘ticketed’ events where the engagement is limited to what I like to refer to as the ‘Champion conversation’.
Pleasant as that may be, this is often the only benefit the sponsor can discern when it allocates its next years marketing budget to organisations competing for those scarce funds.
Perhaps a critical question a Board should answer in its Governance review, is not the value of the sponsorship deals it has won but the value it has either lost or alternately failed to retain.
An exit interview with the outgoing sponsor may yield important insights into the expectations that weren’t met so the retention strategy can be improved going forward.
Getting it Wrong
Good fences make for good neighbors, because there is no uncertainty about the respective rights and obligations in the relationship.
Why then are there not clear decisions made by Boards about what authority is to be delegated and what is to be retained and, maybe most importantly, how is the success of the delegation to be measured?
Getting it wrong can put the organisation at risk through gross inefficiencies resulting from uncertainty and duplication, the destruction of key valuable relationships and ultimately under performance.
It’s just that simple.
Bruce Havilah
