Saturday November 29, 2014

Steward of the Organization

Deloitte Chairman Punit Renjen discusses his working relationship with CEO Joe Echevarria and building a world-class board.

Punit Renjen is the first non-American-born chairman of Deloitte LLP and comes from the consulting rather than the auditing or tax side of the business. Renjen moved to the United States almost 30 years ago when he won a scholarship to Willamette University, where he graduated with honors in management; he now serves on its board of trustees. His first position at Deloitte, about 26 years ago, was as an associate consultant. He was most recently chief executive officer of Deloitte Consulting LLP, where he is credited with driving tremendous growth despite the recent recession. Deloitte CEO Joe Echevarria is also new to his post, the first Hispanic to be named chief executive of a Big Four accounting firm. Renjen spoke with NACD Directorship about the standards of leadership he brings to the role of chairman.

Punit Renjen

You come into the chairman’s role with a new CEO. Tell us about your working relationship.
Joe and I had an opportunity to work together when I was CEO of the consulting practice and Joe was managing partner of Deloitte LLP, so we know each other’s working style. We complement each other, we work very well together, and we understand the role each plays. I understand very clearly that the charter I have is not one of management. It is one of stewardship, one of oversight and governance, and one of modeling the culture. We both leveraged our unique business cards in the marketplace differently. It’s a great relationship.

What is the impact of your being the first non-American-born chairman of Deloitte and Joe being the first Hispanic CEO of the organization?
I think it sends a powerfully positive message—in my case, that someone who grew up in India with relatively modest means can drive to become chairman of Deloitte. It says less about me and much more about how fabulous my wonderful organization is—that is, it is possible at Deloitte to grow and ascend. We were the first [audit firm] to have a woman chairman in Sharon Allen [Renjen’s predecessor]. So I think it’s a very positive testament to Deloitte.

Isn’t it more attractive today to be a consultant than it is to be an auditor?
I don’t draw that distinction at all. We will hire in the United States this year for all our functions— audit, tax, consulting and financial advisory—some 18,000 people…and we will receive some 435,000 résumés. Now, what that tells me is that nearly a half-million people are interested. It says something about the profession. It says something about our organization. So I’m not worried about that. This is a great profession to be in.

How do you go about building a world-class board?
First, start with a belief system that doesn’t apply just to the board but to the entire organization. We’ve articulated very clearly—and now are propagating and uncompromisingly living—seven core beliefs. Those core beliefs define who we are as an organization and also define, inform and lead our board—we live them in the boardroom.

Second, when you start an enterprise with a stated goal of truly creating something exceptional, you have to first define what the role of that organization is. Therefore, at the start of my term, we defined what we deemed were the eight roles of the chairman and the board (see sidebar, opposite). Even though we are a private partnership, many of these roles are applicable to public boards.

Do you believe in the separation of the chairman and CEO roles?
Governance is strengthened by the objectivity of the board and the independence of its chairman; we firmly believe that it leads to better governance. We have an independent chairman. I am selected, nominated and elected by the partners, and the board compensates me. I’m truly independent.

Aside from Deloitte, of course, who would be exceptional as a culture modeler?
The U.S. Marine Corps is an example of an exceptional organization, and at its core is a clearly defined set of beliefs. They understand clearly who they are.

How do you evaluate the board?
We do several types of evaluations each year. The first evaluation is a 360-degree evaluation, where every board member evaluates every other board member confidentially. We hire an outside third party to collate the information, and the only person within the organization that gets to see all the information is the chairman. Second, I sit down with board members in August and have one-on-one discussions and give them feedback on their 360-degree review. Based on the input, the chairman then evaluates every board member. Third, we send out a survey to the entire partnership annually and ask them to evaluate the board’s performance. Finally, the board evaluates itself—as an entire board, not as individuals—around the eight goals that we set for ourselves at the start of the year.… An independent evaluation committee of the board evaluates the chairman and the CEO. So that’s done separately, and they reach out to individuals that we’ve worked with, etc., to understand how we did.

And this is all done on an annual basis?
Our 18-member board is elected on a three-year cycle, so every year six members are up for election, and you only get two terms. Each year, we select a 12-member nominating committee comprising no more than three members of the board, and the remaining are top-performing partners. That nominating committee goes out and polls the partnership, through surveys as well as individual one-on-one interviews, in the June through September time frame, and comes back with a report on the state of the organization for the chairman and the CEO. The nominating committee then comes back with a recommendation of a class of six. Sometimes they will re-nominate, sometimes they will get new partners in. And that’s done every year.

What are your priorities coming into the chairman’s role?
When I look back after my term, I want to be able to [say]— and it’s very important to me, personally—that I was a very effective steward of our organization. I recognize that what I have is something very precious: my organization. I love Deloitte, and I want to leave it better than I found it. It’s important to me that our board is acknowledged by our partners as one that is looking out for the best interests of the organization, the partnership, the practitioners, as well as clients, including capital markets. That it is doing it in the most transparent, most objective way, and that it works collaboratively with management to make the outcomes better. That’s why the definition of the roles is important. That’s why the way that we conduct ourselves in employing the best thinking and the best practices is important. We’re working to create an exceptional board so that we can be perceived as being very, very effective on behalf of Deloitte’s stakeholders.

Roles of the Chairman and Board of Directors
Renjen’s philosophy on how to build a world-class board.

  • Steward of the enterprise. In recognizing management’s responsibility to handle daily operations, the board focuses on the long-term implications of actions, advocating for tough decisions made for the good of the organization.
  • Modeler of values and core beliefs. Boards have an obligation to articulate, propagate and model the core values and beliefs of the organization—inspiring everyone to follow their lead.
  • Guardian of strong governance and orderly leadership succession. Boards that serve as exceptional guardians of these functions maintain an ongoing commitment to transparency, accountability and objectivity.
  • Strategist. Vital skills for the board are to ask, listen and assess. The chairman and directors serve management as a sounding board and advisor to confirm that the organization’s strategy aligns with its vision, mission and core values.
  • Risk and scenario planner. While management owns these operations, boards play a critical role by imagining and anticipating the unknown. Through oversight and input, boards identify potential roadblocks and evaluate their impact.
  • Public face and market maker. Board members, especially at private firms, may represent their brands through activities ranging from publicly presenting perspectives on key business issues to assisting with client engagements.
  • Custodians of trust. In assertively performing this role, boards protect more than the enterprise; they also protect investors in capital markets and all stakeholders who expect other returns beyond core profit, such as corporate responsibility and active community involvement.
  • Global advocate. Boards must ensure that management understands, adopts and maintains a global perspective to help to reduce costs, seek new markets and grow their people.

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