Are you using the right information to ensure both effective compliance and effective performance?
Until 2002, Major League baseball teams selected players using scout intuition and metrics first developed in the 19th century. However, with only a third of the revenue of larger teams, Oakland A’s general manager innovated another approach to stay competitive. That method was to use evidence-based statistical analysis, which revealed that different metrics – which earmarked previously overlooked and therefore cheaper players – were more predictive of success. Using this approach, the A’s not only won a league-record 20 consecutive games, but their story also spawned a bestselling book and film (with Brad Pitt playing Beane) and it fundamentally changed how baseball is now managed.
This is similar to our received wisdom about what generally makes up an effective board – such as a charismatic chairman; a knowledgeable company secretary; and diverse directors with the right education and experience. However, these traits do not stack up against the evidence-base. The financial crisis has brought this debate out of the academic cloisters and into practice. Now more than ever, guardians of governance are being challenged over the quality of their board and are recognising that although following compliance guidelines is important they do not guarantee better board performance.
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