News and Views
May 9, 2019
Posted in: WATSON Views
It seems like everyone is talking about transforming their organization, aspiring to be more agile, sustainable, resilient, collaborative, customer-centric, open, platform-based, long-term sustainable…. Do any of these sound familiar? These all describe what organizations need to do, and to be, to survive in a VUCA (volatile, uncertain, complex, and ambiguous) world.
The reality is that it’s hard to get from “here” to “there”, especially if “here” is pretty comfortable. We know it’s hard to make changes to cultures, business models, etc. without the proverbial burning platform. It’s also hard to manage expectations of shareholders and stakeholders when they may have to forgo short-term results for longer-term impacts that are not guaranteed.
The board needs to give the CEO and the organization space, time, and support to make a transition that typically won’t show results in the same year. It goes beyond patience, to active belief and confidence that the strategy is the right one and the future state can be achieved. And yet – how does a board do that while providing oversight and ensuring accountability?
Take for example Microsoft, in 2014 when Satya Nadella, as a first-time CEO, presented a compelling case for completely transforming the business model, priorities, structure, and culture of the company. If you were on the board:
- How would you approach your work as a director?
- How would you deal with the fact that there would be layoffs and potential short-term disruption to results?
- What about the staff who liked the old way (after all, they had enjoyed enormous financial benefit)?
- How would you ensure that the transformation was on track and was actually going to yield the expected results?
- How do you find the balance between patience, engagement, and oversight?
When I see Microsoft’s success in its transformation, and its subsequent strong stock performance, I think the board must have played its role very well. Few organizations have successfully achieved such a notable transformation, especially without the urgency of a crisis. This board had the courage to back the plan not only at its inception but through challenge and pressure. To keep that courage, they must have asked for and received the insight they needed to be confident that the direction was correct and the transformation was progressing.
Our advice to boards who are living through this kind of change is to:
- Anticipate and talk about what the pressures will be and come back to the discussion at regular intervals to remind everyone that this is normal and expected; reground yourselves in your roles and where you need to focus.
- Identify what the early indicators of success (or failure!) will be. How you will know the change is on track even if it doesn’t yet show up in the results? It takes time for this kind of change to flow to the bottom line or to outcomes, but you can monitor a dashboard of indicators and listen for the right stories.
- Align on the board’s role both through the change and at the end of it. Make sure that how you measure performance, determine pay and incentives, and select and manage top leaders fits the future and not the past.
- Make sure everyone is singing from the same song book – craft rational and clear messages for the change that can be repeated to those who will question you on the basis of results – and shift the conversation to the long term.
When the organization is in significant change, it needs a board that engages differently. This is a powerful opportunity for a board to make its impact and add value to the organization.