Why Boards Should Be More Involved in Transformations
Big transformations are too important for the board to simply watch from the sidelines.
Big transformations are some of the most important (and difficult) things an organization can go through. They can determine whether a company succeeds or struggles.
So why don’t companies make more use of one of their most experienced groups of advisors: the board of directors?
An Untapped Resource
Many board members are experienced executives who have spent years dealing with the challenges that come with major business changes.
But despite this experience, boards are often not very involved in company transformations.
A BCG survey of several dozen chief transformation officers (CTOs) found that almost two-thirds said their board’s involvement was mainly limited to reviewing progress updates.
Around 90% of CTOs said their board supports the transformation,
but only 26% said the board was highly involved.
That suggests there is an opportunity for boards to play a more active role.
It’s understandable that companies usually keep board members focused on their traditional responsibilities, such as hiring the CEO and providing high-level advice and oversight.
That approach works well for normal day-to-day business.
But transformations are different.
They are major changes that can affect almost every part of an organization.
They often need much more hands-on support from everyone involved, including the board.
Different Transformations Need Different Levels of Board Support
Not every transformation needs the same amount of board involvement.
For example, a CEO-led growth plan might only require the board to receive an update every few months.
But if the board itself has started a turnaround because the company is in serious trouble, directors may need to be much more involved. They might even need direct access to the person leading the transformation.
This happened at a healthcare company that was facing serious financial problems.
The board started the transformation, agreed on key goals, and stayed closely involved throughout the process.
This included making major changes to the company’s products and deciding where to invest money.
The board also received monthly updates on important financial numbers and progress against key milestones.
The result? The company reached its targets on time and became one of the best-performing stocks in its industry that year.
Most transformations sit somewhere between these two extremes.
The board doesn’t necessarily need to be deeply involved in every decision.
Instead, its level of involvement should match the size, complexity, and importance of the transformation.
The problem is that many boards don’t adjust their approach.
They provide roughly the same level of oversight regardless of how serious or complex the transformation is.
A Better Way
Companies can make better use of their boards in a few simple ways:
Create a smaller group of directors who have relevant experience. Give them direct access to the transformation leader, including outside regular board meetings. This allows them to provide advice and support when needed.
Set up regular conversations between the CEO, CTO, and selected board members. These could be short online meetings scheduled around important transformation decisions or milestones, rather than waiting for the next quarterly board meeting.
Link rewards and bonuses to transformation results. Only 29% of CTOs say their companies have compensation plans that are clearly connected to transformation results. Boards have an important role in setting these incentive plans. The strongest programs reward people at different levels of the organization (from the CEO to the leaders responsible for individual projects and workstreams) when they make a meaningful contribution to the transformation.
The Bottom Line
Transformations are too important to treat like normal business.
Board members don’t need to take over the transformation, but they can provide valuable experience, challenge decisions, and help keep the organization focused on its goals.
In most cases, simply receiving a quarterly update isn’t enough. The level of board involvement should match the scale and importance of the transformation.
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