Conflict, scandal, derailment–these are the last words you want to hear as a shareholder, board member, or CEO of any organization, especially if you expected corporate governance to prevent these crises. But the business world is volatile and complex, and as humans, we are volatile and complex. The mechanisms of corporate governance alone are not enough to ensure us or our business against inevitable change and challenges.
In her new book, Beyond Corporate Governance, Isabelle Nüssli shows you why the processes you rely on are a flawed safety net and how you can learn to navigate change, no matter the ambiguities or uncertainties you face. She gives you tools to identify the red flags and hidden dynamics of organizational and personal derailment to push beyond the concept of corporate governance as your best and only solution.
Things change and they change quickly. Learn what you can do to help future proof your business and sleep better at night.
Drew Appelbaum: Hey listeners, my name is Drew Applebaum and I’m excited to be here today with Isabelle Nüssli, author of Beyond Corporate Governance: Understand and Manage the Three Hidden Key Drivers to Help Prevent Derailment in Business. Isabelle, thank you for joining, welcome to the Author Hour podcast.
Isabelle Nüssli: Thank you, Drew, for having me.
Drew Appelbaum: Let’s kick this off, could you give us a rundown of your professional background?
Isabelle Nüssli: Sure. So today, I’m a performance and leadership coach with an entrepreneurial vein, I would say, and I work with boards, management, and startups and help them navigate change and tap their potential. But at the same time, together with other partners, I’m building an online, offline education platform on responsible leadership, with a focus on self-leadership.
But how did it all get started? I grew up in Switzerland in a 600-year-old flour mill and was born into an entrepreneurial family. My father was running a construction company and at that time, only boys were considered potential successors–today we smile at these let’s say outdated worldview. So, my husband actually hired me away from a previous employer and asked me to join his family business, which was also in construction but in temporary modular structures, we were building stadium and grandstand stages for large events.
I started off as a controller and I helped build the US subsidiaries, professionalized key account management, and then I quit to pursue my dream, which was a full-time MBA in the US at Kellogg School of Management. I had done an exchange there, I had an internship in China, and just thought I would not come back to Switzerland anytime soon, but I did the math without my husband.
It was really interesting. I did not expect that. During the second year, he asked me whether I wanted to follow in his footsteps and join the board and then become chairperson two years later. I thought, well, okay, jump. Actually, I did ask the former dean of Kellogg and laid out my options and that’s what he actually recommended. Jump. Because he said, join the company and then you can grow with the company. I knew the company and the staff, I knew the market. I knew the clients.
It was then and a period of time, I would say in hindsight that was on one hand very inspiring, so we’re doing projects for the Olympics, and world comps and world games in the US, in Europe, in Asia. And on the other hand, my experience is in both leading an international company through change and crisis management, not only based on business and the market to relay the challenges but also based on the organization of power plays that could be traced back to basic drivers of human behavior and organizational dynamics.
So, in hindsight, I would say my learning curve was almost vertical and I was left with questions. Why would a person go out of his or her way to hold on to power or achieve power, and also what could I have done differently? Then I was pondering the questions and joined a consulting company, but I kept pondering the questions.
Then I learned that I was far from alone–that many others had had similar experiences with regards to turmoil but had never spoken about it. It almost seemed as if it was considered a taboo. So, I decided I wanted to understand that at a deeper level and that I was already equipped with an MBA, and then I went for a Masters in corporate governance, and then change management and suddenly, things fell into place. This is when it clicked in regard to the books.
Drew Appelbaum: Now, why was now the time to write this most recent book? Did you have an ah-ha moment, was there some inspiration you found out there, or did you simply have more time on your schedule because of what’s happening now in 2020?
Isabelle Nüssli: I didn’t choose the timing. It happened I would say. It’s a mix, it’s kind of a combination of my personal experience with the experiences of others, mixed with the acquired knowledge from education and business in law and social science, which allowed me to investigate the background of widespread derailment and explain it in a more scientifically based, but easy to read books. I wanted to contribute to responsible leadership.
As mentioned, when someone asked me, “What would you recommend to a person that would like to become an author?” I would say, it’s the wrong question to ask. What impact do you want to make? What message do you want to contribute? That’s a question you might want to start off asking yourself and that’s what I did.
