Article getting a second opinion: The Board’s Role in Sustainability, HBR, Sept-Oct. 2020
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Business Second Opinion Podcast digs deep to explore questions about business and business practice. In the process of examining them, we give you a second opinion, usually a contrarian opinion, but one that is well tested and proven to give the outcomes you really want without the side effects. And by the way, if you want to learn more about how to work more closely with us, stay tuned at the end of the show.
I am Zac Swartout, and always with me is Carol Sanford, our inhouse positive contrarian. Who responds to big and hard questions with a radically different take.
Carol: Hi Zac,
Zac: What do we have on the docket for today?
Carol: I have been thinking a lot about what it means to be contrarian since I have been called that, fondly and not so, since I was six years old.. I added “positive” to it on my 30th birthday to try to redeem myself. I have come recently to realize it means, in my case, ‘counter-intuitive’ or ‘counter-mainstream’.
Zac: Yes, that makes sense, we are trying to point to what has been accepted by the majority of people, unexamined, borrowed from previous generations and so-called experts and yet there is a really good case to be made, and most often has been made that it is wrong and there is a better answer. How does that relate to our subject for today?
Carol: As I have worked with business, cities and nations, educational institutions and more over the last 40 plus years, I have most often also worked with governing bodies who were fiduciaries and the consciousness of an entity who had a charter. And I am starting a new community, just for governing bodies in 2021. So I was doing some ‘research’ on the popular advice. I immediately could see what crazy advice was being given now days, including by HBR authors, about how to play a governing role. I realized they felt like unexamined ideas and I wanted to do something about it. What did you think about the article I selected and suggested to you we look at?
Zac: Well, the article is The Board’s Role in Sustainability, HBR, Sept-Oct. 2020 by Eccles, Johnstone-Louis, Mayer, and Stroehle. I’m glad we’re taking on this article today, because I think that boards are often taken for granted as a necessary part of the business game, so to speak. However, as you can see with this article, this feels like more of the same top down, kind of arrest disorder kind of thinking. My first impression by the way the author seemed to structure the piece, is that boards float above the company and hand down decrees and ideas that the company needs to adopt, like purpose and mission statements which they highlight quite a bit in here. So Carol, this sounds an awful lot like the kind of ancient kingly thinking that we still seem to be dragging around that we’ve talked so much about.
What made you suggest this particle article?
Carol: It felt so out of any meaningful ballpark about what boards should be working on and their role, but I realized most people would say, “it’s about time” and “right on”. Boards should be driving sustainability and social factors as part of their mandate. What really made me want to confront it was the Five Action Model it recommended. The paradigm of that set of ideas was over 400 years old and invisible to them, the outcomes they advocate will undermine their intentions rather than be advanced by these actions, the business will also be defocused and put the ability to serve customers at risk and therefore revenue. None of that is necessary nor needs to be traded-off. BUT everyone I asked to take a look at it said things like, “that works with me.” They all got excited and thought I was recommending it. UHHH- big sigh!
Zac: Let me share the Five Actions and a sentence or two so we have our listeners on the same page with us…
- Simplify—purpose statement
- Connect- reporting to show connection between capital allocation and bottom line
- Own- internal communication to all
- Reward- behavioral reinforcement
- Exemplify- be an example with advocacy
So, Carol, how do you want to point to a counter-intuitive, but you think more Regenerative Way, to look at governing bodies.
Carol: I want to offer a systemic way to look at governing bodies, whether a commercial entity, advisory, not-for-profit, elected or appointed and responsible for a local association or on larger grand global scales. Not a set, but a system.
Zac: I see you are looking at a framework, so I will remind people it is in the show notes and they can draw a pentad a star with a point facing up which is where you start. Now get me the door or foundational role you have on the top of that pentad.
Carol: Good idea. So the overarching questions are, if a governing body were to pursue a Regenerative path, what would they work on that is different than a Sustainable Path? Or is the process different? If they take on regeneration, is it different for for-profit directors and advisors? Do commercial enterprises differ from not-for-profit in their work and challenges? Philanthropic foundations or activist organizations seeking change? How about associations and membership organizations with boards. Usually not-for-profit structures! And then there are paid and unpaid governing bodies. Whew!
Zac: And Is governing a ‘universal process’ or highly different in each of these contexts? And what makes it regenerative, anyway?
