Each of us can look back and be baffled by how much change is possible in a short amount of time. Remember landlines? Flip phones? How about the BlackBerry? It’s human nature to be resistant to change: boards and corporate directors are no different. Maintaining the status quo is more comfortable than change. Especially because leading the change requires a straightforward vision, strong leadership, and clear communication. In the words of the cartoon Dilbert: “Change is good, you go first.”
But change is necessary for company growth and success. And the National Association of Corporate Directors is one organization that not only talks about change but gives board members and leaders the tools to help boards model and implement change. At NACD’s Global Board Leadership Summit this fall, we’ll discuss how we as board directors can embrace our leadership role, set a positive example, and encourage change.
Oversight Is No Longer Enough
Emerging technologies and new customer demands are now constant threats to established products and business models. These threats affect sustainable and profitable growth, but boards can counter these issues by continuously helping management to evolve their business models, investments, and skill sets.
Expectations of capitalism and acceptable corporate behaviors are also changing, forcing a better balance of achieving profits and having a positive societal impact. A good example is a company’s focus on reducing its environmental footprint. This means that we are now seeing the focus on shareholders shift to include all stakeholders, such as employees, suppliers, customers, and communities.
All this is part of taking an active role in creating the optimal organizational mission and culture. Changing our behavior, processes, and interactions from oversight and support to an active leadership model is crucial to ensure success in our evolving world.
Leading Change Is Necessary
External pressures, rapidly changing governance requirements, and differing stakeholder expectations are all good reasons to call for change.
Failure to change may jeopardize not only a company’s performance, but also its very survival. Poor performance impacts everyone, but proper board and director performance can create a competitive advantage that increases value for all stakeholders. Stagnation is the enemy and change will keep your organization sustainable and on the lookout to avoid pitfalls.
Necessary Board Components for Success
When I look back over my career as a board member, these four pieces are critical to effectively lead and enact change:
Boards need to be comprised of directors who understand and have effectively led change management;
A board’s culture of embracing change should be a model for the entire company;
Board information and processes need to align with and support the new culture to achieve its goals; and
A board’s composition should reflect and support its new evolving culture and behavioral design.
Key Takeaways to Remember
To start leading change in your boardroom, define and describethe mission, values, and culture that you want your company to embody. Boards should assess what the organization needs to retain and what aspects would be most beneficial to change.
Build off of the strengthsin your company and initiate change management plans to achieve your new vision. This includes evaluating the current board composition, leadership and processes and taking action to make changes in a timely manner. Once initial changes have been made, continually assess progress towards your vision and course correct as needed. Don’t be afraid of needing to shift direction in the future.
If there’s one constant, it’s that change will always continue. It never stops. Change impacts all of us, and for boards and company leadership to be successful, effective change management should be a required element in the makeup of every board.
Like our cartoon friend Dilbert challenges us, are you ready to go first, lead, and create an inspiring vision for sustainable value creation for your constituencies? I’m looking forward to discussing change, the ever evolving transformation of our world and more at the 2018 Global Board Leaders’ Summit September 29 through October 2 in Washington, DC. Register now and join me there.
Martin Coyne is a director of EyeNuk. Coyne is the chair and founder of the CEO Learning Network and he is the chair emeritus of the National Association of Corporate Directors’ New Jersey Chapter.
“What would you do if I sang out of tune? Would you stand up and walk out on me? Lend me your ears and I’ll sing you a song, and I’ll try not to sing out of key. Oh, I get by with a little help from my friends.”
When The Beatles first recorded that song in 1967, it’s a safe bet they weren’t thinking about corporate governance and the role of the board of directors. Yet, as I’ve pondered the array of corporate scandals over the past decade, I found these fifty-one-year-old lyrics floating to the forefront of my mind.
Whenever there is a highly publicized failure of corporate governance, the first question that’s typically posed is, “Where was the board?” However, in my experience—after 20-plus years of service in public and private companies, both in the for-profit and nonprofit sectors—that question rarely gets to the heart of the matter because process isn’t the primary culprit. A better question is, “What happened and why?”