So, I think the consciousness of people with regard to derailment has always been there, but it has gained momentum since COVID started. Derailment is present and there’s the right and the wrong is always a good time to tackle it. It’s been a five-year journey.
Drew Appelbaum: What’s different in this book than in your previous books, and if I’m correct, this is your third book published, correct?
Isabelle Nüssli: Two in the hub. Actually, it’s my third but one I wrote under a pen name. It’s actually my second business book. So, the previous book focuses on power plays between boards and management, specifically between chairpersons and CEO’s and it’s based on interviews. It is scientifically founded and it’s different from this one.
This one is different, it’s much broader, it’s also deeper, so it’s, even more, research-based, consists of more real-life cases, and it focuses on my corporate government task fallen short. It looks at the legal framework and then it looks at the key drivers that underly these, falling short of corporate governance.
Drew Appelbaum: Now, while you’re writing the book, did you have any big major learnings or breakthroughs while you were writing it?
Isabelle Nüssli: Yes, absolutely. First of all, I once heard a saying–when you work on the words, you also work on the content concurrently. This is so true. Sometimes you have a concept in your mind but when you write it down and you see it in black on white, it sounds different. That was a big epiphany but also the alignment of my own interest with the ones of the readers. Not everything that I found important or interesting would have been interesting or important to the reader as well. So, I tried to look at information through a different pair of glasses and it really helped me objectivize data and information.
Also, for sure, it helped me analyze and understand and explain my personal experiences, and also other’s experiences and understand them at a deeper level, and also widely held perceptions. Last but not least, I would say, it brings measurable tools and concepts into play.
There’s one more that was actually a point of no return. I have come so far. I think in year four, I thought, my goodness, I could have studied or learned Chinese, I have to finish it but it’s not easy to really get the last 5-10% done, so I just had to do it. Lots of learning and lots of interesting moments.
Drew Appelbaum: Now, when you were writing this book, what was the audience that you had in mind?
Isabelle Nüssli: Definitely it’s for owners and shareholders because they select board members and sometimes senior management, and that’s why it’s also for board members who recruit CEOs and who have the most responsibility and liability for their actions.
Furthermore, it’s for the CEO’s and management teams so also potential future CEO’s. Since it sheds light on important elements of the assessment and installment of top leaders, it’s also of interest to executive recruiters and search firms. In general, when you look at consultants or practitioners, anyone seeking to reduce derailment and improve performance could be general councils, could be HR.
What is Derailment?
Drew Appelbaum: Let’s dive into the book and just start real bottom floor. What is your definition of derailment?
Isabelle Nüssli: Derailment can be considered as an obstruction that diverts an organization or company from its intended course. For example, conflict, excess–what goes off the rails is often the mission and the performance of the business. And the focus of this book is to figure out what triggers derailment and how it can be prevented.
Drew Appelbaum: What does derailment inside an organization look like?
Isabelle Nüssli: Often you see the results, which are fake revenues or inflated profits or false transactions or bribes, the redirection of company funds. The list is long and can sometimes involve hundreds of millions or billions of dollars.
When you look at the corporations and the famous scandals of the 90s. Those are the ones that usually look at the results of a derailment, but they can get personal or organizational, and can be really the end of an organization, and can be the end of a person’s position with the company. It has different shades.
Drew Appelbaum: Now, you talk about corporate governance in the book and that’s supposed to curb some of the issues you just talked about but what other goals does corporate governance have and what is its purpose?
Isabelle Nüssli: Corporate governance is considered soft law. You have company law, hard law and corporate governance concretizes fundamental principles that are described by the law, and it has the goal to balance the sharing of power among different stakeholders, so shareholders, boards, and management members, with the goal to reduce conflict of interest and at the same time, protect the interest of other stakeholders.
Drew Appelbaum: What are the failures of corporate governance? And why hasn’t it led to a reduction of severe conflict in business?
Isabelle Nüssli: First of all, I found that corporate governance did have several flaws. For example, usually, the frameworks are reactive. Corporate governance gets adjusted after a scandal or crisis has happened and also, there are these so-called principal-agent models and I think it’s applied in too simple a way.
It assumes that shareholders and owners act as principles and managers as agents and that they tend to be self-centered and use company resources to satisfy their own interests. But the theory assumes that these interests, the interest of all these groups of principles, and of the groups of the agents are the same and that’s not true.
