The inability to change the corporate culture
even in the face of clear market threats.
The gales of creative destruction in global markets and market pressures for performance—growth, profitability, value creation and competitiveness—combined with investor calls for governance changes and changes in executive compensation based on performance create tremendous challenges for executive management. These in turn create both risks and opportunities for the COO—the opportunity help the Board and CEO shape a high performance future and to succeed the CEO and the risk of being the person taking the fall in the event the market and the risk profile of the enterprise create below market performance or unmet expectations compelling change on the enterprise. To create sustainable value enterprises must master both operational effectiveness and disruptive change—continuously freshening businesses with new approaches, business models, products, people, and ideas—to enhance and sustain performance. The COO has an important part to play in this process particularly with respect to implementing mental models essential to change and high performance.
The fact that most companies cannot meet or exceed the pace and scale of market changes over time— thereby destroying value—provides an incessant call to action. This requires an entirely different mindset—balancing creation and destruction—involving consciously creating new innovations and abandoning others when they are no longer economically viable and a fresh approach is needed to revitalize a company, industry, market or product.
The COO is naturally concerned about both the effectiveness of their efforts and ability to impact performance and the results on their career and succession possibilities. It is important for COOs to note that board members and investors dissatisfied with governance, executive performance and compensation generally perceive the CEO as the principal barrier to making the required changes. This means the COO has a reasonable expectation to ascend to a CEO level role in three to five years. Level Three thinks the winning strategy for the COO is to embrace and participate in shaping changes in the governance, operations and culture of an enterprise to the new realities which must be confronted consciously.
The overall challenge facing the enterprise as described by McKinsey & Co. defines the challenge: “It involves reestablishing the balance between management and the board so that the former runs the company while the latter contributes to its strategic and operational development and provides the oversight needed to satisfy shareholders”. The COO should participate actively in collaborating with the CEO to bring about and implement these changes within and across the enterprise. Achieving a culture and ethos of change requires the COO pursue a broader and deeper course of action which is an ideal preparation for future succession. To the COO also falls the call to action to achieve and sustain operational excellence, to manage the risks companies run when embracing change and creativity, to communicate the principles of corporate ethics and to incorporate them into business processes, and to create and sustain a living, breathing, adaptable corporate culture reflecting them.
Level Three is ready, willing and able to help COOs and executive management bring about the needed changes in thinking, feeling and behavior—individually, in management and the front-line across the enterprise. Changes in the deeper structures of the enterprise affect the corporate strategy, compensation and performance systems, and the culture needed to induce and sustain the entrepreneurial spirit of the enterprise. Level Three works to align the actions of the board, CEO, COO and executive management to shape these important areas by focusing on a tangible course of pragmatic actions that produce the desired outcomes and results.
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