LEARNING TO CHANGE BUSINESS

prepared by Professor Bob GarrattChairman, Board Performance Ltd, London

Chairman, ODPL, Singapore

Visiting Professor, Cass Business School, City

University, London

Some Definitions: 1

• CHANGE from the Anglo French chaunge - the movement from one state or condition to another

by itself it has no moral dimension

• GOVERNANCE from the Greek kubernetes - the steersman

Some definitions: 2

• Learning from the Old English leornung - the self-development of an individual’s attitudes, knowledge and skills

• Leadership from the Old English löd - showing the way forward and ensuring followership through a form of consultation

• Management from the Old Italian “managgiare” - the breaking of wild horses, C16th; and French menager - the domestic economy of a household, C18th

Corporate Governance is a Directoral Dilemma

concerns the appropriate board structures, processes and values

which drives the enterprise forward to achieve its Purpose whilst keeping it under prudent control

The Traditional Organisation

"Us"

"Them"

Symbols

PyramidalHierarchicalMany layersStrictly segmentedTop-down onlyCustomer unfriendly

Citizens/Customers

The Learning Organisation

Acceptance that good and bad learning occurs continuously at all levels of the organisationFocus on systems for capturing learning fastValuing of people and learningDiscussability = forgiveness provided one learns

External World

InternalWorld

Policy

Strategy

Operations

The Business Brain

The Learning Organisation

Giving direction

Monitoring external

environment

THE BUSINESS BRAIN

PerformanceControl System

Policy

Strategy

Operations

Disruptionsfrom the

environment

Deviationsfrom plans

The Learning Organisation

Giving direction

Monitoring external

environment

THE BUSINESS BRAIN

PerformanceControl System

Policy

Strategy

Operations

Disruptionsfrom the

environment

Deviationsfrom plans

Organisational Effectiveness

Organisational Efficiency

The Wrong-learning Downward Spiral

“Downsize”

“Rightsize”

Dumbsize

and

Capsize

For any organism to survive, its rate of learning has to be equal to, or greater than, the rate of change in its environment

L CL CSource: Reg Revans

The Learning Organisation

Primary Tasks for the Board

• Formulating Policy/ Foresight

• Strategic Thinking

• Supervising Management

• Exercising Accountability to owners and other stakeholders

The Learning Board - Basic Framework

BUSINESS BRAIN

ACCOUNTABILITY POLICY FORMULATION

SUPERVISING MANAGEMENT STRATEGIC THINKING

BOARDCONFORMANCE

BOARDPERFORMANCE

SHORT TERM LONG TERM

EXTERNAL

INTERNAL

POLICY FORMULATION

Stating PurposeCreating Vision and ValuesDeveloping Corporate Climate and CultureMonitoring the External Environment

BUSINESSBRAIN

Positioning in the changing marketsSetting Corporate Direction Reviewing and Deciding KeyResourcesDeciding Implementation Processes

STRATEGIC THINKING

ACCOUNTABILITY

To the CompanyTo OwnersTo Regulators and LegislatorsTo StakeholdersEnsuring Directorial Audits

Overseeing Management PerformanceMonitoring Budgetary ControlReviewing Key Business ResultsAssessing Organisational Capability

SUPERVISING MANAGEMENT

C R Garratt 1992

Operations Review Cycle

GovernanceReviewCycle

StrategyReviewCycle

INTERNAL

LONG TERM

Policy Review Cycle

EXTERNAL

SHORT TERM

Creating Strategic Changes

The Board Ensures That

• The organisational purpose is clear• The organisational vision is understood and accepted• The organisational values are understood and accepted• Their words are in line with the values and behaviours• Their business, funding, and people strategies are clear• Project management systems are in place to give

continuous quantitative and qualitative feedback on progress

• The emotional climate allows for learning and critical review

Organisational Capability Survey

TaskFocus

ProcessFocus

Internal Focus External Focus

Clarity of Personal Responsibility Organisational Clarity Financial Rewards

Work Quality Competitor Orientation

Organisational Adaptiveness Customer Orientation

Personal Rewards Personal Performance Group Performance

Leadership

Learning Climate

Four characteristics:

The Learning Organisation

It encourages people at all levels of the organisation to learn regularly and rigorously from their work

It has systems for capturing the learningand to move it to where it is needed

It values its learningIt values its learning

It is able to continuously transform itselfIt is able to continuously transform itself

The “Good Learning” Organisation: the idealised process of critical review and learning

A Mistake or Deviation is made

Accept Ownership quickly and assess Possible Risks

Are they potentially serious?

Take Corrective Action and Inform those affected

Codify problem and Resolution so that others may learn quickly

Problem Solved

Share your discovery to improve work processes and learning

Is there a flaw in the system or process?

Investigatecritically why the

mistakes happened

Tell someoneresponsibleimmediately

Co-operate actively to ensure error

is corrected

YES

NO

YES NO

The ‘bad-learning’ organisation

A mistake is made

Will it show?

Hide it and hope no-one finds out

ProblemAvoided

NO

Conceal itbefore anyone

finds out

Sit tight and hope the problem goes away

Can you hide it?YES YES

Can you blame:- others- special circumstances- a customer

Will an admission of guiltdamage your

employment prospects?

Be first toyour boss withyour version

of events

NO

YES

NO

NO

YES

Asking Discerning Questions

Directors are charged to think critically and independently; and to ask discerning questions of proposals to them using their “intelligent naivety” of the daily operations

Breaking The Existing Mindsetsso that:• Departments are seen now not as

pyramids but continuous “double loops of learning”

• fast decision making leads to fast feedback and project-based learning

• authority is devolved

• successful individual decisions is rewarded

Unblocking Resistance to Change

Changeannounced

Denial

Fear

Piloting/Demonstrating

Understanding

Acceptance

The Stability Group

ResistanceGrieving

Three Key Questions to Identify the Coalition of Powers to Implement Change

Who Knows? (Information not Speculation)

Who Cares? (Emotional Energy)

Who Can? (Formal Power for Change)

Developing Strategic Thinking

Developing Strategic Thinking

Strategic Thinkingis the ultimate test of the leader

rather than of the expert

It is the move from being clever to being wise