On Boards’ To-Do List: Find the Right CEO, Manage the Leadership Team, and Make Sure Transformation Efforts Don’t Lose Momentum, Says New E-Book from BCG
BOSTON—In the face of disruptive technology, globalization, and a volatile marketplace, leading companies are committing to a new kind of transformation—one that is putting boards under new kinds of pressure and demanding that they become active and interventionist, stepping in to guide the process.
Instead of pursuing transformation as a one-time, crisis-driven initiative—and instead of focusing primarily on cost cutting—companies are committing to “always on” transformation, which requires that they profoundly change their strategy, business model, people, and processes on an ongoing basis in order to stay ahead.
For boards, this means taking on new roles, expanding their responsibilities, and changing their culture, says a new e-book published by The Boston Consulting Group (BCG).
Boards must get actively involved by hiring the right CEO, then stay involved by helping the CEO drive change.
“Boards of directors need to play a critical role starting at the beginning and all the way through the transformation journey,” says Lars Fæste, a senior partner at BCG and one of the editors of Transformation: Delivering and Sustaining Breakthrough Performance. The e-book draws on the firm’s work on more than 400 transformations that generated a median annual impact exceeding $340 million through cost cuts, revenue levers, the application of capital efficiency levers, and improvements in organizational performance.
“Boards must embrace the concept of always-on transformation, and embrace change as an everyday way of operating—not as a one-off event,” says Fæste. “The first step is to get comfortable with it, to abandon the idea that you can be a one-time cost cutter or acquirer and start addressing the fundamental transformation of the business on an ongoing basis. This affects every aspect of the board’s work.”
Job #1 for Boards: Finding and Hiring the Right CEO for “Always On” Transformation
“For the board, selecting the right CEO is a tall order,” says Jim Hemerling, a BCG senior partner and coeditor of the e-book. “Many CEOs are still focused on cost and efficiency. But what firms need now is growth. It’s always easier to trim and optimize and cut costs than to figure out something new.”
In the past, boards looked for leaders who were strategic and good with people or markets, but now they also need CEOs who are gifted at transformation, according to Hemerling. “Effective CEOs today can read and understand disruption, set ambitious goals, and motivate people to make fundamental changes in the way they operate,” he adds.
Four More “Must-Dos” for Boards
Four other imperatives for boards in the new era of always-on transformation are these:
“Fundamentally, boards that succeed will be those that accept the new reality of transformation, accept that transformation is for leaders rather than laggards, adopt the right leadership style, and commit to bold action,” Hemerling says. “The imperative to change is a given. The open question is how CEOs, boards, and leadership teams will respond.”
Transformation: Delivering and Sustaining Breakthrough Performance is available for download at here.
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