LEARNING TO CHANGE BUSINESS

1. LEARNING TO CHANGE BUSINESS prepared by Professor Bob Garratt Chairman, Board Performance Ltd, London Chairman, ODPL, Singapore Visiting Professor, Cass Business School, City University, London

2. 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 • GOVERNANCEfrom the Greek kubernetes - the steersman

3. Some definitions: 2 • Learningfrom 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

4. 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

5. The Traditional Organisation • "Us" Symbols Pyramidal Hierarchical Many layers Strictly segmented Top-down only Customer unfriendly Citizens/Customers "Them"

6. The Learning Organisation External World • Acceptance that good and bad learning occurs continuously at all levels of the organisation • Focus on systems for capturing learning fast • Valuing of people and learning • Discussability = forgiveness provided one learns Policy TheBusiness Brain Strategy Internal World Operations

7. The Learning Organisation • Giving • direction Monitoring external environment Policy Disruptions from the environment THE BUSINESS BRAIN Strategy Control System Performance Operations Deviations from plans

8. The Learning Organisation • Giving • direction Monitoring external environment Organisational Effectiveness Policy Disruptions from the environment THE BUSINESS BRAIN Strategy Control System Organisational Efficiency Performance Operations Deviations from plans

9. The Wrong-learning Downward Spiral “Downsize” “Rightsize” Dumbsize and Capsize

10. For any organism to survive, its rate of learning has to be equal to, or greater than, the rate of change in its environment The Learning Organisation • L C Source: Reg Revans

11. Primary Tasks for the Board • Formulating Policy/ Foresight • Strategic Thinking • Supervising Management • Exercising Accountability to owners and other stakeholders

12. The Learning Board - Basic Framework EXTERNAL ACCOUNTABILITY POLICYFORMULATION BUSINESS BRAIN BOARD CONFORMANCE BOARD PERFORMANCE SUPERVISING MANAGEMENT STRATEGIC THINKING INTERNAL SHORT TERM LONG TERM

13. Policy Review Cycle Governance Review Cycle Strategy Review Cycle INTERNAL LONG TERM Operations Review Cycle C R Garratt 1992 POLICY FORMULATIONStating PurposeCreating Vision and ValuesDeveloping Corporate Climate and CultureMonitoring the External Environment ACCOUNTABILITY To the Company To Owners To Regulators and Legislators To Stakeholders Ensuring Directorial Audits • BUSINESS • BRAIN EXTERNAL Positioning in the changing markets Setting Corporate Direction Reviewing and Deciding KeyResources Deciding Implementation Processes STRATEGIC THINKING Overseeing Management Performance Monitoring Budgetary Control Reviewing Key Business Results Assessing Organisational Capability SUPERVISING MANAGEMENT SHORT TERM

14. Creating Strategic Changes

15. 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

16. Leadership Learning Climate Organisational Capability Survey Internal Focus External Focus • Clarity of Personal Responsibility • Organisational Clarity • Financial Rewards • Work Quality • Competitor Orientation Task Focus Process Focus • Personal Rewards • Personal Performance • Group Performance • Organisational Adaptiveness • Customer Orientation

17. 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 learning and to move it to where it is needed It values its learning It is able to continuously transform itself

18. The “Good Learning” Organisation: the idealised process of critical review and learning A Mistake or Deviation is made Tell someone responsible immediately Accept Ownership quickly and assess Possible Risks YES Co-operate actively to ensure error is corrected Are they potentially serious? Investigate critically why the mistakes happened NO Take Corrective Action and Inform those affected Is there a flaw in the system or process? YES NO Share your discovery to improve work processes and learning Codify problem and Resolution so that others may learn quickly Problem Solved

19. The ‘bad-learning’ organisation A mistake is made Conceal it before anyone finds out YES YES Will it show? Can you hide it? NO NO Can you blame: - others - special circumstances - a customer YES Be first to your boss with your version of events NO Will an admission of guilt damage your employment prospects? NO YES Hide it and hope no-one finds out Sit tight and hope the problem goes away Problem Avoided

20. 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

21. 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

22. Grieving Resistance Unblocking Resistance to Change The Stability Group Change announced Acceptance Denial Understanding Fear Piloting/Demonstrating

23. Developing Strategic Thinking 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)

24. Developing Strategic Thinking Strategic Thinking is the ultimate test of the leader rather than of the expert It is the move from being clever to being wise