Letters & Opinion

Leading the Transformation: Building Back Better

By Dr Axel Kravatzky a recognized figure at the highest international level in the Governance of Organizations. The views presented are his and do not necessarily represent those of any of the organizations he is associated with. Comments and feedback that further the national dialogue are welcome at axel.kravatzky@syntegra-esg.com)

Editor’s Note: This is the first in a series of articles entitled ‘Purpose with Profit’ where regional members of the International Organization for Standardization’s Technical Committee on Governance (ISO TC309) will be reflecting on national, regional, and international developments from the perspective of companies, regulators, and legislators, consumers, citizens and the public at large. The intention is to stimulate and inform public discourse on these topics that will support business, government, public sector, media, and civil society to purposefully shape and respond to developments in a way that increases the wellbeing of all.

The pandemic is far from over, but with the arrival of vaccines we can be pretty sure that we have reached an important turn on the road. Vaccines are key to reducing the chance that the hospital system will be overwhelmed through extreme forms of sickness caused by SARS-CoV-2. The promised opening of the economy and social life can proceed.

The hardships and disruptions induced by mitigations for the pandemic will be felt by businesses and organisations and will continue to affect operations in some form for some time. We live in an interconnected world and what happens in one part of the world will have hard-to-predict effects on other parts of the world. But our adaptations have proved that we can adapt; now we must prove our resilience.

Build back better has been a slogan and wish of many and is reflected in many conversations on social media. We want our quality of life to increase again, but many are wishing that social tragedies of every-day life from before and even during the pandemic could be left behind. Building back better holds a lot of hope- but there is a great danger that we will be disappointed, unless we take determined action – in the short and long run.

Building back better in the short term

Economists think of the short run as the time period within which at least some factors of production are fixed.

The key in the short term is to learn from the experience during the pandemic. Many things that seemed impossible or difficult for many before the pandemic became the norm. For example, many of the long and tedious face-to-face meetings for which many spent hours in traffic jams or flew around the world have been replaced overnight with a relentless stream of virtual meetings.  Remote work has become the norm. Many things can be just as good, or even better, remotely. Some things must be done in person; but now there is a choice.

It is essential at this time that people do not fall back into old habits if they were dysfunctional. But who is to tell? Executives must not fall into the trap of believing that it is their duty to know best. They must take responsibility and accountability to lead and generate value. They need to work with those who report to them and plan a series of outcomes that together generate the value that they have been mandated to achieve. ‘Management rule 101’ says that ‘thou shall not plan for other people’. That also implies that executives need to meet, talk, and work with those to whom they have delegated to jointly analyse what has worked well and should be kept, what can be improved, and what should be stopped. Leaders have a special role – to be in service of their team and to lead in a way that enables building new and better.

Building back better in the medium term

The biggest challenge for governing bodies and executives is to question the very same business models that have gotten them to this point. They must conceive of, test, and then intentionally disrupt their existing ways of operating in order to jump on a new trajectory. One of the biggest mistakes governing bodies make is that they are working as managers. Far too often both governing bodies and those to whom they delegate are both down in the trenches. They say they want to be more strategic, but the truth is that many do not know how to – and sadly that is largely the result of bad theories and models. When have you last heard the phrase “nose in, hands out” as a way to summarize how boards should be operating? Sadly, that is largely popular fiction from certificate mills and successful directors know it to be that.

The reality is that governing bodies always need to be knee deep in it! And when we are talking about ‘building back better’ that means that they need to be even more deeply engaged! Even with respect to the oversight function of boards – that requires consistent assurance and corrective action to be taken and it is not just asking insignificant questions about immaterial contracts and expenditures, nor is it about commanding direction ‘from up high with hands on the back’. Those approaches are wrong in theory and practice.

Future proofing the Organisation

The reality is that if organisations really want to build back better, then boards need to double down on two of their core responsibilities and accountabilities:

The first is to revisit, determine, articulate, and interpret the highest and most meaningful purpose and values of their organisation. The organisational purpose speaks to why the organisation exists and what it will have achieved when the organisation has fully evolved.

Only if the board engages with and determines the organisation’s purpose in a meaningful way (as opposed to a platitude on a plaque that does mean much for anyone), can they accomplish the second task that they cannot delegate to others: determining the value generation model for the organization. What constitutes value? What value is to be generated for whom? How should value be created, delivered, and sustained?

Only if governing bodies do their part, can those to whom they delegate develop strategic plans to achieve the objectives in accordance with the parameters that the governing bodies determine.

“ISO 37000 : 2021 Governance of organisations – Guidance”, which was launched on September 14, 2021, is a ground-breaking international standard that establishes the first global norm on the governance of organisations needed for the 21st Century. ISO 37000 details 11 fundamental principles and associated practice that are relevant to any country and any type of organisation. It establishes Purpose as the primary organisational governance principle of an organisation, with four foundational and six supporting principles. ISO 37000, represents nearly four years of collaborative work and a further year of preparatory work.  78 countries were involved across the period, 25 international liaison organisations and with over 1800 comments received.

Building back starts with us. Only if all players, starting from the top and across the organization, truly take up their roles and work as a team can we build back better. To build better, to build for new challenges, also means that governing bodies themselves and those to whom they delegate execution need to have new competencies and perspectives. Together, diverse people can achieve the previously unimagined.

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