I argue that the perspective must be more differentiated and there must be an emphasis on the circumstances of diverging interests that impact company strategy and formulation processes. There are different interests among owners. So, there are family businesses, the family that owns versus institutional owners, they have merging interests and the same holds true for the management level. You have entrepreneurial CEO’s, and then you have business nurseries. They all have different interests and that’s another reason why I think corporate governance is flawed.
Then, furthermore, when you look at how certain actors twist or try to twist rules to suit their agenda, I would say that is another flaw of corporate governance. More and stricter laws and regulations lead to another effect and the opportunity to use them to support one’s own story.
I speak about the case, with the former CEO of Volkswagen. During the emission scandal, he tried to downplay the scandal and then he said, “Where is the lie, which is misinterpreted American law?” But they didn’t get away with it.
That’s another reason to see how you can sometimes try to twist rules, or these are our articles and act in good faith, what does that mean and to whom?
Then there are the three hidden key drivers that also play an important role with regard to why corporate governance falls short.
Key Drivers of Conflict
Drew Appelbaum: Yeah, let’s dig into that because the book talks a lot and analyzes the three hidden key drivers of conflict. So, can you talk about what they are?
Isabelle Nüssli: Yes, first of all, the first one is change as a triggering element as I call it. The second one is human nature as the root cause, and the third one is leadership as the accelerator. Because when you step back and look at corporate governance, it just has not contributed much to the reduction of negative outcomes or been stricter on more regulations. They have to increase pressure. The questions do not lie in the strength and weaknesses of individual corporate governance systems, but in these three underlying conditions or key drivers that cause and increase conflict.
Drew Appelbaum: Now can you talk about the role that leaders in a company play and employees play during change and how they could potentially derail a company during these changes? I think a lot of times we see that the problems are coming from the outside but sometimes they happen from the inside.
Isabelle Nüssli: Yes, absolutely. We talked about the whole world, volatile, uncertain, complex, ambiguous, and then, of course, COVID has accentuated these fast-paced changes into the connected world. So, when you look at these external changes or changes, they often require changes inside the company.
A change in the board of directors, in management, or the organizational structure can easily shift people’s positions, responsibilities, and similar changes which can cause the organization’s power balance to shift unexpectedly.
Watch out for these shifts and the consequences. While the business world is constructed as a rational system, its practical functions are full of irrational behavior, and when we speak about change, change involves people and it can trigger emotions, uncertainties, contradictions. So, it is not enough just to manage change. Successful change process involves forward-looking leadership.
The perception still exists that successful changes are a matter of executing a straightforward plan to get from a clearly defined starting point to the targeted objective. So, it’s rational. Then leaders wonder why the subordinates don’t get tasks accomplished. Why deadlines are missed, why costs get out of hand. It is not necessarily changing that people oppose, but it is the fear of the loss that comes with change.
Against the common belief, people are not stuck in their minds, but in their hearts and stomachs. So usually, you try to explain to them in a rational way why change is needed but you have to meet them where they are, knowing there’s emotion and there’s fear–fear of loss, of identity or position. You just have to meet them where they are.
The challenge does not lie in the change itself, but in successfully leading people through transition, and the transition phase is not equal to change. Because change itself focuses on the external structure and strategy, but the transition focuses on the internal.
So, it is more of a psychological realignment or adjustments that employees need to undergo before change can be successful.
Drew Appelbaum: Yeah, why have you found that some people act in harmful ways or they are more prone to act a certain way when they are faced with turbulent environments, over others?
Isabelle Nüssli: One of my professors, he came up with the term SOB, seductive–that doesn’t mean what we might think it does–but seductive operational bullies. I think it really brings it home nicely. So most often, it is demonstrated by excessive pride, excessive confidence, selfishness, the ego, we all need a bit of ego otherwise you couldn’t survive, but there is way too much ego and with these people, it is excessive.
The same thing holds true with narcissism, we all need a little bit otherwise we wouldn’t survive. But with these people it is excessive. So, hubris or SOB’s refers to excessive pride or selfishness. They consider themselves god-like and this makes them feel an unlimited pride that is not even reduced when they become aware of their weaknesses and failures. By the way, in ancient Greece hubris is considered a crime.
So, hubris for example is present before the person reaches a powerful leadership position. It is developed during childhood, but it lies in dormancy, and power only provides fertile ground for its growth.
