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Kindle Notes & Highlights
by
Bob Garratt
For organizations to survive and grow, their rate of learning has to be equal to, or greater than, the rate of change in their environment.
All members of an organization need to understand that to achieve this happy state there must be systems for comparing regularly what is happening outside the organization, by monitoring the external environment, benchmarking and competitor analysis, and knowing continually what is happening internally, through comparing customer satisfaction, productivity and financial ratios with policies, strategies, business models, plans, trendlines, budgets and projects.
the keeping and sharing of daily learning logs by line managers can be of immense help. I am now experimenting with this for board development following on from board evaluations.
The reality of organizations is that the customer’s perception is usually created by the customer-facing staff, who are often some of the lowest in the hierarchy. These people deliver the product or service and often actually speak with the customer. They, and the quality of their immediate supervision, create or destroy the reputation of the company regardless of its mission, vision and values, and ethics statements, and regardless of all the advertising, public relations and other expensive hype.
The fact that these people are customer-facing makes them the company’s greatest asset. They can learn from the customers and so help the organization respond to their changing needs.
Directors rarely speak to customers except in formal circumstances – at annual general meetings, or when dealing with major complaints or litigation – none of which are suitable for sustained learning as they tend to be adversarial, rather than cooperative, by nature. The directors are ...
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One of the requirements is that the customer-facing staff and their supervisors are able to exercise small levels of discretion over the product’s or service’s presentation and delivery, to fit the customer’s specific needs. If this is not possible, there has to be a rapid response mechanism involving managers for quick decisions about a specific customer.
Boards have a crucial role in creating and maintaining the learning organization. They wittingly or unwittingly create the emotional climate that determines whether or not it is acceptable to be seen to learn at work.
Staff watch directors closely to see if their words and their actions are in synchronization.
Processes without intelligent and rigorous scrutiny are not enough. Governance arrangements that are persuasive on paper must work in practice. The aim of board assurance is to give confidence that the Trust is providing high quality care in a safe environment for patients by staff who have received adequate training; that it is complying with legal and regulatory requirements; and that it is meeting its strategic objectives.
If you look at a selection of some recent UK disasters after which there has been a public inquiry or a coroner’s court – the King’s Cross fire, the Clapham rail disaster (where British Rail was fined £250,000), the Marchioness disaster, the Hillsborough tragedy, the Cowden rail disaster – one key point stands out from the judges’ or coroners’ remarks in all cases: the information needed to avoid the disaster was known somewhere inside the organization but neither the system nor the emotional climate to move such learning to where it was needed existed. The emotional climate created by the
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Managers are there to design, install and maintain the systems that monitor and control the daily operations, and rightly so. The directors are there to ensure that at the cybernetic centre of the enterprise, not at the top, there is a heart and brain. This heart of the business creates an emotional temperature appropriate to that specific organization. This is the essence of the organization’s climate or culture. It is the board that ultimately determines this culture, through its oversight of the executives.
People learn how not to make mistakes by being in a climate where they are stretched by taking on a little too much and then have to grapple with the consequences. If they break the job down into portions they can handle rather than having it imposed upon them from above, they are more likely to succeed.
HQ folk are there to blame the innocent, promote the guilty, and bayonet the wounded – so we cover up. The emotional climate is not there to allow the honest admission of mistakes. How can we rectify this? The learning organization: the idealized process of critical review and learning The ‘good-learning’ organization
At its simplest and most cost-effective, the learning organization requires each director and manager at the beginning or end of the day, or shift, to spend ten minutes with his or her direct reports asking: ‘What went right?’ (and to thank the staff for this), ‘What went wrong?’, ‘What can we do about it?’ and ‘Who else needs to know?’
The discipline is reinforced by each line manager being required to keep a daily learning log and to share it sideways and upwards with fellow managers.
The four conditions of organizational learning A learning organization requires the board to commit to and act upon four conditions: 1 That each member of the organization is encouraged to learn regularly and rigorously from their daily work, and to ensure that time is budgeted for this. 2 That there are systems in place to capture and codify that learning, celebrate and reward it, and move it to where it is needed. 3 That the organization is encouraged by its owners and directors to transform itself continuously through its internal and external learning processes. 4 That such learning is
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Another way in which a bad-learning climate can block the ability to learn is by not giving people recognition for their work. Even in organizations that swallow up any individuality, the basic human need to be recognized as a single personality will always show itself.
If people are never thanked, they will opt for ‘negative recognition’ rather than have no recognition at all. They will purposely make mistakes or not comply. Making a mistake consciously, maliciously or just sloppily at least gets you recognized, even if the emotional climate of negative criticism and punishment is dreadful. This kind of bad-learning climate seems, sadly, widespread.
Marshal Helmuth von Moltke’s dictum: ‘Any plan only survives until the first meeting with the enemy. After that you grasp opportunities.’