Conventional wisdom examines whether the board had sufficient information, process, and the right reports. What often doesn’t get scrutinized is whether the board had the right people in the right places and if the chair or lead director is doing his or her job setting the tone at the top.
In this rapidly changing, complex world, it is incumbent upon the chair or lead director to continuously improve both the process and substance of governance, even in the strongest and healthiest of companies. This is where The Beatles’ lyrics come into play.
The Complexities of Conducting
The role of the chair or lead director is similar to that of an orchestra conductor. The conductor’s primary duties are to interpret the musical score of the composer via an ensemble of players. Using indications within the score, the conductor sets the tempo, shapes the phrasing, and guides the players to perform in concert. While it sounds simple enough, it’s a task of enormous complexity.
The sheet music that an orchestra is given can be likened to the committee charters and board responsibilities. The paper needs to contain the “right tune” and the right mix of notes, etc., but those same notes can be played beautifully or poorly, in harmony or in discordance. Even if individual performers are playing well, one bad violinist can wreck the whole orchestra if his or her part is not minimized or if the conductor doesn’t have the power or influence to get rid of the bad player. Taking the analogy further, the conductor also has to spot the talented players (i.e. board members), even if they are hidden away or young, and feature them.
Then there’s the pacing of the score—think board process. Whether it’s played loudly, softly, fast or slow, is a matter of feel. That’s what the conductor is expressing with his or her gestures and baton-waving. And, of course, the conductor has to be ahead of the music, so the sound carries to the audience, as well as anticipate what’s next.
So, you can have all the scores (or board processes) you want, but if the conductor can’t make the band of sterling musicians work together, the net result is less than stellar performance.
It’s doubly challenging in cases where the board doesn’t have an independent chair because the power of the lead director is usually quite limited, leaving him or her to conduct solely through influence versus explicit authority. In the corporate realm, these are some of the factors that must be considered when making governance better.
Soft Yet Hard
In its recent report, the NACD Blue Ribbon Commission on Culture as a Corporate Asset aptly stated, “While it is often perceived as a ‘soft issue,’ [culture] is actually a hard issue—both in the sense of having concrete impact, and in the sense of being difficult to assess.” The same is true of tone at the top. It can be incredibly hard to assess because it’s ethereal in nature, like the orchestra conductor filling the concert hall with melodious music.
But it does come down to the interactions among the board and its committees, and the transparency of information flow between management and the board at all levels. The responsibility for the “tone” of these interactions, i.e., getting the music to sound good, resides with the board chair or lead director.
In the collective interest of corporations and shareholders everywhere, there’s much to be gained by the ongoing tuning of this tone. Regularly posing the following questions is one example:
Are your governance processes appropriate for the speed of change today?
Is there sufficient clarity about the roles and responsibilities of the directors and management?
Are the right people in the right places for today and tomorrow?
Is the orchestra playing in concert in the eyes of the audiences, i.e.. customers, employees, shareholders and the broader community?
The answers are less important than asking the questions and bringing this kind of curiosity to the board room now.
As the aforementioned NACD Blue Ribbon Commission reported, even for companies with healthy cultures, resting on laurels isn’t an option. The stakes are simply too high and the operating environment too volatile not to seek continuous improvement.
It concluded that, “Performed properly, culture oversight not only can be embedded into directors’ existing activities, but also can significantly improve the quality and impact of the board’s work overall.” This notion of making the music match the words when setting the tone at the top goes right along with the Commission’s finding. That, and a little help from friends, might even mean singing on key.
Roger O. Goldman is chair of the executive committee of American Express National Bank, lead director of Seacoast Bank, and former chair of the board for Lighthouse International. Opinions are his own.
