Board failure (2/2): the board’s role in assessing and communicating strategy and hiring strategically-minded non-execs, with Roger Martin

🎙️ You can listen to the full podcast interview with Roger on Apple Podcasts, Spotify and YouTube.

Roger Martin, ranked the world's #1 management thinker, considers the following in the second part of his conversation with Nurole CEO Oliver Cummings:

• What is the board’s role in developing strategy? (2:13)
• What is the board’s role in communicating strategy across an organisation? (7:37)
• Do you think every organisation has the potential to build a winning strategy, or are some lost causes?  (11:20)
• How can boards hire the best people? (21:49) and
• ⚡The Lightning Round ⚡(23:01)

*This is an AI-generated transcript and contains inaccuracies*

Oliver Cummings:This is the second part of my conversation with Roger, where we pick up in the middle of his thoughts on the board's role in developing strategy. Roger has just described creating strategy as a symbiotic process involving both the board and senior management. It's up to the CEO, he suggests, to make sure that they set up their [00:02:00] interactions with the board in a way that allows them to add value rather than just rubber stamping.

Together, the board and senior management have to define the organization's key problem and explore different solutions through reverse engineering. That was such a lightbulb moment for me, reading your piece there, because I've been guilty of that and seen that happen so many times, where people try and get it done in one session and that idea of breaking it out into three I always just felt incompetent.

Why is it that we can never flipping agree on this stuff? Why does it always end up with this sort of sense of frustration? But suddenly breaking it down into those three stages makes it so much more seamless. 

Roger Martin: It's designed for frustration, the process that you normally go through. Because especially the thing, and I don't know if you tell me if this is the same as much for the UK as for the US companies, but the whole thing is to have a strategy offsite.

You take the whole board. off site for a strategy to the woods, to the shrubbery or somewhere, to the beach. And, [00:03:00] and then the management does thousands, if not tens of thousands of person hours worth of work to get ready for this board strategy day. It's supposed to be this very expansive thing, but they inevitably come with their answer and thousands of pages of PowerPoint to justify it.

And then you're supposed to have a conversation. Yeah, it's just useless 

Oliver Cummings: set up for failure. I love that point that the exec sort of, you know, looking like sort of eager students for the board to sign off and say great work. And at the same time, the boards think their role, they're adding value when they actually change direction.

So both heading for a train crash. Inevitably, 

Roger Martin: it's an interesting thing, Oliver, right? This harkens back to my days at monitor company, and I had all these young consultants working for me, and it took me a while to come to this epiphany, which is that we weren't in the business of answer production, which strategy consultants think they are.

So because we're smarter than the client, obviously, you know, we have great [00:04:00] degrees and we have a business card that says McKinsey or Bain or BCT on it. So we're just obviously smarter. And so we provide answers. And I came to the epiphany a few years into my life. It's no, we're not in the answer provision of business.

They run the company, not us. We should be in the business of helping them reflect on. their situation and for them to think through what's the best answer for the company under the specific circumstances that they inevitably know better than than we do. And when I came to that epiphany that my job wasn't right answer production, it was kind of helping clients through a process of reflection and understanding.

I did something that was extremely controversial and my consultants didn't much like to listen to it, but I banned thinking without the client present. So I said, there will be no meetings back in Cambridge. I was working out of the Boston office, the Cambridge office, and not your Cambridge. And people would want to come back and have a case team [00:05:00] meeting.

I banned them. I said, no, no thinking without the client about this case. You can think about anything else you want. You can go to the beach. I don't care. You just better darn well not think about the client's problem. Why? It's because any answer to any business problem is the product of an extremely long logical chain.

It's, we saw this about consumers, da da da da da da da da da da da da da. 20, 30, 50 steps long. And so what do strategy consultants who think they're the smartest people in the world do? They do that long strand, which they are capable of doing, because strategy consultants often are smarter than the average, if they can do that.

Then, the client who started at step one, You You've been back doing case team meetings in your boardrooms and whatever all by yourself you get to 50 you come to the client and say 50 is the answer and then they say I don't know about that. Oh, [00:06:00] defensive. The client's defensive. The client's not so smart, right?

You know, they don't really get this. They don't understand this situation. No, they just didn't have the chance to go through all 50 steps that you did. And so I just said, nope, we ain't doing that. If you want to go from step one to step two, you do it with the client. Oh, but then the client will kind of see how the sausage is made.

