Cash, risk and 4am boardroom decisions, with Simon Laffin, Former Chairman, Flybe

This week's guest on the Boardroom Confidential podcast, powered by Sherpany, is Simon Laffin, an experienced chairman, executive and non-executive director with 35 years of board experience.  

Simon has served as chairman of the airline Flybe Group, healthcare real estate company Assura, and gardening equipment firm Hozelock Group.  

He shares the boardroom experiences that have shaped his career, including the emergency overnight meeting that decided the fate of thousands of jobs - and his reputation. 

He also reveals how experience has taught him to pay more attention to cashflow than profit, and that more time in the boardroom needs to be spent on considering risk. 

Simon is the author of “Behind Closed Doors: The Boardroom - How to Get In, Get On and Make a Difference”, and his new book, “Why Companies Fail” is out this autumn. 

Boardroom Confidential is brought to you by Sherpany, a leading meeting management solution, designed to meet the unique needs of the board, board committee, and executive meetings.  

Key Takeaways 

Boards talk about profit — but companies die from cash 

(02:00) 

Simon Laffin: I know people know that profit is different to cash. But in the end, the thing you have to know is that companies don't go bust because they don't make profit. In fact, profitable companies do go bust. They go bust because they run out of cash. My experience is probably 80, 90% of a board's time is spent talking about profit. And if you're lucky, someone will say, can we just talk about debt or cash? And that's maybe only 10%. And yet every time I look at problems that companies have, you will find cash is either the thing that caused the company to fail, or it's a really good indicator of something else going wrong that's not always obvious in profit. 

Why boards get risk mitigation wrong — and two tools to fix it 

(11:13) 

Simon Laffin: About 90% of mitigations that companies talk about are mitigations to avoid a risk happening. But I think about half of those mitigations should be mitigations for after the risk has happened — how do we minimise its impact? Too much time is spent apparently preventing a problem, and not enough is spent on: if this starts to fail, what do we do? Because the moment you start thinking about that, you think — I need to be monitoring this closely. You're thinking ahead (...)

(13:23) 

Companies often get caught out by the unthinkable (...) The pandemic was unthinkable to most of us — but it happened. There are two ways to cope. One is the premortem: allow everybody to assume disaster has happened. The second is to focus on the event, not the risk. Talking about risks freezes people up sometimes. If you talk about the event — suddenly it feels real. The event and premortems are two really powerful methods of forcing you to think about risk. 

The hidden danger of consensus in the boardroom 

(16:52) 

Simon Laffin: The biggest risk is consensus. If I criticise myself as a chair, I would say I've probably valued consensus too much — because it doesn't make your life easy. And yet the reality is sometimes you can get consensus where everybody agrees, and it's still the wrong decision. There is an argument that if everybody agrees, the chair should stop and say, we're not going to agree this until somebody disagrees. For whatever diversity people bring — ethnicity, gender, nationality, experience — I think it's helpful because it brings a slightly different slant and a slightly increased risk that you won't end up with too much consensus.