Transformations are large, complex, lengthy, and difficult. They tend to consume a lot of resources and management focus and, over 70% of the time, they fail. However, without them, companies would become obsolete, dying a slow death.
Companies may be forced into transformations for a number of reasons: financial underperformance, lack of differentiation from competitors, uninspiring purpose, underwhelming corporate culture, widespread use of manual processes, dissatisfied customers, change in market conditions, and/or disruption by new technologies. And yet, faced with such a predicament, few companies take the courageous step to seriously start a transformation. The majority of companies still prefer the struggle of the comfort zone over the discomfort that comes along with change and growth. They are held back by executives who are afraid to lead and who naively wish their problems away.
Boards should never allow that kind of situation to happen. Instead, Boards should proactively discuss and continually push for transformation. While transforming because one is forced to is imperative, it is much better to transform because you’ve made the choice to do so. Even if the company is in the enviable situation of having a solid strategy, good financial performance, strong leaders, and no competitor to challenge their position, Boards know the company’s past successes don’t necessarily guarantee a bright future.
However, this approach requires much more involved conversations during board meetings, asking members to prepare ahead of time and fully engage. It demands that Boards say goodbye to delegating their decisions to an alpha member and to the niceties of accepting incomplete answers without debate. It urges Boards to truly represent the company’s shareholders.
When the decision to transform is made, the Board’s role becomes even more important. Board members must lean in to propel their companies’ transformations by engaging in a constructive way along 4 main dimensions:
Ensuring that the right CEO is in place. Every successful transformation starts with the right leader. Boards must ensure that the incumbent CEO can drive the change - or find another one who can. Boards must also secure unwavering commitment and accountability from the selected CEO.
Asking the right questions as the transformation progresses. Seldom in the company’s history will so many critical initiatives be happening in parallel. The best way for Boards to ensure the plan is progressing well and to quickly identify and respond to unforeseen situations is to use the Continuous Transformation framework. This helps them establish a common language to discuss the transformation journey and to ask the right questions at different stages of the effort.
Offering insights on critical topics. Board members should offer their thoughts when they have a strong perspective on critical issues. That is even more relevant if the topic in question happens to be in an area of expertise for that specific board member. These conversations usually identify blind spots and introduce the CEO to other experts that should be consulted, leading to a much better outcome.
Being the voice of reason when things go wrong. Despite all the best intentions and efforts, transformation projects will go wrong. Often. Not only is that okay, but it is to be expected. As long as the reason for the problems is neither a lack of commitment nor a lack of skill from the CEO or members of the executive team, board members can choose to become the voice of reason, normalizing that situation for everyone else in the room. Boards should not focus on mistakes per se, but on how CEOs and executive teams respond to them.
In the next several articles, we will explore each of these dimensions in more detail and tackle important questions around transformation to provide guidance on how Boards can help make them a success.