Board Transformation – What’s on the Agenda?

Covid-19, and a confluence of other societal factors, forced organizations that were already knee-deep in transformation to telescope timelines and accomplish in weeks what had previously been associated with multi-year timelines. Smart organizations have leveraged what was learned and incorporated lessons into a re-imagined future that will outlast the pandemic. As we look to that future, more transformations are on the horizon, but just as this isn’t business as usual, it isn’t even transformation as usual. This is transformation on the heels of a pandemic that has sapped the energy from leaders at every level, challenged the mental and physical health of leaders and employees alike, and created a tsunami of burnout. While there has been some focus on leadership for the next normal, what has received relatively less focus is the Board and its role in overseeing risk management against the backdrop of the next normal.

Transformation is here to stay

LHH-Knightsbridge’s 2018 Board and Executive Survey, conducted in partnership with the Conference Board of Canada, highlighted the stark realities and complexities of being a CEO in 2018. Organizations were impacted by multiple, multi-faceted drivers with profound impact, that were changing the way organizations operated from the outside in and the inside out.  Across all sectors, organizations were undertaking multiple transformations. More than 95% of organizations in our 2018 sample of a wide swath of Canadian businesses reported ambitious transformation agendas, with an average of 3 transformations being undertaken simultaneously, and resulting in, on average, a reported five change initiatives being on the agenda for the next 12 – 18 months.  At that juncture, Boards and leaders were not completely confident that their organizations had the needed transformational capabilities.  In hindsight, this was child’s play.

Rethinking the Board’s role

By 2020, with the onset of the pandemic, amplified pressure to address diversity and inclusion, and changing demographics, a completely different reality emerged. Accelerated transformation was a requirement, with the now familiar transition to working from home, virtual delivery models of every ilk taking front stage, and a change in what was expected of leaders.  Two years into the pandemic, with first-hand knowledge of what was on their plate, senior leaders can be forgiven for thinking that they fared well as leaders through the pandemic.[1] Merely surviving was a feat, and so many successfully transformed their businesses in record time.  But, what has emerged is a new challenge: extreme fatigue and burnout in senior leaders’ ranks and throughout organizations, and increasingly lower levels of satisfaction with senior leader performance, the deeper one goes in the organization. Part of the dissatisfaction is attributable to the heightened demands and a perception that senior leaders are not quite understanding the pressures that have cascaded.  With transformations not abating any time soon, the challenge is how to maintain momentum and focus and (re-) engage a workforce and leaders at every level who are, in a word, exhausted.  The Board challenge is how to provide oversight of risk management against this unique backdrop.

 Evolving Board Demands

While the basics of corporate governance do not disappear, Boards need to be able to provide support, coaching and advice to the CEO in a complex context. They need to be able to effectively provide oversight of risk management in areas that are new and evolving or amplified in importance. They need to create the right Board culture to ensure risk is considered from every angle, and that strategy benefits from diversity of thought. And, they need to do all of this with an understanding of the critical talent-related risks facing organizations; ensuring business continuity in the face of the Great Resignation, addressing mental and physical well-being to which the C-suite is not immune, understanding the closer scrutiny on organizational culture for would-be applicants at every level, addressing the vocal needs of different demographics. The list is long.   

Building a Short List

Boards will certainly benefit from beginning with the following 3 considerations.

1.      Board self-assessment against a new Success Profile:

CEOs who have been the traditional bedrock of Boards may not have had to contend with newly emerging leadership expectations, and the types of risks and issues that are facing CEOs today and into the future. The Success Profile for a Board Director looks different from what may have worked in the past. As illustrated in the Success Profile graphic below, Boards may benefit from considering whether they need to augment or change skill sets, mindsets, and perspectives to ensure that they have the knowledge, experience, and capabilities to oversee risk management, possibly in new areas, such as cyber security, artificial intelligence, technology investments, transformation, environmental and social governance (including climate change, and diversity, equity and inclusion). They equally need to consider what new and different behaviours may be required to provide oversight at this particular juncture. For example, as the C-suite grapples with navigating and leading through evolving uncertainty and ambiguity, Directors may need to sharpen their own agility to regroup, reframe and persevere and tolerate missteps. Humility -- the ability to listen and actively cultivate an openness to good ideas from the broader ecosystem—has added importance to address the unique and complex challenges that are rising to the Board table. Empathy, and the ability to connect at a deeper level, is not only a new expectation of leaders – it must be one for Directors as well, as both mental health concerns and inclusion rise to the fore.

