I came across an excellent opinion piece written by Ram Charan, a world-renowned business advisor, author, and speaker who has spent the past 35 years working with many top companies, CEOs, and boards. He’s known for cutting through the complexity of running an organization in today’s fast changing environment to uncover the core problem that needs solving.
Ram Charan’s article in the newsletter Corporate Board Member Briefing, is about the five lessons a board can learn from the recent debacle surrounding the artificial intelligence company, OpenAI, where the board of directors fired the CEO, then re-hired him after the entire company threatened to quit OpenAI and move its brainpower to Microsoft.
Perhaps for the first time ever, super-talented employees with highly specialized skills could walk out and destroy a company while starting a new competitor.
“They claimed power for themselves over the board of directors of a multi-billion-dollar organization. And won.” – Ram Charan
At first glance this story of drama and turbulence at a high-powered, high-tech company might appear to have little relevance to the work most of us do as board directors leading the organizations we serve. But in this blog, I’ll be striving to make the case that Ram Charan’s five lessons can be applied to any board and the work that we all do.
I’ll also share excellent resources from Deloitte and others on the more general topic of talent retention and the board’s role in that conversation. For many of us, we’re just beginning to understand that board oversight of culture and talent is a fundamental part of our fiduciary duty.
To paraphrase the Russell Reynolds article referred to in our Resources section below - when it comes to talent management, boards should keep their ears to the ground, meaning directors would be well advised to ensure they understand what’s going on and they’re listening to what’s happening in the organization.
To put it succinctly, no talent > no company >> disaster for all stakeholders.
Like a character in the classic movie comedy, Caddy Shack, I started working a summer job at a local private golf course when I was thirteen years old. It was a fun place where I could ride my bike to work, play nine holes before my dishwasher shift, 18 holes afterward, and then walk back into the kitchen to make whatever I wanted to eat before biking home in the dark along a country road. Life was good, the staff was great – a real family atmosphere.
In year three, the club had a new manager and things were no longer running smoothly. The mood was tense, and the senior staff miserable. Things came to a head when the new manager identified two waitresses (as they were known in 1975) that he wanted to let go because he didn’t like how they looked. To the rest of us, including the club members, the two servers were like family.
Here’s what happened next. The Chef organized a staff walkout in protest, meaning the clubhouse had to shut down on a busy night.
By the next day, the board had fired the manager they had hired, and everyone else was back at work. There was no joy in the workplace, but rather a feeling of relief.
This low-tech example of hospitality workers walking off the job to protest an injustice is obviously not the same as the OpenAI super-talent crisis where a new competitor could emerge instantly.
But the two scenarios are similar - an organization was incapacitated for a time, resulting in maximum inconvenience for all stakeholders including the employees themselves. The board of directors was forced to fix a problem of its own making.
What are the common lessons we can extrapolate from these examples?
In the high-tech world, the labor market keeps shifting in favour of uber-skilled knowledge workers. In terms of the super-talent overseen by our own boards, could Ram Charan’s five lessons, outlined below, apply to boards that oversee talent like doctors, nurses, air traffic controllers, teachers, day care providers, and police officers, just to name a few?
Consider Ram Charan’s insights, and ask yourself, “Can the five lessons of board failure in the OpenAI story be adapted to our own governance world?”
Lesson 1: Brilliance doesn’t make you immune from error. Even the brightest people can make glaring mistakes. In the case of OpenAI’s board, exceptionally brilliant tech minds exercised flawed judgment, underscoring that intellect alone doesn’t guarantee infallible decisions.
Lesson 2: The power of board composition. Crafting the right board is paramount. A board’s unchecked ego or misguided decisions can single handedly jeopardize an entire industry’s future. The lesson here is clear: curate a board not just for expertise, but for humility and forward-thinking vision.
Lesson 3: Oversight is essential. No matter the individual brilliance or collective expertise, the absence of proper oversight can lead to catastrophic outcomes. It’s a stark reminder that even the most accomplished minds require checks and balances. Establishing robust oversight mechanisms within a board structure is fundamental to prevent grave errors that could otherwise jeopardize an entire industry.
Lesson 4: Extinguish fires early. The board (and the CEO) must do all they can to head off any kind of impasse with key talent (or the CEO) long before it becomes a combustible issue. Reason, listen, keep your ears to the ground to avoid having a tense situation boil over. No one wants to have what happened at OpenAI happen to them, even within a key department or division.
Lesson 5: Don’t embarrass or surprise anyone. The board’s sudden public firing of Sam Altman is a case study in how not to treat a CEO with a powerful followership at a company. But it’s also an example of how not to treat anyone in your organization. If you have to terminate someone, do it with dignity and avoid any kind of public spectacle.
How can the board help your organization attract, develop, and retain talent?
Although we addressed this question in an earlier post, The Talent-Savvy Board, there’s still more ground for The Savvy Director to cover. The Deloitte Governance Framework includes talent as one of the five critical governance elements over which the board provides active oversight. The others are performance, strategy, governance, and integrity.
In addition, the Resources section at the end of this blog provides several high-quality links to get you thinking about your board’s role in talent development. You can access any time.
One example, The Talent-Intelligent Board by Deloitte is broken up into six emerging issues. The best way to keep your ears to the ground on each issue is to ask key questions during the board’s talent oversight discussions. We’ve noted Deloitte’s key questions below.
1. Overseeing talent-related risks
2. Increasing management accountability for talent
3. Considering the impact of demographics on business and talent management strategies
4. Understanding the talent retention risks
5. Maintaining the right talent oversight by the board of directors
6. Planning for succession in the family business
Thank you to Deloitte and all thought leadership writers in today’s resource section.
We wrap up this edition of The Savvy Director with a closing thought from Ram Charan:
“Talent now is going to have a voice and it will challenge the power of capitalism when it feels it is not being used wisely, creating new challenges for boards and management teams. Be prepared.”
Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online membership with practical tools for board directors who choose a growth mindset.
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