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.
The word innovation typically conjures up images of new technologies like networked sensors and quantum computers. That was certainly my focus when I wrote my February blog on the age of innovation. We had just closed NACD’s cutting-edge program at the Consumer Electronics Show, and the buzzing excitement felt on the showroom floor was on my mind.
But as directors, we know that although tech is important for our businesses, it’s merely a means to an end: sustainable growth that benefits all stakeholders. Technology plays a major role there, of course, but the real drivers of company value are people and, more specifically, culture.
Recent remarks by Facebook CEO Mark Zuckerberg before the Senate’s Commerce and Judiciary committees, as reported by the Washington Post, made this point clear. During the hearing, Zuckerberg told senators that Facebook is going through a “broader philosophical shift.” This is precisely why my recent focus at NACD has been cultural innovation.
When I became CEO of NACD in January 2017, I knew from my previous 16 years here that we had a strong culture. I had seen our staff grow from 12 to nearly 100 during those years, most typically through internal promotion and the hard work of engaged teams. But what was our cultural secret? Could we articulate it, and thus preserve it and pass it on? I got a head start on the topic by serving on the NACD Blue Ribbon Commission on Culture as a Corporate Asset, which released its report in late 2017. But there was more to come.
One reason I was chosen as NACD’s president and CEO was that the board knew that I would champion corporate culture as a core asset of the organization. Quoted in Lori Sharn’s CEO Update story, our chair, Dr. Karen Horn, stated, “The top people have all been together a long time and really share these values. Because we’re growing so fast, we’ve brought in a lot of new people to the organization. We need to be sure the new people feel the same kind of engagement and buy in to the current culture, and buy in to the development of the ongoing culture.”
Encouraged by the board, one of my first acts as CEO was to establish a Directors Council, made up of the 13 director-level managers. The Council meets every other week to promote collaboration across departments, with the goal of continuing to foster a healthy, thriving culture. The Council suggested that we develop a Values Statement, so we appointed a Values Squad made up of Council members to interview staffers, and by summer a first draft was ready. The six values, which were formally announced in a soft launch to staff in January, follow:
We are one NACD.
We succeed through member impact.
We communicate openly.
We are continuous learners.
We are innovators.
The current phase of this initiative is to weave these six values into the fabric of our organization, and the board has been engaged throughout.
As our own internal effort at NACD demonstrates, directors can make a tremendous difference in culture. In her March 26 blog, Andrea Bonime-Blanc suggests that directors ask management if there is an “explicit culture program in place,” and if it is “intertwined and integrated” with the company’s mission, vision, values, and strategy—all clearly board-level issues.
Along these lines, a recent blog covering a March 28 panel discussion at a Leading Minds of Governance event was aptly titled “Experts to Directors: Innovation, Culture Change Starts With You.” As the blogger (our own Katie Swafford) said, “There is a buzz in the air about renovating corporate culture in the name of innovation.”
I, for one, have heard—and amplified—that buzz. Have you?
Ever since the rise of capitalism in post-feudal Europe, people have predicted its self-destruction. Private creation and ownership of wealth carries risks, and these risks have been spotted by advocates and enemies alike. Free-market proponent Adam Smith in Wealth of Nations warned against the dangers of separating ownership and liability in joint-stock companies. A century later, in Das Kapital, Karl Marx, a foe of capitalism, said capitalism would fail due in part to the inevitable decline of profits over time. And at the turn of this past century, capitalist icon and financier George Soros wrote of the “capitalist threat” in the Atlantic Monthly magazine, predicting that uninhibited pursuit of self-interest without concern for the common good would lead to a breakdown of the free-market economy.
In more recent times, however, we have not needed books or articles to sound the alarm. The current realities of persistent recession and excessive regulation say it all. Clearly, capitalism is under siege and we, its practitioners, are its only hope.
Fortunately, there are several existing communities devoted to this noble cause. One is NACD itself. At our national headquarters and in our chapters, we at NACD believe the organization is helping directors do their jobs well, which, in turn, strengthens companies and the economy.
But NACD is not alone in its dedication. A number of movements have emerged with the express purpose of saving capitalism from both itself and overregulation. One of the newest and fastest-growing is “conscious capitalism”—a movement that challenges business leaders and indeed all stakeholders to rediscover and live their companies’ true purpose—even while creating long-term wealth for owners.
The phrase was coined by Muhammad Yunus, who received a 2006 Nobel Peace Prize for founding the Grameen Bank, a provider of micro-loans. The term caught on quickly. Kip Tindell, CEO of the Container Store, and John Mackey, co-CEO of Whole Foods Market, co-founded Conscious Capitalism Alliance in 2007, which would join with an institute to become Conscious Capitalism Inc.(CCI).
