Mastering Board Papers

[00:00:00] Intro: Welcome to Minutes by Board Cycle, where in each episode we pack the insights from one of Australia's boardroom leaders into just a few minutes.

[00:00:09] Speaker 3: Today's podcast guest is Alison Watkins, Chancellor of the University of Tasmania and former CEO of Coca-Cola Amatil, who gives our host, Richard Conway, her top tips on how to write a good board paper.

[00:00:23] Richard: Hello and welcome to the minutes podcast. I'm your host, Richard Conway. And today I'm thrilled to be joined by Alison Watkins, Alison, welcome to the podcast.

[00:00:36] Alison: Thank you, Richard.

[00:00:38] Richard: It's a treat to be talking to Alison today about a really important, but practical topic, which is how to write good board papers. And I say that for a couple of reasons. So firstly, Alison was formerly the CEO of some leading Australian organizations, Berri, Graincorp and Coca-Cola Amatil. So she's well aware of the amount of time and effort that [00:01:00] goes into preparing briefings for boards from a management perspective.

[00:01:04] Richard: But now Alison is one of Australia's leading non executive directors, sitting on the boards of West Farmers, CSL and the Reserve Bank of Australia. And she's also the Chancellor at the University of Tasmania. So she can bring a director's perspective to the topic as well. So to set the scene, Allison, I think it's useful to get some perspective on how important board papers really are to directors.

[00:01:31] Richard: So as a non executive director, how much do you rely on the information you're given in a board paper to make a decision on a given subject versus, for example, relying on your own skills and experience?

[00:01:44] Alison: I think you rely tremendously on what's in the board papers. Yes, you do bring your own skills and experience. You bring your own observations from, what else you're sort of seeing and reading and experiencing. But you're providing [00:02:00] those as the overlay to the information that's in the board papers.

[00:02:04] Alison: So it is absolutely the core of good decision making for a company. There's no doubt.

[00:02:10] Richard: So board papers, the information in there is your primary source for decision making and then you're overlaying your own experience and skills on top of that. And so, so what Allison, in your opinion, would be the key features of a fantastic board paper?

[00:02:28] Alison: Well, there are, I mean, of course, there are different kinds of board papers. So, you know, obviously you might have board papers that are, financial type statements or risk management papers that are structured around enterprise risk management frameworks. You might have compliance related board papers that are structured around specific sort of regulatory and legislative requirements.

[00:02:52] Alison: So there are all kinds of different board papers. But I think the papers that where the most [00:03:00] sort of, ambiguity, I guess, and variability, can apply are those papers where a team is putting forward, a management team is putting forward a specific recommendation or an important topic for discussion. Be that, you know, a strategic topic that might be an acquisition or disposal or significant investment of those natures where they're actually putting forward an argument and a recommendation, let's say. Or they might be requesting input.

[00:03:31] Alison: So if we talk about those kind of board papers, I think there are a number of things. I mean, first of all, the structure of the paper. And having a sort of a template I think it's an incredibly useful thing because for executives who might be writing these papers, you don't write them very often.

[00:03:50] Alison: For directors receiving these papers, it's incredibly helpful if they do follow a kind of standard logic, not necessarily completely [00:04:00] slavishly. But in my experience, the best board papers, broadly set out what I'd call, follow a, what I'd call a sort of a situation, complication, resolution type of structure.

[00:04:13] Alison: Situation is generally sort of a recap of where we're at. Might be, you know, when we last met, we decided the following, or it might be that, you know, the competitive situation is such that we need to consider the following. The complication is, okay, what's changed, why do we need to do something, and what are the potential things that we could do.

[00:04:37] Alison: The resolution is, here's what we're recommending and why. Broadly, situation, complication, resolution is a useful sort of structure to set out an argument in a way that tunes the directors back into.

[00:04:52] Alison: Well, you know, cause you've got to always remember they are thinking about a million different things. They're only seeing these papers for your [00:05:00] company, maybe once every six weeks or so. And so you've got to tune them back in. You've got to explain the situation to them. You've got to sort of then set up, you know, okay, why do we need to make a decision or change things? And what are the considerations there, and then what's the recommendation.