And Oh, and that's a bad thing. Oh, oh, could you help me understand in what way that's a bad thing? The answer that's going to determine their compensation, their life, whatever, not yours. You're going to walk off into the sunset declaring victory. You don't want them to understand how that gets made, that decision gets created.

Really? So anyway, I had to have some hard darts with these far too smart for their own good kiddies. But in due course, they kind of saw it and realized, Oh my God, if we do that, we never get to [00:07:00] 50 and have the client say, I don't know, this worries me. This is dangerous. I don't really understand. Never.

Like never. And they become the crazy enthusiasts for, you know, for it. We're going to do this. It's so bold. Yeah, exactly. That's the philosophy that management has to take with the board if they want a board to be effective. Don't do a whole lot of thinking. away from the board, and then expect somehow the board will be with your thinking at the end?

Chances are close to zero. I'm ranting a little. I do this, and I kind of get into a rant ish sort of mood. It's 

Oliver Cummings: great. I like it. It strikes me there's a really interesting parallel there with actually the board and the executive and the rest of the organization. One of the things I've observed is you'll have these boards come up with these brilliant strategies and yet you go to talk to the person on the shop floor and they've got no idea what's going on.

And there's data showing that less than 30 percent of execs rate their board as either good or excellent. And interestingly, [00:08:00] within that, if you break it down, the CEOs are much more positive than the rest of the executive team. And I suspect if there were data on the, those outside the executive team, it would be even more negative.

Have you seen the best boards do to successfully navigate communicating strategy across a whole organization? 

Roger Martin: I mainly don't think of it as their job, right? Like, I think a well functioning board Should work with the management team in a fashion that gets them a real strategy. Now, most strategies are garbage or just complete garbage.

And so the idea of communicating it, you know, like, good luck to you is my view. Like, I do believe in the shop floor person for sure. And they mainly just roll their eyeballs and say, you know. This too shall pass. These morons are with all this platitudinous kind of crap and big, long words. And that's our strategy.

You know, we're going to have synergistically integrate the, you know, the [00:09:00] consumerishness and they're saying, Oh my God, who are these morons anyway? Mainly because it's just not strategy. So if the board can do a job at enforcing their being a strategy. And I take the attitude that AG took. He said, if anything is going to sail in a company of a hundred and then employees, it's got to be, this is Americanism, Sesame Street simple.

And he wasn't saying that by saying it's because these people are dumb. It's, no, no, we have to get it to the point where it's Sesame Street simple. That is our job, and then it will be dead easy to communicate. So it'll be dead easy to communicate for our business, the consumer is boss. CIB, and we've got to win the first moment of truth, FMOT.

And these would be simple, logical things. We have two moments of truth. Not just when Oliver puts Pantene or Head Shoulders, whatever, in your hair, and your hair ends up being clean in a way that feels good to you. That's [00:10:00] the second moment of truth. The first moment of truth is when Oliver either picked Pantene or Head Shoulders off the shelf.

And if it wasn't in stock, or that we had inferior shelving to the company that, that, that Oliver's boots or wherever you went to, to get it, liked them better and gave them better shell space because we're annoying to them, we lose FMOD. And if we lose FMOT, we don't get the second moment of truth chance, and we lose.

So, he simplified his strategy in a way that made it easy for communication. And that's, a board should simply be asking that question. Again, if I were a board member, I'd just insist that we create a script for how we describe the strategy, and then market test it with a bunch of frontline workers. Just say, what do they think of this?

Does it make sense? Would they tweak it in any way? But it's more management's job to do that, but the board can be helpful in enforcing. But [00:11:00] if the board's got a CEO that's interested in actually communicating a real strategy, they'll have done it themselves and don't need the board and the CEO is not interested in it.

It doesn't matter what the board says. Back to my story of my friend, it didn't matter what the chair says. Not at all. It doesn't matter. I'll just obfuscate and refuse to do it. That's the challenge. 

Oliver Cummings: Do you think every organization has the potential to build? A winning strategy or are there some lost causes you can always do it 

Roger Martin: and this is one where I eat the dog food my friend I was a dean of the Rotman School of Management a truly crappy business school when I took it over like truly crappy it was at best fourth ranked in our in southern Ontario I was running a deficit the leading school I was running a deficit the leading school And as their advertising campaign image, a giant gold one were number one and anybody else is chopped liver.