Drew Appelbaum: What are the other benefits that leaders or CEOs can find just by learning about their own behavioral patterns?
Isabelle Nüssli: As human beings, we tend to act on impulse. So as just as I mentioned, if you learn about negative behaviors that we are prone to, we can make an informed decision and change our actions. It takes practice and patience, but it works.
The first step is to bring a pattern or behavior into the consciousness, and decide whether it is productive. Then the second step is to learn about the origin of these behaviors. The third step is to rewrite the so-called inner script around that behavior, and you can see the script to change actions.
But as it is with change in general, it is impossible to press the button to change. The process demands trust and patience, mainly with oneself, but also with others, and it doesn’t happen in a single moment of awakening. It emerges gradually through questioning long term beliefs, and yes, it is not always comfortable, but neither is running a marathon or preparing for a marathon. It is really is powerful.
The awareness of human drivers of conflict will permit these leaders to lead change by anticipating the impact on people and power bonds.
It also facilitates self-awareness, which is a keyword–I call it my gold standard. It is a keyword because it is crucial for better management of self and others. So, being proactive and learning about their own behavioral patterns and how they play out, will allow them to stay ahead and better deal with potential conflict, and with change in general.
Drew Appelbaum: Now let’s say you’ve read this book and you have dealt with the emotional side, the planning stages, and put together all the processes to avoid harmful outcomes and to improve performance. How can derailment and prevention really be measured?
Isabelle Nüssli: It is not an easy question to answer. It is not an exact science, however, there are few indicators. For example, you can compare pre-intervention and look at the rates of recorded frauds and conflicts, and compare and contrast. You can ask the board, you can ask management, you can ask the different protagonists what has happened since you started with the derailment prevention?
Furthermore, there are surveys and I call them 729 degrees plus feedback, to see where people are in their belonging process and how far they’ve come. Also, it’s a look at corporate governance systems and making sure it is proactively adjusted. Usually, corporate governance defines the what–what the roles are–but not the how, how roles are implemented, how roles are assumed. So, make sure you look at role clarity.
Again, compare and contrast or take a survey. Furthermore, one of the measures is the checks and balances you have in place. Is there a cultural trust, do you have good governance, is the board diverse enough, are the committees established, what about the size, diversity, tenure, structure, etcetera, is there whistleblowing in place?
So, you have hard and soft indicators. There are a bunch of indicators, which we can measure. As mentioned, it is not hard science, but it is definitely worth the effort versus not doing anything.
Drew Appelbaum: Isabelle, writing a book, especially one like this, which will help so many business professionals but also is so detailed–we really just scratched the surface of what’s in there, is no small feat. So, congratulations on putting the time in and publishing this new book.
Isabelle Nüssli: Thank you very much, Drew. It’s been a pleasure. I am excited and I can’t wait to hold it in my hands.
Drew Appelbaum: Now, if readers could take away just one thing from the book, what would you want it to be?
Isabelle Nüssli: Can I have two quick ones?
Drew Appelbaum: You can absolutely have two.
Isabelle Nüssli: So, one of them, I call it LOCC. It is the leader’s oral collaboration contract. So, it is not another written contract. It is an oral contract. I came up with it, and it can be downloaded for free. It is about two leaders or more that discuss the important discussion points of how trust is built, how do each of them build trust, and how do they want to move forward with regard to trust-building? The second discussion point is role clarity or how should the roles be assumed and executed? The third one is power, what will the power division look like going forward, what does it look like now? All of these relevant leadership topics should be discussed.
The second one is just the question–no it is not a question, it’s food for thought. One day your life will flash before your eyes, so make sure it is worth watching. Make sure it is worth bringing the popcorn out and watching your own life movie.
Drew Appelbaum: Isabelle, this has been a pleasure and I am so excited for people to check out this book. Everyone the book is called, Beyond Corporate Governance, and you can find it on Amazon. Besides checking out the book Isabelle, where can people find and connect with you?
Isabelle Nüssli: I am on LinkedIn, I am on Twitter, although not active, but mainly on LinkedIn. I have a website, www.leverage-your-self.com or www.selfleadershipdays.com and that’s mentioned on LinkedIn. I look forward to connecting and interacting with the community. Thank you.
Drew Appelbaum: Isabelle, thank you so much for coming on the show today, and best of luck with your book.
Isabelle Nüssli: Thank you, Drew. It’s been a pleasure.