6. Results
6.2. Leadership and governance
It was noted from the review of integrated annual reports and management reports that governance structures were established at all four of the case organisations. The leadership team which comprises of executive directors as well as the board of directors were noted to be providing the prescribed leadership as defined in traditional governance practices. A review of the duration for which the Chairperson of the Board of Directors, the Chief Executive Officer (CEO) and Chief Finance Officer (CFO) or Finance Director/Manager were in their role was assessed from the integrated annual reports. It was observed that the turn-over of the three roles over a period of seven (7) years varied from organisation to organisation. It was only at the Research and Development organisation where the CEO and the CFO were the same for the seven years. It was at the mining company that the three roles changed three times over the period of seven (7) years. The observed turnover is important since it has a bearing on the stability of the organisation since the Chairperson of the Board of Directors and the CEO define and set the strategy of the organisation while the CFO finance its execution. The observed trend on the turnover of the Chairperson of the board, the CEO and the CFO is presented in Figure 6.3 below:
Figure 6:3: Turnover of the Board Chairperson, CEO and CFO at case organisations Two representatives of the Research and Development Company were complementary of the leadership the organisation received from the CEO which helped the organisation to return to a state of compliance. One representative shared that “the CEO was extremely focused on developing systems, measuring success and reporting
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on it across the organisation.” She added that “the CEO adopted the strategy that streamlined how things are done through the leadership that focused on compliance thus giving the organisation what it required: clean audits, consistently.”
The assessment of established governance structures at the four case organisations using integrated annual reports and management reports indicate that there is a formal governance structure that was adopted to guide the activities of the business. It was noted from internal and publicly available documents on the case organisations that governance structures were established from the board of directors to the operations level. These governance structures were applied to the strategy execution, projects used to implement the strategy and reporting structures on the performance of the organisation. A sound and functioning governance structure is key in strategy execution. The establishment of governance structures at strategic and operational levels enabled the management and control of the process used to execute the strategy in order to create value for the organisation given the approved corporate strategy.
It was noted from the review of integrated reports that all four case organisations had a board of directors in place that was supported by board committees. Furthermore it was noted from the review of management reports that various committees were established within the case organisations to see to the realisation of the mandate of the committee including adherence to the governance requirements within the organisation. It was shared by the participants that were interviewed that the formal governance structure that is established within the organisation is well defined and it was only the Telecommunications Company that indicated that the governance structure was appropriate for some of the activities of the business.
The observation made from integrated annual reports as well as the management reports at case organisations showed that the board of directors and executive managers are aware of both internal and external risks that face the organisation. All four case organisations had business risk management structures which enabled for appropriate action to be taken to mitigate against internal and external risks. A participant from the Freight Company shared that “the management of business risk is critical to the organisation and it is thus included in the Corporate Plan”. Furthermore, reporting on the management of business risks was included in the governance structures creating awareness to different levels of the organisations so that they could take appropriate action given their delegated authority. A representative from the Freight Company highlighted that the organisation uses a heat map of top 10 risks to help the organisation visualise its risk profile.
In all case organisations it was shared that there is a formal risk management committee that is accountable to the board of directors that was established to oversee the management of the business risks through a formalised risk management process.
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Only top risks (5 or 10) were presented to the board of directors for awareness and to obtain the required resources to mitigate against severe risks where they exist. It was concurred during the interviews that the effectiveness of the risk management structure is well defined and appropriate for all business risks. The changes in the business environment, both internal and external, presents risks to the organisation and it is thus imperative that these are not only monitored but mitigated taking into consideration what the strategic aspirations of the organisations are. The establishment of risk management committees and the incorporation of risk management at operational level made the risks visible so that they may be mitigated through the adoption of appropriate risk mitigation steps.
Communication was highlighted by representatives from a number of case organisations as key in the implementation of strategy. A representative from the Research and Development Company emphasised that “communication during stakeholder engagement should cover items such as the business model, growth and sustainability of the organisation and seek to obtain buy-in from staff emphasising the role they should play in realising the strategy”. She also shared that “the information is made available through the intranet and ERP system. There are roadshows where staff are engaged to present the strategy of the organisation.”
The responses on governance and leadership which were obtained from the participants from the case organisations is consolidated and summarised in Figure 6.4 below:
Figure 6:4: Summary of the leadership and governance traits
The active involvement and establishment of a formal governance structure that is effective bodes well for effective strategy execution since the board of directors and executive directors are concerned about the value that is created by the organisation.
The ability to measure and evaluate how well the organisation is functioning in executing its strategy and also in the management of business risk enables the board of directors and executive managers to make informed and appropriate decisions in order to maintain the organisation on the right course.
Legend Yes Somewhat No
J K L
Telecoms Mining Research and Development
Freight
Leadership and Communication J J J J
Governance and Oversight J J J J
Articulated Business Model J J K K
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The importance of the effectiveness of the case organisations in realising their corporate strategy was critical in the realisation of the business model of the organisations. It is imperative that the organisation understands its business model (how the organisation creates, delivers, and captures value) so that it is able to drive delivery of value to different stakeholders. It was also important to appreciate how the business model is affected by the changes in the market and the need to develop capabilities within the organisation. It was noted from the review of integrated annual reports that the four case organisations were cognisant of their business model. It was an important observation to make since a well-defined business model that is managed as the business grows is imperative for its survival. It was the view of the participants (Figure 6.4) from the mining and telecommunications companies that their organisations have articulated their business model well, while the participants from the research and development as well as the freight companies that there is a need to refine the business models so that the value that is created by the organisation as it carries out its business activities is enhanced. This is a key observation given the importance and implication of a well-understood business model to an enterprise.
The participants from the Research and Development as well as the Freight Companies reflected that the lack of a well-defined value which the business is creating may have a bearing on how well the organisation articulated its business model. It was also shared that this limited the outlook which the organisation had during the corporate strategy execution thus dwarfing the value that is created and realised by the business.
It is the view of the participants from the Research and Development as well as the Freight Companies that the business model is adequately defined as depicted in Figure 6.5 below.
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Figure 6:5: Effectiveness of an articulated business model (degree to which it is defined) Although the view on the prevalence and formalisation of the business model differed between the case organisations, the representatives from all four case organisations believed that the business model could be improved since it was appropriate for some of the business activities as displayed in Figure 6.6.
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Figure 6:6: Effectiveness of an articulated business model (level of effectiveness) It is thus important that the leadership and management of the business does not only focus on effective strategy execution but that the enhancement of the business model form part of management activities in order to improve the survival of the organisation.
Conclusion
The observed leadership traits and management system to oversee governance and business risk are aligned to what is reported in the literature. Ramakrishnan (2012) pointed out that boards are formed to oversee the performance of the organisation and ensure that stakeholders’ expectations are met or exceeded while complying with the statutory and regulatory norms of society where the organisations operate. He also shared that Board of Directors must ensure that the business is not only legally compliant, but also delivers on the expected performance. It is thus the view of the researcher that the effectiveness of the leadership team and management systems are fundamental in corporate strategy execution through project portfolios.
Chapter 6: Results