Why Not Lawyers? Board Advice From Sir Damon Buffini
Our most recent guest to BCKR was Sir Damon Buffini – businessman and governor of the Wellcome Trust. He was formerly head of the private equity company Permira. Here is a summary of what he had to share with us.
Why should a lawyer get onto a board?
When anyone looks for a new board member, the first port of call is often an accountant, which is surprising given their specific focus and lack of breadth. Lawyers could also be labelled as being too specialised, not financial, and people say ‘We’ve already got too many lawyers in the room’. However, looking at the job spec for a normal NED, Damon believes lawyers can be more qualified than accountants at adding value – but not as lawyers.
Why? They are good at thinking about complexity and regulation, they have diversity of thought, breadth of experience and good judgement, not just in the detail but in weighing up legal certainty versus morally correct thing to do. These are what lawyers do in their day job.
What does Damon want as a chair?
• Board members have to be able to contribute to strategy
• Hold management to account and challenge in a sensitive way, helping management achieve the strategy and objectives. People and interaction with people are key.
• Clarity of thought is critical around some complex issues. Don’t lose track of that.
• A collective of directors have to fit together, between 8 and 20 in his case. 20 is too many. But fit is important.
In an interview, what would he be looking for?
He wants to see the candidate has shown an interest in broader business issues rather than just the specialism he’s been involved in. How? Skill up.
• Being a NED in a smaller organisation first, a charity perhaps
• Business school courses
• Finance & budgets – you have to have a basic understanding and be able to articulate it
• Coaching – talk to others who have already gone down this route.
Why do it? It is extremely interesting and you learn a lot.
Clarity of purpose, mission, strategy, understanding stakeholders, all crucially important- now relevant for all corporates and charities. There has to be an output to focus on. Main difference – the alignment of employee interest and shareholder value with profit is easier to spot in a corporate. The level of responsibility is similar.
Do you think differently about charity boards versus corporate boards?
Some charities may have, in the past, thought that they were not subject to the same scrutiny but that is no longer the case. Not for profit motivations are very different and often more complex. The liability profile is different. Since Kids Company there is a realisation of the real responsibilities. Regulations are hugely onerous and fiduciary responsibility is the same.
The big difference is the alignment of interest in the for-profit sector which is about shareholder value. 30%+ of CEO time can be spent on shareholder interaction and governance box ticking, not business issues. But it’s just a consequence of doing business.
Focus on governance not purpose, is a huge issue.
Where do you look for your new non-executives?
In the old days you’d ring up your mates. Now it is about getting diversity on the board.
Diversity is great, but tends to make finding the right person harder. There is a pool of candidates that the large headhunters use. They often don’t have the right connections into the next generation to provide a better range. So you have to go into the community you know and ask around, having identified the spec. On one of his boards he is the devil’s advocate. Each board should have one.
Damon thinks having diversity of views around a table is very important. At Permira, there were lots of different views but decisions had to be unanimous. That takes time and skills of the chairman. Not everyone’s views will prevail. However, just because your view doesn’t win through, there is generally no need to resign. As long as everyone’s opinions and views have been respected, that should be enough. That’s why humour and fit are important.
Age diversity is important too. Generally boards are too old.
How basic should your finance knowledge be?
You must be able to read a balance sheet and understand things such as :
• Gross net margins
• Working capital
What do you look for when choosing an organisation?
Damon looks for organisations he’s really interested in. Somewhere he feels he make an impact. Size and scale are also things he considers. Larger organisations have levers you can pull. He likes that. Small organisations are more nacent and tend to be more volatile. But he’s not on plc boards because there’s too much governance. And he has to like the people.
White middle class males probably have to demonstrate something more than others. Not all white, not all male or female, diversity of age, ethnicity and experience.
What’s gone wrong on boards you’ve worked on?
• Letting management think they’re god
• Chairmen not spending sufficient time understanding the nuances of the organisation
• Chairing too many organisations at once
Training and experience.
There is no training like doing the job.
You need to demonstrate that you can operate at a higher level.
Understand what the key areas are for business in the next ten years.
UK law firms are hugely successful international businesses but their experience is still discounted. A key hurdle for lawyers to overcome is the lingering question in a chairman’s mind ‘Why would I want someone who’s going to stop me doing what I want to do?’