2.      It starts at the top: Ensure an inclusive Board culture:

 While there has been growing focus on increasing diversity at the Board table, building an inclusive culture is about ensuring that those voices are heard, valued, and actively engaged. Tackling the transformational challenges that lie ahead requires true diversity of thought, and the ability to see through multiple lenses. Boards with a more diverse composition, including a transformation mindset, will more likely be supportive of CEOs and their teams who are thinking in new and different ways, taking risks, making missteps, and focusing their efforts on re-inventing, re-imagining and re-engaging their people. Boards (and especially Chairs) may benefit from considering how they invite diverse voices to the discussion, paying careful attention to ensure perspectives are not lost, and whether they intentionally bring on diverse talent, but then inadvertently onboard for conformity to an existing culture.   When Boards do engage in mentoring programs for newer Board members, they may want to consider reverse mentoring too – what can the more seasoned Director learn? 

 3. Plan for amplified risk around talent  

As the pandemic enters its second year, talent has emerged as a critical risk, with the potential to impact short- and long-term business continuity. Executives have had to learn how to lead virtually, have worked to keep the business and employees afloat, and struggled to meet new leadership expectations, and it has taken a toll.  Mental and physical exhaustion have led to the Great Resignation; Executives are either choosing to accelerate retirement, choosing to take a break from the demands, or moving elsewhere to roles that are more appealing.  Deeper in the organization, employees similarly are mentally and physically exhausted, feeling unheard, as leaders have struggled to connect in a virtual work environment, re-evaluating work-life balance and passions, and are similarly actively entertaining moves. Boards are faced with three immediate challenges: addressing the risk around talent departures in critical roles; ensuring capacity and readiness for the next waves of transformation which likely includes deeper support of the CEO and C-Suite; and ensuring that the CEO and C-Suite, in turn, are demonstrating the right leadership and connections to the rest of the organization.     

First, Boards need to address immediate risk and ensure a solid emergency plan is in place for critical roles, and that it is updated and reported on regularly. Critical roles are not just executive roles. They are roles that are critical to the strategy that the organization cannot afford to have vacant. For the longer term, Boards also need to ensure that they have a clear understanding of bench strength within the organization and are kept apprised of the development undertaken to groom and retain successors to take on evolving critical roles.  This means that they need to clearly understand current and emerging critical roles, specifically where the organization may be most exposed, and risk mitigation strategies, and ensure that the update and discussion becomes a regular part of the Board agenda.

Second, with transformations not abating, Boards need to consider whether their organizations have the capacity, capability and readiness to execute on transformation.  This includes an objective assessment of senior leaders and whether teams need to be shored up with additional talent, replaced, or supported in new ways.  It hinges, in part, on the recognition of the pervasiveness of exhaustion and the likely need for Boards, and especially the Board Chair, to more deeply support and coach the CEO (and C-Suite). This level of collaboration requires a culture of openness where issues can be discussed, failures can be dissected for learning, and strategies can be co-developed. Boards may need to make difficult decisions to slow the pace and modify demands in order to ensure capacity and readiness for transformation.

Third, even while Boards are supporting senior leaders, they simultaneously need to hold them accountable for demonstrating empathetic leadership and setting the right tone in the organization.    Effective leadership in 2022 and beyond requires truth telling and candour and inspiring and connecting to the future.  It requires treating others as they would like to be treated and staying plugged into the physical and mental well-being of all employees. Indicators that should regularly be reported to the Board include engagement survey results, retention data, talent risk assessment and scenario planning, talent pipelines – especially through a diversity lens.

Board transformation is vital to stay aligned with the organization transformations ahead.

[1] The Adecco Group (2021) Resetting Normal