There is no safer way to paralyze a company than a constant back and forth of goals and methods.

Burkhard Randel

Burkhard Randel
Member of the Executive Board of the Association of Supervisory Boards in Germany e.V. VARD

We spoke with Mr. Burkhard Randel about #FutureGoodGovernance.
The interview was conducted before the outbreak of the Corona Pandemic.

A ship needs a captain. A company needs leadership that anchors agility, flexibility, social responsibility and thus sustainability in the company. How do you envisage corporate governance in the future? Which tools will be used?

The question already contains some important elements of the “new” leadership: agility, flexibility and social responsibility – without these, of course, it is not possible. I would like to add clear objectives, the ability to implement and convince, and team spirit. To ensure that these terms are not just buzzwords, here are a few brief remarks:

At the beginning the objectives have to be set, and they have to be worked out best as a team. Since this will not always succeed, it is a must to use your powers of persuasion and implementation to take the team along even if not everyone agrees.

“Agility” and “flexibility” are two sides of the same coin. You are agile when you act quickly and flexible when you are ready to incorporate new insights just as quickly. The art, as is well known, is not to exaggerate both in such a way that the proverbial “giddyup and giddyup” occurs. There is no safer way to paralyze a company than a constant back and forth of goals and methods.

Sustainability is one of the buzzwords of our time and in my opinion a little overused. If we remember the origin of the term, in forestry it meant not cutting down more trees than can grow back (Hanns Carl von Carlowitz, “Sylvicultura Oeconomica”, 1713). In terms of corporate management, this can only mean not using more resources than are available – in both the short and long term. Sustainability is also relevant because stakeholders are increasingly asking for it. There may well be conflicts of interest here, for example with profitability. A company that “only” focuses on sustainability will go bankrupt, and a company that “only” focuses on profitability will also go bankrupt, because customers, employees and investors are increasingly questioning the ethical principles of corporate governance and turning away from the company in the event of serious violations of social responsibility.

The future of corporate governance will depend on management’s ability to meet the above criteria as evenly and, above all, as appropriate to the situation as possible. And new demands are constantly being added: I recently read that in future the abbreviation “CEO” may be translated as “Curiosity Enhancing Officer”, since “curiosity”, i.e. curiosity, must be anchored in the entire company in order to survive. Certainly another interesting aspect, which I agree with, if a good portion of implementation power is added, the ability “to get things done”, so to speak, which should not be neglected in the case of all the other, rather noble qualities and goals.

About the tools: By “tools” I do not mean IT, AI, AR, etc., but the means by which the management fulfils the framework conditions mentioned, i.e. rather the “soft skills” and not the statistics, business plans, etc. In my understanding, “soft skills” are the abilities to communicate the goals and means of corporate policy and to put them into practice. Without these communicative skills, corporate management is no longer conceivable today. “Top down” commands are not enough. Employees and investors expect an exchange of information worthy of the name. This is sometimes laborious, but indispensable.

Trust is good, control is better. Today, it is still primarily about numbers and compliance. Artificial intelligence is also changing the way we think. Can you imagine a management system in which the supervisory board does not watch over the management? For example, should the ‘monitoring’ be outsourced to a technically highly equipped external service provider? What are the prerequisites or consequences of such changes for the company organization?

In the foreseeable future I cannot imagine a complete outsourcing of the supervisory board function to an external service provider. I see the following reasons for this:

  • Artificial intelligence is increasingly being used, but so far it has always been used where large amounts of data need to be collected and used to identify correlations. AI is currently not able to predict the future. Neither can humans, but human predictions are blessed with a combination of experience and the evaluation of future scenarios that goes beyond simple extrapolation of the future from the past and present. It is precisely this, sometimes unconscious, evaluation of possible future scenarios that constitutes the advantage of human prognoses.
  • A, as the question states, “technically highly equipped external service provider” will always represent its own interests, and not just those of the company it is supposed to monitor. He would possibly have the advantage of going to work without bias. This can be quite helpful in the case of encrusted structures, such as still exist in many companies. Nevertheless, I think it would be better if those who make or monitor decisions were part of the company. This promotes responsibility and a sense of duty. An external person would in all likelihood look after several companies and for this reason alone would attach less importance to the individual. Admittedly, there are also human multi-supervisory boards, but even these are not quite wrongly viewed critically.
  • An external service provider is unsuitable for the case of employee participation on the supervisory board. Which side, capital or labour, should he choose in case of conflict?
  • What I can very well imagine, however, is that external service providers should be called in to use the modern tools of AI, AR etc. and make decisions based on them.

Will your company still exist in 10 years? What will it do then?

The product and customer portfolio is quite broad. Neither from the product nor from the customer side is a total failure likely. The basic need for “cleaning” will continue to exist. All previous attempts to replace this with disposable solutions or special surfaces (keyword “lotus effect”) have failed. In addition, we are investing in new products that will ensure the environmentally and user-friendly use of food waste. This is not only about disposal, but also about energy recovery. This market is only just beginning and will certainly gain enormously in importance, as it turns waste into raw material.

Will there still be companies in the current sense of the term in 20 years’ time? What changes do you expect or would you like to see in terms of company organisation and financing?

