Archive for February, 2010

7 Essentials of Highly Effective Companies

The subject of board performance is near and dear to us.  Businessweek recently interviewed David Thomson on his “Essential No.7 – Build a Billion Dollar Board,” during which he discusses the topic with Tom James:

James says that having experienced, seasoned people on the board is just what a growth company—and its management—need. “A board has to have no fear about challenging management. As a CEO…you need to be willing to stand up for your ideas, but sometimes you learn that the ideas of highly experienced board members are a lot more important than yours,” he says. James also points out that relationships that board members have outside the company can be an invaluable asset.

James’ methodology, from even before his company went public in 1983, was to hire former CEOs of other brokerage firms. He used to tell his CEO board members: “We are putting you on the board so that we can avoid the mistakes that you have already experienced.”

During the course of the interview Thomson recommends three specific steps to strengthen a board:

  1. Act early to balance your Board with CEOs, customers, and alliance partners.
  2. Leverage Advisory Boards to bring deep expertise.  Make them small but highly talented and experienced.
  3. Breathe fresh life into your Board, renewing it or adding to it to get fresh perspectives.

Watch this 3-minute outline of Thomson’s “7 Essentials of Highly Effective Companies” on Blueprint for a Billionhere at BPV’s Youtube channel.  (His discussion of boards begins at 1:38 of this clip.)

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The wizards of American medicine

On January 28 in The Wall Street Journal, Daniel Henninger explains how attempts to *reform* America’s health care industry in a top-down fashion inevitably fail due to “unimaginable complexity.”  Henninger chooses the medical devices industry to illustrate his point, and cites Massachusetts as an example - but one could easily substitute Florida and its 92 companies (and approximately 4000 jobs).

According to data compiled by Hoover’s business research from the U.S. Census, the health-care industry consists of 340,650 separate establishments employing 5,508,926 people. I leave it to a mathematician to calculate the number of possible economic relationships this would produce every day, much less annually.

Documenting the history of medicine with uncompromising realism.

Documenting the history of medicine with uncompromising realism.

…One of the jewels of this collection of professionals, which the politicians say is “failing” us, is the U.S. medical-device industry. It has come a long way since the days of “The Clinic of Dr. Gross” in Thomas Eakins’s famous painting.

There are 8,616 separate medical-device companies in the U.S., employing 359,065 people. Within the device industry, its two largest categories are electronic and precision equipment and surgical appliances. These are the wizards of American medicine.

The president says the special interests oppose his bill. But to pay for the bill, Congress would levy a $2 billion annual tax on the medical-device industry, which ardently opposes the legislation.

Let’s pick a state. How about suddenly famous Massachusetts. The Massachusetts Medical Device Industry Council lists more than 220 companies as primary members. They have weird names like Aeris, ExtruMed, Bioxcell and WunderThink. Yet the Democrats are agog that Massachusetts voted Scott Brown into the Senate.

Harvard Medical School Dean Jeffrey Flier said of the health-care bill in these pages recently that “our capacity to innovate and develop new therapies would suffer most of all.” And that’s the high-minded criticism of the bill. Down at the level of simple retail politics what you see are tens of thousands of separate health and medical interests that understandably are in motion because of this bill’s determination to change everything in American health care.

The president and his health-care advisers are giving philosopher kings a bad name. Only people who have reduced American health care to rows and columns of data in academic studies would think it possible to remake this incredibly sophisticated organism as easily as rebooting a spreadsheet.

You can’t do it.

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The Daily Stat: Directors want better boards

In a recent survey by McKinsey, reported at The Daily Stat, over half of directors thought their boards had failed to meet the demands of the recent crisis.

Underachieving Boards

Underachieving Boards

We find it interesting that of the ten topics mentioned, only three had ‘implemented’ scores higher than scores for woulda/coulda/shoulda (still!).

Furthermore, it echoes the nostrum about some generals’ tendencies to fight the last war.  Existing regulations typically fail to anticipate the next regulatory breakdown because they’re designed to prevent the last one.

As we’ve written elsewhere, great boards are less a matter of rules and procedures and more a matter of how the members interact within the framework created by any set of rules and procedures.

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