Left to right: Leigh Bailey, Eric Jackson, Sandra Vargas, Roland Hayes, John Orner

Business has changed significantly over the past 20 years. The technology and digitalization that emerged in the ’90s is so well integrated into our daily lives that we can’t imagine the workplace without it. Other factors like globalization, changes in competitive landscape and regulatory shifts have fundamentally affected the way companies operate. In order to survive in today’s business world, organizations must be adaptable.

In fact, many companies today are finding that a complete reboot of their business model is required in order to be sustainable. But it can be complex for leaders to navigate the transformation of their organizations while at the same time maximizing their existing models. According to McKinsey & Company, only about 30 percent of businesses are successful in doing so.

There are several factors that contribute to the 70 percent failure rate, among them a digital knowledge gap. For other companies, the realization that transformation is necessary comes only after several quarters of poor financial performance when it may be too late. In some cases, company founders are so wedded to their original vision that they resist reimagining it, even when the current model is on its last legs.

Another issue often associated with organizations that fail transformation is lack of critical expertise and support from the board of directors. In an effort to learn more about the roles of the board and leadership in organizational transformation, The Bailey Group partnered with the Minnesota Chapter of the National Association of Corporate Directors to host a panel discussion with representatives from four Twin Cities-based organizations: Reverend Roland Hayes, board chair for HealthEast Care Systems; John Orner, board chair for Lifeworks Services; Eric Jackson, chief operating officer and board member for Lubrication Technologies; and Sandra Vargas, president and CEO for The Minneapolis Foundation.

Among the valuable takeaways, four key factors emerged for leaders and board members to consider when embarking on the challenge of organizational transformation:

1. Emotional intelligence

HealthEast began navigating an organizational transformation after its former CEO retired. Shortly after incoming President and CEO Kathryn Correia’s arrival, HealthEast implemented the Lean Management System, which is based on the principles of the Toyota Production System and focused on improving quality of care, reliability and reduction of waste. The organization also rolled out a new electronic health record system. These changes have fundamentally transformed the day-to-day work of HealthEast’s staff and physicians.

Board Chair Roland Hayes emphasized the importance of engaging emotionally intelligent board members to aid in successful transformation. “I don’t think we are often attuned to the human dimension of transformation,” he said. “Every change creates loss, and the response to loss is grief.”

Hayes added that although those who work in the health care system are educated and help patients and families manage grief, it is not always considered as it relates to employees and organizational transformation. He believes it is important to be sensitive to the fact that the staff is grieving and to provide support throughout the process.

2. Diversity of perspective

Minnesota-based nonprofit Lifeworks Services has empowered people with disabilities and their families for more than five decades. Over the past 15 years, the agency has provided critical fiscal, job support and in-home services that enable its clients to lead self-directed lives; recent federal initiatives have driven statewide regulations that are affecting those services.

Prior to Board Chair John Orner’s appointment to the Lifeworks board in 2007, all members were directly connected to the mission through family or friends with disabilities. Orner challenged that thinking and has worked closely with President and CEO Judy Lysne to ensure there is diversity of perspective at the board level. He believes that in addition to specific skill sets, varying viewpoints will help ensure successful organizational transformation, not just as Lifeworks navigates the industry’s current landscape, but as it faces future challenges as well.

3. Strategic partnerships

In the midst of exponential growth, Lubrication Technology’s board posed an important question to Chief Operating Officer Eric Jackson: “What are we doing to prepare to lead a company that is double the size we are today?” Leadership was focusing its efforts on the everday demands of running the company and minimal time had been invested in long-term planning.

Jackson and the board recognized the importance of building strategic partnerships with individuals who could accelerate future growth of the business. Lube-Tech also began seeking out new board members with extensive knowledge in areas where the company was not as strong and was intentional about recruiting well-connected individuals who could expand the company’s network. “We primarily look for board members that support where we want to go as a company,” Jackson said.

According to Jackson, Lube-Tech is now a player in the rapid consolidation of the petroleum industry and has also successfully entered the retail market, largely thanks to the expertise and support of its board.

4. Authentic relationships

When Sandra Vargas joined The Minneapolis Foundation as its president and CEO in 2007, the agency’s goal was to grow from a $640 million to a $1 billion organization. After a feasibility study and a new business plan, Vargas and the board of directors began facing the challenges of taking the foundation to the next level together. Part of that work has included evaluating human capital and building a new senior leadership team.

Vargas said one of the keys to transforming the foundation has been building authentic relationships with the board that are based on trust. “I try not to have a face that they don’t recognize,” she said, adding that she is transparent with them about the wins and the losses. “If there is bad news coming, the last thing I want to do is surprise my board.”

With a board of 31 members, Vargas also emphasized the importance of connecting with them in small groups so they can learn about what’s happening within the agency on a more personal level.

Hear more from our panel of thought leaders in a special edition of The Bailey Group’s LEVERAGE podcast—”The Board’s Role in Organizational Transformation.“