“In my experience, we need to start all our discussions about board membership, accountability, and responsibility with the term ‘leadership,’” said CACI International Executive Chair Dr. J. “Jack” Phillip London. “Leaders cultivate and sustain an organization’s culture. They set the expectations right from the beginning. They are continually communicating what’s appropriate and what’s not appropriate in terms of behavior. And that’s done by example, by discussion, by dialogue, and by role modeling.” As London pointed out, however, having leaders with strength of character is not enough to transform an organization’s culture.
London further explained his view of the role of the board in helping to establish and perpetuate a strategically advantageous culture during an interview with Steven R. Walker, NACD general counsel and managing director, Board Advisory Services Group. Among the highlights, excerpted from their interview, were his reflections on contagions, communication, and culpability.
For these aspiring directors and current directors, how can the board verify and check on the fact that every company holds itself as having high integrity and high ethics?
One of the things that we’ve done at CACI in the last year or so is put together our culture, character, integrity, and ethics [board] committee. We have at least 20,000 employees around the planet, and we surveyed them to get feedback on how they viewed the company’s culture, our standards of ethics, and our operational perspectives on being innovative. This committee is now in the process of putting together a dashboard of metrics that we can use to assess and evaluate as we go along. Turnover rates, anonymous reports of problems—those kinds of things. Of course, you want to do it in a light-handed way. You’re trying to bring people along and encourage them. It’s amazing what happens when you ask people to perform with sincerity and integrity. Good folks, well-intended folks, will tend to rise to the requirement, and it’s amazing how that can be contagious. And the beauty of that is, when there are people who come along who don’t subscribe to that kind of thing, they find a way to meander out the door.
What was the motivation to create the board’s culture, character, integrity, and ethics committee?
I saw too many things going in the wrong direction in our society, our culture, our government, religious institutions, and the athletic world that I didn’t care for. And I thought, “We’ve got a pretty good culture at CACI, and I think we’ve got a good reputation. Let’s put something together that can sustain this.”
How do you, as a leader, make sure the board has access to the layers beyond the C-suite and has open access to things and can nip problems in the bud?
We have concerns in that area. One of the things I do is go around to my organizations and sit down and talk to people. I meet with our customers. I’m confident that the board wants me to do that. And when you do it in the field, you’re diving way below a lot of players. And I’m amazed at the kinds of questions I get in one of these sessions.
Communication’s a big deal. And we work hard at making sure we communicate with our people. But it takes persistent effort and, again, priority, and one of the wonderful things is that our leadership group—the CEO, general counsel, and human resources executive vice president—are very on board with this. By the way, they are members of our culture, character, integrity, and ethics committee. It’s not just board people. It’s members of the C suite and others, and I’ve even thought about bringing on some people that are outside the corporation with appropriate liability considerations.
How do you address crisis from the top?
Well, you’re probably talking about our Abu Ghraib situation. If there’s anything that I’ll absolutely never forget in my career, it’s the experience that CACI went through with the wrongful allegations and charges with regard to our interrogators in the early days of [the war in] Iraq. I first found out when Seymour Hersh put out his article in The New Yorker [in 2004] making some claims. The public was ready to hang me. I made the fairly early discovery that the allegations in the leaked report had flaws in them. They had listed some people in there as being our employees, who weren’t our employees.
And so, I dug down into it and found out that our culpability was really misrepresented. It gave me the fortitude, commitment, and the confidence to stand up on it. The main problem was a lot of people wanted to have me fired because of the type of work that we were doing. I would save my neck in the media at least by letting all those people go, but that was not the right thing to do. If you just hang in there, and you’re credible, and you’ve got your facts together, you’re going to prevail—and our reputation today is probably better than ever.
Dr. J. “Jack” Phillip London is the Executive Chairman of the board of CACI International, a Fortune 1000 Largest company that provides services to many branches of the federal government, and serves on the boards of the U.S. Navy Memorial Foundation, the Naval Historical Foundation, Friends of the National WWII Memorial, the Senior Advisory Board of the Northern Virginia Technology Council, and CAUSE (Comfort for America’s Uniformed Services), the “wounded warriors” support organization. He has served on numerous other boards and foundations.