They had approximately based on our [00:12:00] analysis, four times our revenue. We were hemorrhaging professors. And I went to the group and said, I actually don't care about. Being number one in Canada, we're going to be globally consequential that will because there's no globally relevant at all business schools in Canada will accidentally mean we're number one and but I couldn't care less about Ivy and they all that many of the professors mocked me and just said, Listen, if we could just close the gap a little bit with Ivy, so we're not so embarrassingly behind, that should be our strategy.

I said, No, Five years, we'd caught up to them, 10 years, they were completely in the dust. We were the obvious number one, the only globally consequential business school in Canada. Our revenues were up 10x, so I inherited a 13 million budget, we had a 130 million budget, all that. It was the end. We were the only school in Canada that hired world class professors at world class rates.

We ended up, around the time I ended, as the third ranked business school [00:13:00] faculty in the world, after Harvard and Wharton, ahead of Stanford, Chicago, Sloan. We had nothing, but we had a strategy. And with a great strategy, you can do anything. Same with Tennis Canada. We weren't a top 50 tennis nation, probably not a top 100 tennis nation, no resources, big debt, no history, no nothing, no sun, 500 courts that you could play 12, 12 months a year in Canada.

Any county in Florida would have more than that. There were probably, in the United States, if we had 500, the U. S. has, oh man, probably 100, 000 who are now considered one of the leading tennis nations. So, I don't buy any argument that, oh, you can't have a strategy. In both of those cases, our strategy was completely, utterly, and absolutely different than anybody else.

So, you cannot take something crappy. [00:14:00] And make it great by doing what everybody else does. Because by the time you get to where they got to, 20 or 30 years later, they've moved, uh, and you're toast. But there's always the opportunity to do something different. 

Oliver Cummings: So I'm the person on the shop floor at Tennis Canada.

What was your pitch to me? What's the strategy in a nutshell pitch to me as 

Roger Martin: the person on the shop floor? We are going to only fund athletes who will train in a way to make them world class. So any athlete who's on a training course that isn't going to be world class, we won't fund them a dollar. Two, we will.

enable you, we will regulate with outputs, not inputs. So French Federation says in order to be a French Federation kind of person, you have got to train at the French center or be trained by French coaches. So they regulate the [00:15:00] inputs with the hope of producing the output. We said, you can either come to Tennis Canada's training center, which we've upgraded dramatically, if you want that, or if you meet these standards, body fat, endurance, you're able to do these strokes in this way with this consistency, whatever, we will fund you entirely to be coached outside.

No one else did that. We took, we hired the head of the French Federation to do the, kind of the, if you will, the inside one, or the head of the Junior French Academy, he became the head of ours. We hired a guy, Bob Brett, the late Bob Brett, he died of cancer, unfortunately, a couple years ago, or five years ago.

Sadly, who's coach born for specker Goran Ivanicevich, et cetera, one of the top three or four tennis coaches on the face of the planet and did something unheard of. We put him in charge of our under 14 program working with eight, nine, 10 year olds. He would show up at these tournaments and everybody's what is a tennis God showing up with this 10 year old because we [00:16:00] said we have no people in Canada, right?

Last time I checked and we don't have any tennis tradition. And so we've got to have a guy who understands. What greatness looks like early on, and then give them the kind of training they need to be great, which they wouldn't normally get because they wouldn't be trained by somebody who knows exactly how he made Boris Becker a Wimbledon champion or Goran Ivanovic, number one in the world, John McIntrye, blah, blah, blah, blah, blah, all these players.

It was considered insane, but I will never forget. Bobrak and I played tennis, we became great friends, and I played tennis with him at 6 a. m. before his day and before my day. Whenever he's in Toronto, because I was in Toronto then, as Dean. And he came back from the day before with Bianca and Rescue. And she would have probably been 9 then, maybe 8, maybe 9.

And I remember him saying, she has got a tennis head on her shoulders. [00:17:00] An eight or nine year old kid, he just knew she had what it, what it took, and she became our Canada's first ever Grand Slam singles champion, won the U. S. Open ten years after that event. What would that first line person say? We're aiming to be world class.

