Helen Scotts outlines five critical ways in which boards can play their role in guiding organisational transformation.
It seems that every industry, company and business leader is grappling with change. The way we work, live, consume, spend our time, what influences us, the choices we make and how we view the world all seem to have changed dramatically in a few short years.
Business is not immune to this tide of change. In fact, the business world is at the epicentre of our changing world as the driving force behind much of the innovation and growth. So how does business keep up and transform to stay competitive and continue to grow?
Transformation may be ubiquitous, but it is not an organic occurrence that happens by accident. It requires deliberate actions and the willingness and courage to transform constantly. It requires a firm vision, clear direction and alignment across the organisation to achieve it.
Transformation needs to start from the top. The board of any organisation plays a critical role in shaping the transformation. Its task is to create clarity around the growth agenda and unleash management to go after it.
Successful transformation starts with the board defining the parameters for growth and enabling the company to change in order to achieve it. It asks: What kind of growth? How much? How far can we go? Without this clarity, management will be paralysed by uncertainty or waste resources pursuing multiple, divergent opportunities, all of which cannot be taken to their conclusion.
At the end of 2010, the board of a major not-for-profit organisation in the healthcare sector articulated a strategic direction which called for its organisation to grow in size and capacity and to become an organisation of influence and the first port of call for healthcare advice in the home. The board recognised that in order to lead the transformation successfully, it would need to lead the change from the top. The board articulated the growth direction to guide management in achieving it. These parameters were:
To expand geographically and secure a national presence.
To grow by diversifying revenue streams and developing new and allied businesses, thereby reducing over-dependency on certain income streams.
To broaden models of care delivery and achieve greater scale.
Since then, the organisation has grown from $50 million to $150 million, expanded into other states and into New Zealand. Strategic acquisitions have enabled work to commence on new service delivery models as platforms for growth. This organisation has transformed and transformation continues to be the order of the day.
While the contribution of the board starts with creating that clarity, it certainly does not end there.
Learning from companies that have undertaken successful (and less successful) transformations reveals five critical ways in which boards play a unique role in governing and guiding transformation. The board:
Sets the direction for transformation. As both the keeper and the shaper of the organisation’s long-term value, its role is to provide clarity by defining both the direction for the organisation and the parameters for growth and transformation.
Ensures total alignment as a board. When key investment decisions are required, any lack of alignment can emerge to stymie important decisions and frustrate management. The responsibility to test continuously for alignment rests with the chairman. Every director should ask questions and raise challenges to enable misalignments to surface and be resolved. This process can often be assisted by an external adviser.
Manages its own and management’s hunger for growth and transformation. Directors are usually successful business people in their own right with a strong appetite for growth. While valuable, this desire for growth must not interfere with the responsibility of the board to scrutinise and challenge initiatives brought to it by management to ensure it is in line with the strategy. At the same time, the board through the chairman will add critical value by ensuring that the time and energy of the CEO and management team is directed towards where it will make the greatest impact.
Reviews lessons learnt from transformation. Organisations will experience challenges in pursuing opportunities and it is the role of the board to ensure that learnings are extracted, shared and leveraged into future endeavours.
Continually improves its own effectiveness. The board’s ability to lead organisational transformation is greatly dependent on whether, as a decision-making body, it is effective. With transformation often comes rapid change, exploration of new opportunities and new challenges. Investing in rigorous board performance reviews will ensure the board is enabled – having the right people and reviewing “what it does” and “how it does it” – to deliver the objectives. Improving a board’s effectiveness is critical to good governance and successful transformation.
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