This blog is a companion to the May 9, 2017, interview with Gary W. Patterson, CEO of the Fiscal Doctor on VoiceAmerica “Innovative Leaders Driving Thriving Organizations” on Board Black Holes and Taboos. This blog is based on an article by Gary W. Patterson published in Financier World Wide, Boardroom Intelligence. Gary and Maureen are collaborating to refresh the data and identify the most recent issues.
We invite you to take the new survey (5 minute investment) and help us update the results for 2017.
Carla was on the board of a high-profile company. Like many others, their industry was facing dramatic change because of the pressure retailers were experiencing. Her primary distributor was facing economic challenges and she wanted to diversify to manage the potential risk. At the same time, she wanted the company to pay attention to the speed with which competitors were developing new products and evaluate how her organization should pace new products to stay current and manage profitability.
Boards continue to govern in an increasingly complex business environment. Participants at the National Association of Corporate Directors (NACD) Annual Board Leadership Conference SUCCESS identified a list of twenty uncomfortable topics that board directors and CEOs sometimes gloss over. We believe all directors should be considering how they are performing against these criteria. We created an updated survey for you to evaluate your risk and encourage you to evaluate how you score on this 10-question board health check-up and identify where you might be experiencing your highest risk.
According to Gary Patterson, “Pressed by hard financial realities, leaders say they made it through the recession by hunkering down through the mean times and getting lean. They were forced to cut fat, then muscle, and finally bone.” They are so busy delivering the current products and services and focusing on meeting current objectives that they often don’t have the capacity to do as thorough an evaluation to identify future risks, as they would prefer. We live in a world where there is not enough money, people and time to fix all problems and pursue all opportunities. If leaders don’t think through the taboo topics, they can make suboptimal choices.
Gary grouped the top issues into five key categories:
- True customer and service profitability: Organizations need to understand their business and how they compare to their competitors against current performance and against projected trends so they can proactively manage the opportunities and threats we will face.
- Ability to handle change: Organizations are not putting enough focus on strategically identifying possible changes and conducting experiments that will give them data they can use to navigate new or different territory. This includes leveraging their best people and proactively performing succession planning and developing future and emerging leaders across the enterprise.
- Overly optimistic financials and procedures: Organizations need to continually invest in innovation, including addressing structural barriers such as incentive plans and risk profiles to ensure they are positioned to stay relevant while not being overly leveraged because they tried to innovate too quickly or placed too many or too high-risk bets for their financial situation.
- Opportunity cost: Organizations often play it safe a bit too long and hesitate to terminate products and services that are no longer supporting long-term profitability and may be draining resources. This happens for many reasons ranging from lack of sufficient data to thinking too conservatively about innovation and risk.
- Situational blindness: Unwillingness to see and consistently address the “brutal facts” when they are presented including the regulatory concerns about executive compensation.
As executives and board members, it is critical to take the time to periodically evaluate these risks and mitigate them. Perhaps now is the time to get your organizational house in a little better order: to know, prioritise, and fix those high-impact issues that will not go away. With that process, you will better understand your risk profile and be more comfortable that the right big bets are being made on your business. Then, you can worry less about your million-dollar blind spot finding you before you find it.
About the author Maureen Metcalf, CEO and Founder of Innovative Leadership Institute, is a renowned executive advisor, author, speaker, and coach whose 30 years of business experience provides high-impact, practical solutions that support her clients’ leadership development and organizational transformations. Maureen is recognized as an innovative, principled thought leader who combines intellectual rigor and discipline with an ability to translate theory into practice. Her operational skills are coupled with a strategic ability to analyze, develop, and implement successful strategies for profitability, growth, and sustainability.