We are doing it in a flexible way that is focusing on outputs. We are putting extra energy of the sort no other country does on output. tennis ID early on. So if you see a kid that you need to have Bob Brett come and hit with, talk to and see, we'll make that happen. If you want to be a world class tennis coach, here's how you got to do it.

We're not interested in developing local quality tennis coaches. You can do that on your own. If you want to be world class, here's the program. And I think they would all they would all be able to identify. That's what we stood for. And at first everybody thought we were absolutely nuts, but we were Absolutely not.

McEnroe came up and did this detailed kind of study of Canada [00:18:00] to say, how is it that we would trade our juniors for your juniors straight up, even though we have 340 million people and lots of sun, and you have 34 million people and no sun. You can do it. Absolutely. Got to be different. Got to be clear.

Got to instruct. Interesting story. Anybody can do it. Honestly, Oliver, anybody can do it. It's just people don't. They're not willing to make bold choices. Full stop. Why is that so difficult? One is strategy is a lost art. And so it's not being taught. It's not being taught properly in business schools. The big strategy firms have figured out that other things are way more lucrative than strategy.

Do a post merger integration study of two big firms, and that's 300, 400 million dollars of billings and strategy study, maybe 10. And so, so strategies down to a tiny fraction of McKinsey, work. Now they would claim everything that's not strategy is strategy. And so they [00:19:00] would argue, but insiders to me will tell me this.

So one problem is strategy is the lost art. The right stuff is not being taught at business schools. A great producer of skilled strategy people was the strategy consulting industry, which led the academy by a long shot. I went to, I entered Harvard Business School 16 years after the founding of Boston Consulting Group, six years after the founding of Baden Company.

And there was one elective strategy course at Harvard Business School. So, it used to be lead. Intellectually and in practice by the strategy consulting industry, that industry is essentially gone bye bye because it's interested in something else. And I don't begrudge it. They're making more money doing non strategy than strategy and it ain't even close.

So that's one impediment. Oliver is that there isn't an available. Kind of pipeline of people who kind of know how to make these [00:20:00] choices and then it requires boldness and sticking to it. And I'm proud to 10 scan. I'm proud of it. Not because it was kind of my strategy exclusively. There were four of us.

It was a strategy. It was, but I was the ruthless enforcer of it. If anybody came to the board with a list of who are we funding? Is that person training to, uh, at world class levels in a world class way? No, but he's always been good to us and has been a good player and he plays on the Davis Club team.

Zero. Zero. If he wants to train the way it's necessary to train, fine, but otherwise zero. So I was the ruthless enforcer of the strategy, and you need that. Because we didn't see green shoots in this strategy for about seven or eight years. Then we saw green shoots with junior Grand Slam singles champions.

For the first time in history, we'd never even had a finalist in history. We suddenly started to get a spate of them. And then it was, maybe this is gonna work. And [00:21:00] people then doubled down on it. And we didn't have our first true of the four things we're looking for, Grand Slam singles champion until Bianca Andreescu did the US Open.

And that was over 10 years after. So one problem is sticking to something because a great strategy turnaround takes time. Takes a lot of time. It's 

Oliver Cummings: a good strategy, plus ruthless enforcement, that's it. 

Roger Martin: Yes, ruthless enforcement. And man, was I ruthless at the Rotman School. Like, I just, we were not going to do non strategy things.

Full stop. By the way, I've never actually written about this, and you'd be happy to know, because you'd probably like Whitney Johnson said, See, we need to do a podcast on what you did at Rodman. So sometime in the next month, I think I'm going to do that and I may then take that transcript and write something about it.

So there you go. 

Oliver Cummings: Amazing. Definitely sounds like one that needs to be written. One last question before we go on to the lightning round. Oh, yes. About the benefits of a [00:22:00] psychographic profile as the way to assess board members, Arguing. The only useful reason to be on a board is to think it's good for democratic capitalism.

Dismissing those who want to be on there for prestige or camaraderie or financial gain or any of those other reasons. How do you distinguish between two candidates both have that psychographic profile? 

Roger Martin: If I were interviewing for boards, I would spend my time asking questions like, Tell me a situation.

Where you needed to take a highly unpopular stand was unpopular within the norms of your group, the dominant kind of theory of what the right answer was. And you went against it. And if the person says, Gee, Roger, I can't think of any, I would eliminate them from contention, even if they were the CEO of a giant company, a sitting CEO of some giant tech company, because they will have no utility.

