Uncertainty is the mainstay of the present global economy. The eurozone saw a winter recession and faces challenges ahead. And while some initial signs point to the possibility of a “soft landing” rather than full-on recession for the United States, the outlook isn’t all rosy.
Continued concerns around inflation, climate change, the war in Europe, and continued disruptions to the global supply chain leave plenty of ambiguity regarding the interconnected impact to global markets. In times such as these, the most effective boards stay steadfastly focused on strategy, structure, and talent.
Directors, of course, hear a lot about strategy—and for good reason. A clear strategy is the compass necessary to stay the course, even in turbulent times. And given the current job market, the topics of succession and effective leadership are often at the top of every board’s agenda.
But there is often not enough discussion about the critical interplay between strategy, structure, and talent. When a company is failing to execute, or, alternatively, consistently exceeding expectations, the “why” is usually found in the organization’s alignment (or misalignment) of strategy, structure, and talent.
Structure seeds the capabilities necessary to execute strategy with precision. “Structure” should be carefully architected to ensure the organization’s needed capabilities, governance and decision-making, and organizational design come together to make executing strategy possible. We often call this the “operating canvas” because it represents how a company is organized to achieve results. The board should be keenly aware of whether or not the operating canvas is well thought out and implemented with intention to determine if the organization is equipped to deliver on strategy.
In today’s dynamic environment, clearly defining organizational capabilities is a critical first step. Capabilities refer to the collective competencies, resources, and capacities an organization possesses. These capabilities encompass things such as processes, skills, knowledge, technologies, infrastructure, culture, and relationships.
There are some telltale warning signs when the operating canvas and strategy are disconnected, and directors can ask the following questions to probe executives:
- What are the value drivers of the strategy and the business model?
- What are the key capabilities needed to deliver on the strategic value drivers and create competitive advantage? Why are they critical to our success?
- What capabilities are new or underdeveloped? Which are overdeveloped and maybe overused?
- What is our strategy for how we will acquire or build these capabilities within the business? How long will it take?
- What is the business risk or impact if we don’t have these capabilities? What are our alternatives to acquiring the capabilities?
- How are we adapting the operating model and organizational structure to integrate these new capabilities?
Far too often we see companies that create an organization structure without clear alignment to strategy and capabilities. They create an org chart, but names in boxes don’t drive results. Designing the structure of the organization requires significantly more rigor and thought, and directors should talk with the CEO and senior leaders in depth about this topic to identify the risks of a misaligned organization.
With a well-aligned operating canvas, designed to execute on the priorities of the business, an organization can truly develop the impactful talent strategies that properly prioritize the critical roles, upskilling and reskilling, and workforce planning required for success. That said, it is important to keep in mind that the relationship between structure and talent is not always linear. In fact, it almost never is.
Talent creates the energy and momentum not only to begin the journey, but to see it through. There is absolute truth to what Walt Disney said about success: “You can design and create and build the most wonderful place in the world. But it takes people to make the dream a reality.”
Influencing the selection of highly qualified, dynamic leaders is potentially the single most important thing a director can do to activate the company’s overall strategy to drive sustained results.
In times of uncertainty, having leaders who effectively lead at the enterprise level, motivate and inspire trust, and make decisions in the face of ambiguity cannot be undervalued. These leaders understand macroeconomic and market trends, can balance the pressures and opportunities, and are able to translate them into powerful strategies backed by an aligned organization. They are skilled at setting strategy, structuring the organization for execution, and ensuring that they have the talent to succeed.
The most effective boards know which leaders from their management teams are skilled at inspiring, creating, and sustaining change, but it isn’t always easy. Many of the interactions between boards and their management teams are well-rehearsed presentations with prepared sound bites. While directors tend to have sufficient exposure to the CEO, they rarely have enough time with other members of management to accurately assess these qualities.
More and more we see directors creating opportunities to interact with management and gain deeper insights including site visits and dinners, formal and informal coaching, and leadership assessment and development programs. These have the added benefit of developing leaders and giving them exposure to what boards care about most. Directors can use these opportunities to do the following:
- Engage in casual conversations about the market, the priorities of the business, and beliefs about motivating people and leading teams. What changes do the leaders think improved the business, and what would they do without any constraints? What culture are they working to foster? Directors should listen for the “why”—do their leaders connect the dots?
- Share experiences, lessons, and wisdom, doing so as a coach, not a judge. Often, these open and vulnerable discussions open the door to the board better understanding who up-and-coming leaders are and how they lead, think, and act.
- Ensure a strong succession pipeline. Boards should require their CEOs and chief human resources officers to drive a robust process to develop leaders, including through leadership assessment with targeted development plans. Directors should dedicate time to learn about key successors’ strengths and get to know them on a personal level.
Regardless of whether we see a true recession play out, or simply remain in the limbo state of the last few quarters, resiliency will be determined by how organizations understand the interplay between strategy, structure, and talent and whether they place them at the forefront of their agendas.