[00:05:16] Alison: So having that kind of standard approach I think is incredibly helpful. If it's a complex topic, you know, that runs to more than two or three pages even, having a short executive summary up the front.

[00:05:28] Alison: I always reminded our teams that, some of our directors, they're receiving hundreds and hundreds of pages, times three for some of them, in the space of a week or 10 days. And so there will be some directors who maybe just read one page. And so they need a, or even a half a page. So you do need to give a tight executive summary of what the paper says. And what the recommendation is. Not just what the paper does, but the conclusion it reaches.

[00:05:56] Alison: I think that is an important component of a well written board [00:06:00] paper. I think most board papers, I really like to get a sense of the choices, the options that were considered. As part of it, that often would sit in the complication section as I outlined.

[00:06:10] Alison: But what options did we consider? And what were the relevant considerations to know that. And those may take the form of a criterion in a particular decision, or they may be listed as specific considerations.

[00:06:24] Alison: But as a director, you need to know that, for example, relevant stakeholders, have they been thought of, you know. So if it's a decision that impacts the community, for example, what are those considerations have they been thought of?

[00:06:40] Alison: Environmental considerations may be important. Accounting treatment considerations may be important. These will be different according to the topic. But seeing what considerations have been covered off and satisfying yourself, that's important for a director to know. As is who's been consulted in [00:07:00] putting the paper together and who owns the paper. So I generally like to see most recommendations, apart from, there were some areas which appropriately come from functional heads. But business related decisions, I think should come either from the CEO or the head of a division and functional heads would have been consulted. Legal compliance, finance, et cetera.

[00:07:25] Alison: They would not be typically the owner of the paper. And the person who's actually standing up and discussing it with the board, that's really important. And risk usually have a role and visibility in a well written board paper as well. So the challenge is there's quite a bit to cover, but one that can be sort of adjusted according to the topic is important. Because you don't want to end up with something that is 10 pages long. Generally a well written board paper on a even on a complex topic, I think can be [00:08:00] covered in five or six pages.

[00:08:02] Alison: And it can be tempting to add lots of appendices but they really, I think, should be optional extras and kept to a minimum. And I think if it's, the lead up to a board paper is really important as well. So, serving up a really complex decision cold is, less than ideal.

[00:08:22] Alison: You know, as a management team, you have to be sort of thinking ahead. And thinking, okay, we're going to need a decision on just this particular exit of a division that we want to make, and how are we going to be sort of talking about that and advancing the conversation, maybe having a couple of papers along the way that are for discussion that give directors the opportunity to have input, and then we get to the final decision.

[00:08:47] Alison: We've done the groundwork and we're not surprising anyone. That can create real problems when you get something that's a big decision and the board hasn't been sort of adequately warmed up [00:09:00] to it. So those are a few thoughts. It's not easy, but yeah, I think a well written board paper takes you a long, long way and is really worth the effort from a management team point of view.

[00:09:12] Richard: Yep. Two things I wanted to pull out of what you just said there, Alison, was particularly the importance of the situation aspect for directors who are not in the company every day. So you can't necessarily assume that they remember all of the discussions that have been had on a particular topic. But what I wanted to dig in on in particular was what you said about options and alternatives.

[00:09:35] Richard: And I wanted to ask you in the case of for example, where company has a decision that's quite line ball between different alternatives, how would you like the different alternatives to be treated in a paper? And would you always expect management to come to a clear recommendation on one of those alternatives?

[00:09:54] Alison: Generally I look to management and to put forward [00:10:00] a point of view. If there are line ball options, then I think it's advantageous. Generally for those sorts of topics to have been discussed in advance with a board and input sort. And I think it is quite okay and indeed often important that you do put papers forward that are for discussion.

[00:10:24] Alison: I think you genuinely need to think about the input you're looking for from the board and frame up, ideally, some questions that you would like the board to focus on and where you've got some line ball options. I think that's the perfect opportunity to really help get some steer from the board or know where the board are coming from. And or bring the board along.

[00:10:47] Alison: So at the end of the day, I do think it's important that management teams make recommendations, and have a point of view. And I think it's quite a dangerous thing to create the situation where the [00:11:00] board makes a choice. That's not a good idea. But that's a lot about the process. I mean, the board paper is at a point in time and it's a document that really is a combination of what has hopefully been a good sort of process of bringing a board along. If it's an issue where direction is not crystal clear.