Carol: This year’s Regenerative Business Summit will give an overview of The Regenerative Governance Framework. It holds the premises and principles that I used with Chad Holiday in DuPont and he used to organize the Advisory Team with five enterprise leaders to co-create the U. N. Global compact. We started with alignment with the DuPont Board that he chaired. And we spent four years with Colgate in Western Europe to integrate 9 counties and 12 languages for governing across those continental boundaries.
Zac: And In DuPont, they also built dozens of business unit task forces with external members for each business that lead to shifting the board’s position on Dupont’s role in social change. It was also used in Colgate Europe by Chuck Beck to create innovative relationships across Europe which provided leadership to the integration of Europe supporting the reimaging of supply systems and work systems in a heavily regulated environment. So what did they work on?
There were five questions that underlie the framework.
Carol: One of the problems with the five actions was how they stayed very internally focused while talking about sustainability. It is non-systemic and fragmented case being made. The shift in Regenerative approaches is that you move the mountain not by trying to get your own business to do the right list of things and influence others by example. But by working again on the Hidden variable we talked about last time and will keep talking about. So the first principle is: Become the Strategist for a Regenerative Industry. Move the whole industry as an insider, not an outsider. Premise is that the fast, deep and permanent way is to work indirectly.
Zac: So indirect means. Just to remind people. And why indirect is a different paradigm. So, as a callback to our last couple episodes, indirect means not working directly on the problem or issue. That often escalates the situation. But rather, working indirectly or nodally. Like we talked about last time, working directly is a Newtonian way of seeing the world as a cue ball that needs to be struck in order to change, versus indirect which is working on what’s hidden or implicate allowing for deeper and lasting change.
Carol: So indirect is about what moves everything but does it without the head on mode that raises and escalates the forces back. Engages from Capability, Culture (Field development) and Consciousness. The first step we did in initiating the UN Global Compact was to make all your competitors your allies. Seek to move your industry, not compare yourself to them. And take a nodal step
Zac: Like in DuPont, Chad Holiday answered the question about what is the nodal step, it was to get people to be self-examining along a path with being exposed or incriminated. So the UN Global Compact only requires members who wanted to be associated with it, to submit a report, transparently, on a set of guidelines. There was no judging, rating or ranking.
Carol: What we believed was that people move themselves faster when they are not put on the defensive and not ranked, judged by others. And we found that transparency itself, self-offered, caused people to make changes. Even Chad was startled. Not everything was moved immediately and when Chad left, it slid. We need it as a cultural expectation to work this way, so a lot to do. That to me is what having a systemic problem means. Change paradigm, not practices to more favorable ones to the other side
Zac: Right, that would be a direct approach. And the direct approach creates resistance. Polarizing and escalation of conflict. The indirect, transparency, creates a place to reconcile to. So we will work at the Summit and in the new community in Jan 2021, with a set of Board Members, on how to move an industry.
Carol: In addition to seeking to lead an industry, not for profit boards need to lead in the same way in social systems. I sit on a board and we try to steer philanthropic boards by forming alliances around a community or watershed for people to invest for the whole. We don’t accept proposals because there is so little money. We use it to educate our peers in community and economic development
Zac: The second question was how does a board maintain transitional integrity of who it is. There is so much change, companies lose who they are quickly in a change. There are two aspects here. The first principle is about learning to use the Essence of a place and/or entity, to maintain integrity during transitions of leadership. How does the Essence of the entity get stewarded across transitions in management and board member and committee rotation, so its brand and identity are not personality driven by each CEO or Executive Director?
Carol: Such an important question since personalities and powerful people can begin to drive. I worked with several not for profit boards to go beyond the operating agreements that are required by state law for creating operating agreements. The second principle is to work with managing principles for the Governing body and management. It is done in the context of developmental and learning sessions and not board meetings to shift the focus to the vitality, viability and evolution of the offerings and alliances of the business.
Zac: Where you work with Essence expression as the foundation and the reconciling vote for design, decisions and directives through time across leadership transitions and up and down markets. In other words, the reference point was not people or issues, but the entity that they were leading.
Carol: Yes that was the principle we developed in Colgate. If a whole organization or company has been developed to work this way, it is powerful. It is systemic in how it works.
