Before boards can effectively oversee change, they need clear answers to the most fundamental questions, says CeCe Moken, a board member at Wells Fargo, Genpact and DailyPay who has led digital businesses from an operational perspective. “What problem are we solving for our customers? Even if it's an internal change like implementing a new enterprise system, our customers are our employees. So I always ask myself, with everything: What problem are we solving and how do we know if we can build a lasting advantage?”
Cynthia “Cindy” Jamison, Chairman of the Board of Directors of Darden Restaurants and Chair of the International Flavors and Fragrances Audit Committee, frames the guiding question as follows: “What do we think we're trying to transform from, what are we trying to transform into, and why? What's the research that supports this? What's the data that supports this?” she says. “Debates need to be teasing, but not emotional, and should be based on data.”
It's even harder to maintain that discipline when a persuasive CEO is making a pitch. Jamison recalls a situation where a typically brilliant and highly innovative CEO kept coming up with transformational ideas that were “bets on the farm.” “It took me a while to realize that I needed to dig deeper into the why and what,” Jamison says. “A lot of CEOs get to be CEOs because they're great storytellers. They can sell it, it'll all come together and they'll think, 'Wow, that sounds really exciting,' but then after they've spent hundreds of millions of dollars, they realize it doesn't seem to work.”
Being specific about success means imposing metrics on management from the beginning. Jamison points out that there are three non-negotiables. First, choose milestones that represent progress along the way, rather than the end goal. “You don't say, 'I want to increase revenue by $1 billion.' You say, 'I want to see revenue growth within two quarters.' You're trying to see if you're making progress and gaining traction quickly. ” Second, in turnaround situations, consider focusing on liquidity rather than GAAP earnings. “Cash doesn't lie,” she says.
Third, we need to improve the quality and frequency of reporting to the board. “I'm not trying to crush management with a ton of reports, but in a transformation it always makes sense to agree on short-term and medium-term metrics, create a dashboard of the five, six, seven things you want to track, and send it to the board every month. You don't have to wait for a quarterly meeting. It all has more immediacy.”
Idie Kesner, dean emeritus and professor of strategic management at Indiana University's Kelley School of Business and a director on the boards of several publicly traded companies, says continued board focus is important. “The worst thing a board can do is have a 'drop the mic' moment — 'Okay, we've made the decision, we don't need to keep it on the table anymore.' Continuing to update and making sure we're balancing the metrics we've set and the timing we've set are all very important.”
