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June 2002 Hot Topic
Change Comes to the Board Room
Since you can’t pick up a business publication this month that
does not have reform in corporate governance on the cover, we’ve
decided to do our bit of bandwagoneering and climb on board this
freight train for change. For many CEOs and boards out there,
you had better get a good grip on the issues and a head start on
the solutions because, as Bette Davis says in one of her film
classics, “It’s gonna be a bumpy ride.”
Here we are in the middle of the AE era (where AE stands for
After Enron) looking at potential changes in a part of the
business that has not often seen change – the corporate Board.
Not only are we looking at potential changes, but we are also
using a language that many might have thought did not apply at
this heady level. Terms such as “process” and “reengineering”
are now being applied to what happens before, during, and after
those drawn-out meetings in the boardroom.
The facts are that the investment community is rethinking how it
looks at companies in which it has investments. A part of that
re-thinking is a re-look at just what is expected from the Board
of Directors. In fact the New York Stock Exchange (NYSE) has
just published its recommended changes to board practices in the
report of the NYSE Corporate Accountability and Listing
Standards Committee. Final recommendations are scheduled for
formal adoption in August 2002 and, when adopted, will cause
major changes in the way boards and directors operate and
interact with management, employees, owners and each other.
Until now, managing changes in the ways companies operated was
largely beyond the purview of the board. In fact, the closest
many board members have come to the changes going on the
organization has been during the review and approval of an
impending big change and then possibly following up on
implementation progress and results. In short, the Board has
usually not been down in the details of managing such a change.
But with major changes coming in everything from board
composition and committee charters to conduct of board business
and reporting of board decisions, board members are likely to
feel they have come out of the frying pan and into the fire.
Fact is, CEOs and boards will find themselves lined up in the
Red Zone, with no viable option but to score. Better yet, there
are proven playbooks at hand: planning and execution guidance
from Red Zone Management and The Change Management
Toolkit that can be readily adapted for Board level change.
Companies undergoing big changes have realized the need to apply
change management to enable changes to be made on target, on
time, and on budget. While change management has been applied at
several levels of rigor … from little more that communicating
that a change is coming to formal change engineering … it has
been focused “at lower levels of the organization where
employees need it most.” Conventional wisdom has it that middle
management on down is the target population for systematic
change management. But with the changes likely to be implemented
at the Board level, the new population that just might need
change management is a traditionally strong-willed one made up
of seasoned pros – individuals who have each already
demonstrated business success in their careers. Few of us could
name a tougher audience for change management.
The responsibility for making recommended changes in the
Board will fall to the Chairman … with the help of the CEO (in
case they are not one and the same) and possibly with a “lead
director” from among the independent members of the board. The
driving force behind the change may well be the CEO … who may
have the strongest motivation to configure the board for the
After Enron environment.
The change management method for making the needed
changes can be found in several places in our library … but
should generally include the following key steps:
- Complete a Vision or
Blueprint for Board Operation … as
modified by the new regulations. The trick will be to envision
how the board should be operating two years from now (not just
short term to meet regulations) in order to meet all its
purposes and objectives.
- Identify and define
the Key Board Processes … once again
as modified by new regulations. The trick will be to develop
high-level flow charts that show the most important steps
taken by the full board and its various committees as it
fulfills its purpose.
- Implement the needed
tools of the Board … tools needed to
support board processes. Tools include everything from the
corporate forms needed to run and record its business and the
information products used to keep the board informed of
company information to evaluation and pro forma preparation
procedures.
- Revise the Performance
Management Systems for the Board …
including everything from the roles of board members (full
board roles as well as committee roles) to the training that
directors receive relevant to their duties and compensation
amount/structure.
- Project Manage all
changes … to ensure the Vision is
put into place on target, on time and on budget. Bottom line
here is that somebody must manage all the moving parts in an
organized and professional manner to ensure that Board is able
to operate to maximum effectiveness while meeting all
regulatory requirements.
Bottom line,
change is coming to the corporate boardroom. It may now be time
for Boards to show what they are made of as they reconfigure
themselves to meet today’s demands and those evolving in the
near term. Whatever changes they decide to make will likely be
easier if some of the basic principles of change management are
employed. What’s at stake? Perhaps the whole company. Ask Enron!
Ask Andersen! Ask Tyco!
By: Dutch Holland
& Linda Wilson
 Dutch Holland,
CEO of HDI, has worked as a management consultant for 30 years,
helping organizations and leaders manage and implement change
successfully. And if you enjoyed this short article, you'll
love his new book, Red Zone Management: Changing the Rules for
Pivotal Times (Dearborn Trade, Chicago, Fall 2001). Check your
local bookstores or read a review at amazon.com
or barnesandnoble.com!
Contact Dutch at 713-877-8130.
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