[00:11:20] Richard: Yep, absolutely. And now Alison to switch to, talk about board papers from the opposite perspective. There's some things that you commonly see that make your job as a director harder in in board papers?

[00:11:32] Alison: Yes, absolutely. Yes. Lack of synthesis, I guess, would be a common one. When you put a board paper together, that is the combination of a lot of work. A management team sometimes will want to share all the work and say, the paper will go along the lines of, we've been busy beavers, we've done all this work, we've done all this analysis, and this is what we want to do.

[00:11:59] Alison: [00:12:00] Sometimes management teams and papers fail to really step back and put themselves in the shoes of the reader and sort of set out the context. Set out the options and put a clear recommendation. Very often, you know, it's comforting for boards to know all of the great problem solving work that's been done, but you don't need to trawl through it all.

[00:12:23] Alison: So I think the papers that do a great job of synthesizing from the reader's perspective in a very clear way where we are, what our options are, and what we're recommending and why, those are the the best papers.

[00:12:39] Alison: The worst papers don't give any signposts up front on where they're going and lengthy rambling and you get to the end of it and you think, well, so what? I'm not quite sure what I'm meant to do with this information.

[00:12:56] Alison: Directors always want shorter papers. I know as an executive, when you [00:13:00] do board surveys, that's always the feedback you get. Directors want shorter papers. Executive teams are always struggling and saying, well, no, they need to know this, and they need to know that. It's always a tension, but I still believe that well written board papers can be short.

[00:13:16] Alison: Those two are not mutually exclusive, and too often you get really long, long, rambly papers. So, yeah I think, I do think having templates, having a strong company secretariat and a strong quality control role where you have someone who's just really good at putting themselves in the shoes of the non executive director makes a huge difference to the quality of the board papers.

[00:13:43] Richard: Yeah, absolutely. And then lastly, Alison, I wanted to ask you about the relationship between the board paper that the directors get before the meeting, and then the paper author is very commonly or almost always asked them to come to the meeting to present [00:14:00] the paper. So, assuming that I've written you a fantastic 10 out of 10 paper that meets all of your requirements.

[00:14:08] Richard: As a paper author, what should I be thinking about using that time in the board meeting for if I've covered off all of the topics already in the paper?

[00:14:17] Alison: As a paper author, I think you should definitely not be re presenting the material. However, even though directors will say they've read the paper and they don't need you to re present, it is nonetheless important that you take charge of the narrative and the discussion by providing, I'd say, a five to ten minute break.

[00:14:43] Alison: Which doesn't feel like a rehash of what's in the paper, but is perhaps coming more from your perspective as a leader in the company where you're saying, you know, providing some sort of personal context and [00:15:00] saying, look, this is something that I feel very passionate about. I'm very proud of the work that's been done and as you can see, we've recommended X, Y, and Z, and I want to tell you that I am very personally committed to making sure this is a success. You might have wondered, or I've had a couple of directors contact me and ask.

[00:15:24] Alison: So using 5 to 10 minutes to sort of convey your personal ownership and fluency with the topic to perhaps flag a couple of things that you think they should have asked or been curious about, or have asked.

[00:15:41] Alison: And cause you've probably got some directors who are sitting there thinking, Oh, hang on, I read that paper five days ago. I can't quite remember. So I think you should always be mindful that you probably have got some directors who, or maybe they did the speed read version. So, do take the opportunity just to land the really important [00:16:00] points to answer the couple of questions that you think they probably should have, or might have and then open up for discussion.

[00:16:08] Alison: But I think it is really, it's a fine line, you definitely don't want to re present. And, you know, generally, I really think avoiding, in my experience, PowerPoint presentations are rarely needed or helpful in board presentations. Because the board is really wanting to look at the executive, to form a view on that person, to see their commitment, their fluency with the topic, their ownership, their accountability, that's what they're wanting to do.

[00:16:35] Alison: They're not wanting to look at a screen and understand a framework. That's really not how boards are making a judgment in the moment. So I think really people talk about the sort of concept of executive presence. I guess, being in a boardroom with a board, being in control of the conversation around a really important decision is a great [00:17:00] opportunity to display your executive presence.