[00:23:00] They will, because you don't have any utility by just agreeing and being agreeable. And you'll have utility when you say, you know, I know we're heading in this direction, but It really makes me nervous and worried and everybody's like, What? Roger, why are you saying that? Blah, blah, blah. This is my life, by the way, on publicly traded boards, which I will never go on again.

Oh, Roger, that's so extreme. You know, newspapers are going to hell in a handbasket. Our newspaper business is going to be this Thompson. It's on the board for 14 years. They're going to be worth nothing soon. I don't care if they're worth something now. And they're, and they outperform their peers. After brutal battles, we sold the Gannett for 2.

2 billion. Three years later, we would have to pay somebody 500 million to take them off our hands. And Gannett had to write that probably down to zero. They probably hit it. But I talked to the Gannett CFO a few years later and they said, yeah, we got jobbed. You got to be willing to do [00:24:00] those things when Virtually everybody, including management is against you, then you can be useful.

If you're not willing to do those, you just aren't very useful. So that would be the thing that I would focus on more than anything else about them. Young, old, male, female, blah, blah, blah, you know, ex CEO, current CEO, ex CFO, I don't care. I just care about people. Will they, do they have a mind and they will use it even if it's uncomfortable socially to, to use their mind?

How do you know if they have a mind? I would ask them about strategy, just a sense, because there are bunches of great strategists who don't use strategy terms and don't, That aren't formally strategists, but I can tell by talking to them whether they're used to. You see, strategists have a certain determinism to them.

They will say, I don't care if everybody thinks X and things seem to be going fine. I see these storm clouds over there, nobody else sees those [00:25:00] storm clouds, but we're going to act now because those storm clouds will hit. And if we don't act now, it will be too late. And all the others are like, Oh man, what are you so worried about?

Why are you so worried about the textbook business? It's going to hell in a handbasket too. And so let's sell now. Which we did and got 7. 75 billion for a business that retraded three years later for 2. 25 billion. That's being deterministic. There is a crash coming and if somebody else thinks there isn't one coming, they can have our business and we'll take the check.

Thank you very much. So, I would ask them, Questions that would help determine whether they have a strategic mind and then ask some questions to see whether they'll sit there and let bad stuff happen, or will take unpopular stance to make a better thing happen. 

Oliver Cummings: Roger, time has flown, which means it's time for the lightning round, where I'm going to say a quick question and ask you for a quick [00:26:00] response if you're ready.

I'll see if, I may pass, but I will try to answer 

Roger Martin: them all. Border and behavior that irritates you most. Smarmy agreeableness. Most valuable board ritual. Oh, probably the in camera, because you got at least a chance of having people say what's really on their mind. Favorite quote and why? 

Oliver Cummings: Oh, 

Roger Martin: I'm sort of a dewy guy.

A problem well framed is half solved. Your most significant professional insight. Oh, the one I talked about before that I'm not a solution deliverer. I am somebody who helps the client go on a thinking journey. Changed my life completely. The worst professional advice you ever received. I was in my second year at Harvard Business School and back in Toronto for Christmas.

There's a party that the alums give, this sort of a networking party. And there was a guy who was a solo practitioner strategy consultant named Kovale Brown. And he, and he came up to me, I didn't [00:27:00] come up to him. He came up to me and said, Oh, Roger, what do you intend to do? And I said, I want to be a strategy consultant.

And he said, Oh, nobody will want you. You should do something else. So I don't know where Kovale Brown is today. Maybe I don't know if he's alive or dead. But I guess I. Turned out to be okay at that strategy and the statement of the year What have you changed your mind on about boards over time? I mean I went into going on boards thinking they were more useful than they are there They're way more fraught than they are first board I was on a big public board and why I see traded company Celestica in the EMS space.

I was the chair of the audit committee. I sent a note to the CEO about a note he had sent out that was critical of the analysis in it. I just said, I think you drew the wrong 

Oliver Cummings: conclusion. 

Roger Martin: He said it was up, and I said that if you look at it more carefully, it's down, whatever, you know, it was 180 degrees off.

And he [00:28:00] said, he sent me a note back saying, if that's the way you're going to respond to my note, I'm going to stop sharing information with you. And I said. Eugene, his name was Eugene Polistok, Eugene, I'm the chair of the audit committee, a CEO can't say that to the chair of the audit committee, and it's on an email now.