Zac: I assume in an alliance of businesses you can move beyond issues-based association, by working on managing principles. That sounds like a solid way to reconcile. I can see how that could have helped in a situation I led not too long ago. During my time in Langley Memorial Hospital here in BC, there were always new change initiatives coming down from the Fraser Health Board. Unfortunately they were often tied to issues or whatever the media was reacting to at the time. So, as a result, each initiative could often and would often conflict with something else that was already in play or be redundant to something that was started a year or six months or three weeks earlier, or even worse make double work for people on the ground who were already overburdened. There was never really a reconciling force at work, so I can see how having the essence of each hospital, for example, driving change would have been so much more potent. I actually tried to lead some of that work but the unending initiatives from the board actually made it impossible.
Carol: And if you were in a board position for the city, you could look at what’s the essence of healthcare, not hospital by hospital, and then the managing principles could be created in a developmental context. Plus, there was no cultural field that gave people the desire to work for the greater whole. And this is not a single event but a process over several months and they continue to be tested and become an anchor over a longer time. We will show how to do that work with the new Regenerative Governing Body Community. What was the next question we are working with?
Zac: How can the financial effectiveness of a business or organization and its place in the world be guided in up and down markets, in risky times such that investor/funders, consumer/beneficiaries, marketplace/regulatory confidence be tended. And how to ensure integrity of the persons on the governing body as a self-managing entity. A time something like that might be needed is. With the amount of reactivity in the markets at the moment, it can be hard to see the forest for the trees. As a result, I know that as a business owner I can get really destabilized by all of the mixed signals I’m seeing every day. However, this question really helps ground my thinking, because I can see that I need the governing body of my company to seek to grow our financial effectiveness through building our own capacity to grow self managing. And knowing that we’re all working on that together gives me the confidence to stand shoulder to shoulder as thinking partners with the rest of the body, rather than waiting for someone to tell me the answer which probably doesn’t help me or anyone else in the company lead any better.
Carol: Financial effectiveness is different than bottom line maximization. They have to learn to measure different things and the board can set the context, the field for this. For example, in all the examples I am talking about here, the performance measures are the beneficiaries world, not the company’s bottom line as the start and end point. We will work on that at the Summit. It speaks to how you overcome externalization of costs but very importantly, how you have metrics and measures that regenerate the company, industry and ecosystem.
How can financial effectiveness be guided with innovative practice to ensure earnings, margins and cash flow are steady and fair? Including developing of investor relations, whether institutions, taxpayers, shareholders or private capital as loans, donations or stock purchases.
Zac: The last point on your framework is “How the governing body engages in stakeholder development beyond current management such that they ensure social systems are moved to promote equity through systems design, wealth creation through strategy choices, health and vitality of a nation and planet through leadership roles.” How can they lead evolutionary growth (which is regenerative) rather than expansion growth (which is degenerative)?
Carol: I think we spoke to this in several earlier podcasts. There is a role for the board but we need to leave that for a different episode. It focuses on how to overcome the fragmentation of governing. And learn to govern from the quantum idea of wholes. The master paradigm shift. They then have different expectations, guidance and assessment processes. See you at the Summit hopefully as a governing board.
Zac: Carol Sanford Institute has been offering development communities for forty years with online versions for a decade, so we are pretty good at it. We are bringing our paradigm shifting approach to a new Community in the new year. Regenerative Governing Bodies. Check out on the website at CarolSanfordInstitute.com under offerings. And we kick it off at the Summit Nov. 17 for business teams. Join Carol’s newsletter at Carol Sanford.com. to get more information on upcoming events.
Carol: We have a new Seed-community for individuals. The Regenerative Educator Community. For development roles for anyone who considers themselves an educator in institutions, organizations or professions . The community is established to enable members to work with a Developmental Epistemology, that is how they want to educate: Move from expert view to- Experientially, Developmentally, based in 7 First Principles of Regeneration. Check out SEED-communities.com to learn more. Look under Regenerative Life offerings. We have extended the Founder’s Fee by out to Oct. 15th. Which grandmother’s you into a lower rate for ever.
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Carol: and keep listening to Business Second Opinion for more ideas on working from Regenerative Paradigms and Practices. And my new book is out The Regenerative Life with an extensive workbook and Book Club materials, which Carol supports with Live online Workshops for Free. More at carolsanford.com.
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Zac: This has been Business Second Opinion
Business Second Opinion Podcast digs deep to answer questions about business and business practice, you may not know you need to ask. But we believe you should be asking for the benefit of your understanding and your business’s ethics and practice. In the process of answering them, we give you a second opinion, usually a contrarian opinion, but that is well tested and proven to give the outcomes you really want without the side effects.
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Carol Sanford and Zac Swartout, co-producers