Most businesses will need to transform to remain profitable. The challenges they face include a variety of forces, such as the rapid take up of artificial intelligence, geopolitical disruption of supply chains, upward pressure on interest rates and employment costs from inflation, and technological changes inspiring new business models – the need for change is obvious. What’s less obvious is a common definition of what transformation means, and how companies should best align their directors
and executives to ensure success. After a career focused almost entirely on transformation over three decades, it’s clear to me that many companies struggle with building the necessary alignment between directors and executives to implement strategy, making it more likely their efforts will be unfocused, less effective and less efficient. Consider a simple test. If you’re a director or C-suite executive, think about your organisation’s current strategy. Imagine what it’d look like if you assigned percentage weightings to each element and expressed it as a simple pie chart. With this in mind, compare it with your company’s current investment slate and capital budget, also expressed as a pie chart. I bet they don’t overlap perfectly. Some may even be wildly different. That’s because it’s inherently difficult to build alignment across your board, executive, strategy and execution. With these difficulties in mind, here are seven steps to build better alignment. 1. Develop your corporate strategy (obviously) Right off the bat it’s critical that the board and executive agree on the disruptive forces at play in the world, how they could affect the organisation, and what the company intends to do about them. Take some time to craft a clear list of these forces, together with your proposed responses. Put the Microsoft PowerPoint away for now, and instead work on distilling the shared views of directors and executives into a simple strategy statement as follows: “Because of X, Y and Z (the disruptive forces, or ‘why’), we intend to do A, B and C (the strategy, or the ‘what’).” There’s nowhere to hide in this simple expression of your strategic intent, and it’s the first foundation of alignment. I suggest that you don’t proceed further until you can all agree on this. 2. Agree on the broad implementation approach Once you’ve agreed on the strategic intent, which can be considered as the ‘ends’, it’s important to identify the ‘means.’ Develop broad plans for how you’ll transform. This might include acquisitions, redesigning the customer journey, new products, re-engineering processes, outsourcing, etc. This is not intended to limit your imagination, but more to put a stake in the ground that gets everyone on the same page regarding what’s intended. 3. Translate your strategy into objective metrics Having agreed on the ‘why’, ‘what’ and ‘how’ of the transformation, translate your strategy into a set of clear measures that will demonstrate whether you’re making progress towards successfully implementing it. If your strategy is to digitise the company, then measure the extent to which your customers use digital channels, the percentage of products that can be offered digitally, and the number of people working exclusively in the digital domain. Express all of these metrics as a ratio against those that remain physical. The idea is to start measuring against what you want your company to become, not just what you already are. 4. Build a ‘change the company’ dashboard All businesses typically have a clear dashboard for running the company, tracking current performance, and regular board reporting. Complement these ‘run the company’ metrics with a dedicated ‘change the company’ dashboard. This should include a small set of metrics that track the external disruptions that gave rise to the need to transform, together with the metrics identified in step three above. Don’t mistake this dashboard for the project management report that tracks scope, schedule, costs, etc. It’s totally different, and is designed to promote measurement, discussion and interventions relating to the transformation of the company and its products, services, processes, technologies, operations, and people. 5. Identify fulcrum roles Speaking of people, I’m absolutely convinced that the skills, temperament and determination of your team will make or break your transformation. In every company, you’ll find both willing supporters and those determined to resist, either actively or passively. Success requires both engaging the supporters and removing the resisters, and also understanding the ‘fulcrum’ roles. These are the key roles that’ll be most affected by any proposed change, and around whom the entire transformation effort will swing. If you don’t have the right people in these roles, then things will get very tough very quickly. Agreeing on the appointment of talent to these fulcrum roles is also a great way to build alignment between the board and the C-suite. 6. Cascade accountability to key executives With the ‘change the company’ dashboard done, and having identified the fulcrum roles, it’s now time to cascade KPIs to each executive. Given that your transformation is likely to be material to the future success and even existence of the company, no executive should be able to achieve their entire scorecard outcome without delivering some or all of it. All executives should have ‘skin in the game’ that motivates them to engage with the transformation effort and drive it forward with urgency and determination. 7. Measure ongoing performance Directors will now be well positioned to work with the executives to measure the ongoing delivery of the transformation. Regular ‘change the company’ dashboard reporting is best done quarterly to ensure that there’s time to move the metrics and executives are not micro-managed. Everyone should insist that metrics are rated as either ‘green’ (achieved) or ‘red’ (not achieved). Avoid the use of ‘amber’ given that, in my experience, it’s most often ‘red’ in disguise. Use this binary tracking mechanism to generate authentic conversations on the topics and results that matter most, and identify what elements require help or additional resources. In summary, remember that your directors and executives must be aligned around all three elements of transformation – encompassing disruption, strategy and execution. Having a shared view of what you’re trying to achieve, how you’re going to measure and report it, and who’s accountable for delivery, will ensure your transformation has the greatest chance of success.