The board’s job is to maintain oversight of the risks involved; the management of risk is an executive function.
Risk is where the probabilities of different outcomes are known, but not the outcome itself.
most executives and directors have enough trouble grappling with what they think are current risks without getting into their intellectual helicopter, looking at the wide horizon and trying to grapple with the ‘unknown unknowns’ lurking out there. Yet that is the board’s job – to be sensitive to the shape and speed of the clouds on the horizon and to track them so that their rate of learning is such that they can survive and gain advantage.
Over-reliance on quarterly reporting corrupts the executive’s performance and reward systems and forces directors to take a ridiculously short-term view instead of carefully reviewing the long-term trends in their business.
the only truly workable, collegial board is where the statutory directors, whether executive or independent, can come together to debate and decide as equals around the boardroom table.
It is a mark of an educated mind that a person can entertain a thought without having to accept it. Aristotle
The test of a first-class mind is the ability to hold two opposing views simultaneously and still be able to operate. F. Scott Fitzgerald
directors have increasingly restrictive experience as they know more and more about less and less.
the careful selection and development of sufficient diversity around each boardroom table is the key.
John Argenti’s Corporate Collapse17 demonstrated that if too many of the same sort of people – same age, sex, educational background, professional background, social background, etc – came together at the top of an organization for any significant period of time, this was one of the danger signals of corporate collapse.
As most of the existing directors have little formal training, the dynamics around the boardroom table can become frustrating and ultimately dysfunctional as new ignorance meets old ignorance. We have not yet come to terms with the importance of true diversity on boards or the processes for developing it.
The learning board model highlights four tasks for directors: policy formulation and foresight strategic thinking supervising management ensuring accountability.
To ensure the dynamics of organizational effectiveness and organizational efficiency, the board must be able to balance four distinct intellectual viewpoints simultaneously: an external perspective an internal perspective a long-term perspective a short-term perspective.
FIGURE 11• The full Learning Board model
The natural rhythm of the board starts at the beginning of the enterprise’s financial year with an annual review of policy. This has the whole board reflecting upon whether the purpose and vision need to be reconsidered.
The values need to be checked annually, and the best way of measuring them is to change each espoused value into one or two observable behaviours, which then form a key part of each person’s annual appraisal. From the chairman to the part-time security guard, it should be the same set of values-based behaviours. If these behaviours are evident throughout the organization, including the board, in the short term they form the emotional climate of the organization; and in the longer term they create the organizational climate. Both are measurable and should be reported to the board at least twice
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Many directors and executives see purpose, values and organizational climate as ‘softy wimp’ issues. I argue the opposite; if an organization does not keep focusing on them and tracking the trends around them, it is impossible to create the energy for the learning to keep up with environmental changes.
There is a hard side to policy formulation too. This comes from monitoring the external environment. Some call this horizon scanning, and it is often the least preferred aspect of many boards’ work.
many boards are increasingly intimidated or downright cynical about whether they can do anything to design their future or whether they must always be slaves to the slings and arrows of outrageous fortune.
I have carefully defined the board’s prime role in this area as horizon scanning, looking out to the messy external horizon and focusing on uncertainties rather than risks, which I see as an operational issue.
to give a basic framework for the board to develop its horizon-scanning capacity, I have returned to the old, even steam-driven, PPESTT analysis.
This encourages careful exploration of trends and changes in the political, physical environment, economic, social,...
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These are reported and debated at quarterly board strategic-thinking reviews, and then the two who were looking at political take up the physical environment, and so on, so that at the end of an 18-month cycle the board is much more sensitized to the changes on the horizon.
What is important is that a board fully addresses the issues of who does what; where scarce resources are best deployed at board level; and whether the chairman and managing director’s roles are clear to both the board and the stakeholders.
the biggest problems seem to arise if the dividing line between independent and executive directors is drawn diagonally from top left to bottom right of the learning board model. Here the chairman is definitely responsible for policy and the managing director for supervision of management, but there is every possibility for confusion and argument about strategy and accountability unless there is a highly robust process by which the directors and executives debate and reach consensus. Such a process is rarely well developed so turf wars break out between the perceived two types of director.
A better approach is for the board as a whole to design the main focus of its responsibilities collectively as simply directors, to allocate leadership appropriately, based on the individuals available, and to review the outcomes of these decisions at least annually as part of the corporate governance audit process.
Many executive directors will admit that they are so functionally specialized that they cannot ask questions of the other executives or professional disciplines or make helpful comments. Therein lies a clue for the chairman for their development.
A director needs to use intelligent naivety as a key tool of the job.
Directing is becoming a proper job in itself. It is each director’s duty to ensure that he or she is trained for it and appraised at least annually for it.
Policy formulation is the least understood, and so least visited, aspect of directing. There are four major aspects of policy formulation. Three of these – purpose, vision and values, and emotional climate and culture – are soft aspects (dealing with powerful socio-emotional issues).