The Conscious Capitalism movement, via CCI, has grown in less than half a decade to become a convening force—one strong enough to tear me away from my office! Last month I served on a panel at the Fourth Annual Conscious Capitalism Conference at Bentley University in Waltham, Massachusetts. The event focused on the importance of “love and care” in the workplace, along with similar topics, including the board’s role in corporate culture, the theme of my panel.
The conference brochure advised me that “conscious businesses have distinctive cultures that help to sustain their adherence to their higher purpose and their orientation towards maintaining a harmony of interests across stakeholders. Conscious cultures are self-sustaining, self-healing and evolutionary.” So far so good!
I assumed my purpose was to suit up, show up, and “carry the flag” for corporate directors. I could just picture myself as being the only “suit” among a sea of social activists and rising-star millennials, being a lone voice explaining that directors do care. In preparation for the panel, I had come up with what I call the 5 Cs:
code (help develop the code of conduct)
CEO (pick the company leader and successors with an eye to culture)
compensation (compensation committee sets incentives for nonfinancial and well as financial results)
controls (audit committee ensures compliance with laws, the code of conduct, and any other norms)
composition (nominating and governance committee selects the board, which then sets the tone at the top through all of the above)
But as it turns out, although I did intone my 5 Cs, I didn’t have to do much explaining about how the boardroom works. Directors and business VIPs were everywhere in the crowd of over three hundred—including some with strong NACD credentials.
Day 1 featured former Medtronics CEO Bill George, who co-chaired the NACD Blue Ribbon Commission on Executive Compensation, as a keynote panelist on the theme of love and trust in business.
On Day 2, the director community was also in evidence. The moderator of the corporate culture panel, Deborah Wallace, is an NACD Fellow, and her panel included NACD’s most recent Director of the Year, Jenne Britell, chair of United Rentals. Another director on the panel, Ralph “Bud” Sorenson, is the chair of the nominating and governance committee of Whole Foods. The conference also featured several notable CEOs, past and present (not only Tindell and Mackey, mentioned earlier, but also Ron Shaich, founder and co-CEO of Panera Bread; and Doug Rauch, former CEO of Trader Joe’s and current CEO of CCI).
Coming all the way from Australia was Ian Pollard, a prominent member of the Australian director community, active with the Australian Institute of Corporate Directors. And I couldn’t resist giving a shout-out to Steve Jordan, director of the U.S. Chamber of Commerce’s Business Civic Leadership Center. (BCLC advances businesses’ social and philanthropic interests through a variety of programs, including corporate citizenship awards and a disaster help desk that empowers businesses to help communities when natural disasters strike.) Like yours truly, Steve is a member of the advisory board of the Caux Round Table, which deserves its own full-length blog post—coming soon.
This star lineup told me that corporate America is already engaged in social responsibility, already devoted to making capitalism sustainable for the long term. Why else would such respected directors be there? And I noticed some knowing nods of agreement from the audience when I discussed the Global Reporting Initiative (GRI), the standard for reporting on company accomplishments in the environmental, social, and governance (ESG) realm—or “sustainability” for short. At NACD, we’ve been keeping our members in the know about such issues—which we will cover at our Board Leadership Conference in October 2012. As usual, our speakers and panels on sustainability-type issues will draw an appreciative crowd.
But Conscious Capitalism runs deeper than simply preaching to the choir about the importance of social issues. According to CCI co-founder Raj Sisodia, Conscious Capitalism has four defining characteristics: “First is a higher purpose. There needs to be some other reason why you exist, not just to make money. Second is aligning all the stakeholders around that sense of higher purpose and recognizing that their interests are all connected to each other, and therefore there’s no exploitation of one for the benefit of another. The third element is conscious leadership, which is driven by purpose and by service to people, and not by power or by personal enrichment. And the fourth is a conscious culture, which embodies trust, caring, compassion, and authenticity.”
Ideally, these values permeate the conscious corporation at every level, including all its employees. Keynote speaker Singh Kang, general manager of the Taj hotel in Boston, gave a good example. Taj is owned by the Tata Group, an $80 billion Indian conglomerate known for its benevolence to employees. Kang was general manager of Taj Mahal Palace in Mumbai during a terrorist attack on November 26, 2008, referred to as India’s 26/11. During the crisis, he stayed on duty, focusing on safety for all as his employees tried to protect guests, even taking bullets for them. Eleven employees died in the attacks. Their families received generous, lifelong survival benefits from their company, returning loyalty for loyalty.
This was Conscious Capitalism in action. These loyal employees and their equally loyal employer will remain forever etched in my mind, inspiring me to continue defending and protecting our economic system—along with the positive values it can foster.