In 20 years there will still be companies in the present sense. Property, work and a result for which the market is prepared to pay more than the cost of producing that result will continue to exist in the future. Whether the current legal forms will survive depends on how far they are able to meet the demand for capital and labour. The current diversity from registered trader to SE and listed AG has ultimately arisen from meeting this need (and from liability reasons). I regard these forms of companies as sustainable. As far as financing is concerned, one naturally thinks of new ways, such as crowdfunding. Such innovative methods will increase, but will not replace the classic ones.

The corporate organization of the future will be characterized by less hierarchy (organizational structure) and less detailed definition of work processes (process organization). I see the following main reasons for less hierarchy:

  • Strictly hierarchical organizations are sometimes (too) slow in their decision-making and implementation. However, black-and-white thinking in this respect is also not conducive to achieving the desired results, because in crisis situations there is sometimes little time for a broad discussion. So it depends on the situation of the company: If everything goes as planned, I don’t need a hierarchy, everyone does what they are supposed to and does it well. But when does that happen? Nevertheless, the hierarchies of the future are likely to be flatter. New working methods (keyword “Scrum”) will be used more often.
  • I observe an increasing refusal of younger people to take responsibility and to take a clear position. This may sound unworldly in times of “Fridays for Future”, but there is a big difference whether I join a movement and thereby save a day at school, or whether I have to assert myself against a majority and have to cope with setbacks. In this respect, on the one hand comfort can be observed, on the other hand uneasiness to tell others what they have to do or not do. In addition, the tendency to accept sacrifices (leisure time, private contacts) for professional success is decreasing. It is therefore likely to become more difficult to fill management positions.
  • Deeply structured hierarchical organisations are less able to meet the ever faster growing challenges (keyword “half-life of knowledge”) than those with flat hierarchies. The man/woman at the top will be able to rely less and less on already existing knowledge and will therefore have increasing problems to make appropriate decisions quickly. He/she must therefore delegate responsibility to where the current expertise lies. Problem: see previous paragraph.

Even less sustainable than strictly hierarchical organizations are those with a process organization that prescribes everything down to the last detail. Changing requirements in terms of problem definition and solution demand a flexible organization that works on a project-related basis. Cooperation is (often rightly) preferred to confrontation.

Car manufacturers are becoming mobility service providers, food producers are becoming lifestyle providers, media houses are becoming data science companies. Where will your industry develop into? Will industries – as we know them today – still exist in 10 years? What will happen then?

You have to take a very close look at the individual industry in order to make a qualified statement. Many of the transformations mentioned in the question are still in the very beginning. Before Daimler makes more revenue from Car-Sharing than from car sales, it will probably take some time. The same applies to Nestlé as a lifestyle provider. The furthest along this path are certainly those industries that do not produce hardware. The commodity “information” is naturally more suitable for digitalisation than a Mercedes car or a packet of soup. Nevertheless, the potential that lies in the transformation to software in the broader sense should not be underestimated for hardware manufacturers either. The first steps have been taken, among other things, by the Internet of Things, in which user-supporting functions are digitized. Or the numerous digital little helpers in a modern car.

Since the linking of hardware and software will increase, the boundaries between industries will also be redefined. In the future, “industry” will be defined less by hardware (“automotive industry”) than by use (“mobility service provider”).

As a company leader, one must be able to answer – oneself and others – the question of the purpose of the company or the specific mission of the company. What advice do you give a CEO of another industry on how best to approach this issue?

There is still a relatively large degree of agreement on the definition of “corporate purpose”: A company is there to satisfy the needs of customers. At this level of abstraction, it is still quite simple. It becomes more difficult if you want to apply this to the concrete case. It already starts with the “needs”: Are these only the intrinsically present or also aroused? What about the change of the concrete need over time or through innovation? Are there ethical boundaries that go beyond mere conformity with the law? So, if I were to give advice, it would be to determine why customers buy your products and make sure they will continue to do so in the future. The unimposing “why” then also contains everything that is more wordy described in terms of USP, competition, framework conditions, etc. Last but not least, of course, it is also important to provide shareholders and employees with their piece of the cake so that the company remains interesting for them.

The so-called stakeholders, in particular the (institutional) shareholders, are already exercising their ownership rights and obligations much more than just a few years ago. It has long since ceased to be sufficient to tick off the requirements of a code of conduct in terms of compliance (“comply-or-explain”). Internationally, the intensive and permanent communication/interaction of stakeholders with corporate management is gaining ground (“apply-and-explain”). What trends do you see here and how do you assess them?

The so-called “activist shareholders” have become indispensable. This is partly due to the meagre returns on other forms of investment. To this extent, “Apply and Explain” will continue to increase. This is neither good nor bad per se, but may even lead to an improvement in compliance and adherence to other regulations. It simply depends on how these rights are exercised by institutional investors and with what objective. If it is done with a constructive basic approach, it is to be welcomed. If it is simply a matter of “stirring up” the board of directors and other shareholders, it is counterproductive and distracts all those involved from their actual tasks.

#FutureGoodGovernance is currently still comparable to a crystal ball in many areas. Which future aspects of good governance are particularly important to you? What would you do if you had three wishes?

Good governance must serve to ensure that the company performs its tasks better, more profitably and with a secure future. The three wishes:

  • Few, clearly formulated principles
  • Guarantee entrepreneurial freedom
  • Rewarding performance, not form loyalty

A manager I admire once said this very briefly and aptly when asked about the purpose of all entrepreneurial activity:

“To become rich with decency!”

This also applies to good governance, which should describe more precisely what is meant by “decency”.

Thank you very much for the interview!