You've said it. You're going to withhold information from the chair of the audit committee if you don't like what the audit committee chair kind of says, and he said, I'm the CEO, I can do whatever I want. I took that, those emails to the board and said, We have a problem here and I, I can't, unless you kind of say he intended to share, you know, unless you say, tell him he can't do that and he agrees I'll have to resign from the board because I can't be audit committee chair under those circumstances.

The board was like, Oh dear, this is very sad, and you should try to get along better with him. I resigned. Six months later, they had a board meeting, maybe nine, six, nine months later, they have a board meeting where there [00:29:00] are armed guards at the, at the door. Eugene comes in, he's fired by the chair for withholding information from the board, and walked out of the building, but not allowed to go back to his office or anything.

Did anybody come to me and say, Gee, Roger, you're a bit of a canary in the coal mine. I wish we would have listened to you and not had to have this worse, much, much worse, embarrassing kind of thing happen. No, I violated the norms of the board to be nice and keep everything nice and quiet. And, and so, wow, that's, that's when I started to realize boards suck.

What are you invested in and why? I don't invest in public companies, I have a barbell shaped portfolio of early stage equities, really early stage, typically, often friends and family rounds and early rounds and cash or fixed income, like cash, like cash, like things. And people often say, wow, you're supposedly this great strategist, you should be able to be a fantastic investor.[00:30:00] 

And I say, you misunderstand investing then totally. The, it does not. matter whether I think the strategy of a company is good or a public widely held publicly traded company is good or bad. I may think it's a great strategy, but if the market has bidded up to a level that it can never earn a return, even if with that great strategy, then it's a dumb investment.

And the only people who are good at making that calculation are people who spend 100 percent of their time making that evaluation like Warren Buffett, right? He says I analyze stocks every day. He's an expert at that. I'm an expert at telling you whether the return on book equity of a stock will be high or low, but not that.

That having been said, I think I've great insights on the strategies of early stage companies. And, and there isn't a market yet this market where there are all these experts kind of watching. And so that's where I can have competitive advantage. And, and that's where I make whatever money I [00:31:00] make. Best board interview question.

It would be, tell me a time when you've had to go against the conventional wisdom and the norms of the group to make sure a point of view that you think is important prevails. 

Oliver Cummings: And the worst board interview question you've been asked. Let's see. 

Roger Martin: Tell me about your resume. 

Oliver Cummings: And finally, three things our listeners should take away from this podcast if they take nothing else.

Roger Martin: One would be to do your best to think systemically. So I've several times during this talked about the fact that when you need directors most you're going to get them least. You should be thinking through. Those things systemically ask the question, what would have to be true for the board to be able to stop a CEO from doing something that's that's bad for shareholders, bad for the company?

So one is sort of broaden out and ask, how does this system work? Not how does this one transaction within the system work to would be strategy really [00:32:00] matters and kind of all of. Crap that's out there about, uh, it's all just execution. And it's just, it's just what it is. It's people who don't understand a thing about, about strategy.

And three, think for yourself. You know, you are young, Oliver. So you have an entire lifetime ahead of you. I'm getting older. I hopefully will have a bunch left. But for me, it's more evident that it is for a young person like you that life's too short. Life's too short to let somebody else think for you.

And that is what happens out in the world. You get badgered into thinking the way you're supposed to think. And it's worse now than it's been at any time in my life, by the way, where you are asked to think by other people a way to think. And the great Vaclav Havel was so great on this when he made, made the point that when somebody Forces you to think a way you do not believe is actually [00:33:00] true.

They take all your power. And when instead, you say, I know you're telling me you want me to think this way, but I'm going to think the way that I think is right. You have enormous power, even if you don't think you have any. A little 

too philosophical, maybe, but that would be my last one.

Oliver Cummings: Roger, you were inspirational when I first met you, and this will go on to my Life Highlights Reel.

Thank you so much for taking the time to share your wisdom, experience, and insights, and looking forward to hearing and reading about the story of Rotman in the not too distant future. Thanks. Those are very kind thoughts, and it was a pleasure being on with you.

🎙️ You can listen to the full podcast interview with Roger on Apple Podcasts, Spotify and YouTube.