Few, if any, company directors in this generation have navigated something as dire as a pandemic. Nevertheless, board members who have lived through a previous existential corporate crisis can provide us with signposts. As coronavirus hit, we interviewed more than 20 seasoned directors and active and retired CEOs about how boards should lead through the worst times. This is their advice.
Channel – and curb – your enthusiasm
As one director put it to us, “it’s not helpful if too many helpful people are trying to be helpful.” Chairs need to manage and temper well-intentioned directors who are eager to assist management, as their involvement may overwhelm an already-crowded effort and bog down management teams with distracting requests.
Step up…but don’t overstep
Under normal circumstances, the distinction between governance and management is usually clearly defined and understood. In a crisis, boards are challenged with toeing an ever-moving line. The board’s role should always be to support management in the right way, at the right time, without trying to manage the company. Ask the right questions and test management’s assumptions, while being careful to frame this challenge with appreciation for and encouragement of a hard-pressed management team. Find the right balance between giving advice and asking questions, even when tensions are high.
Challenge the optimism of your worst-case scenario
Optimism bias is real, and needs to be checked. Scenario planning by executives is often too rosy, based on the worst that has ever happened in the past, not the worst that could happen in the future. Urge management to plan for unprecedented scenarios and then work backwards to more likely events. Complacency will stifle progress; keep focused on planning throughout a recovery period that may linger far longer than expected, and which may involve new risks you didn’t anticipate at the start.
Plan for permanent changes
Prepare to challenge management’s thinking about how the crisis has fundamentally shifted business operations and which changes will permanently impact the company’s strategic direction. Boards will need to grapple with what these changes mean for legacy businesses and even for some cherished cultural behaviours. Consider which aspects of the business should remain the same, which will briefly change, and which have been permanently disrupted – including consumer behaviours, public expectations, supply chains and operating models. Make sure that management establishes mechanisms that capture enduring lessons from this crisis to help make the organisation more robust going forward. History demonstrates that the most significant shifts in a sector’s competitive rankings occur during moments of crisis and uncertainty such as these.
Challenge premature declarations of victory
Even if it appears that the waters have calmed, the crisis is likely not yet over. Be careful that neither directors nor executives get a false sense of security as soon as indicators start pointing in the right direction. There are often aftershocks to a crisis and there will be key companies that fail to recover in parallel with the rest of an industry. Keep everyone focused on performance and outcomes long after others have declared victory.
Set the tone
Now is the time for decision making that demonstrates inclusive capitalism in action. Companies with boards that act fast to reinforce a strong, compassionate and positive culture with both internal and external stakeholders stand to benefit the most post-crisis. Employees, customers and communities will be making long lasting judgments based, in part, on how the board behaves in the coming weeks.
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Manage director behaviours
Crises and stress inevitably amplify behaviour for both better and worse. Directors are tested in new ways, and their engagement with one another dictates how effective the board will be. The bulk of board interaction is currently being conducted over Zoom, Teams, BlueJeans et al. Early evidence suggests that these medium tend to make directors empathise less and broadcast more in their communications with each other, and to become entrenched in their positions. Chairs will need to step up their efforts to manage behaviours. They may need to increase the frequency of their one-to-ones with directors and incorporate timely guidance on individual performance.
Keep succession in focus
During times of tremendous pressure, the board will see which executive leaders rise to meet new challenges and inspire confidence – and which do not. Note what this reveals about the management team and, as critically, what it says about the internal succession pipeline. Look at the experience that was missing from the team as well as the behaviours and leadership qualities that were or were not displayed. During a crisis, boards have a unique opportunity to sharpen their understanding of who their leaders truly are, and how they should adjust both short- and long-term succession plans.
In hard times, the soft stuff matters more
Don’t underestimate the power of saying thank you and asking specifically about how the leadership team, their partners and immediate families are holding up. Small words or gestures have a big impact with the management team that is working hard to protect and resurrect the business. Express gratitude and celebrate small wins along the road to recovery. This will help reinvigorate a fatigued team and keep them energised for whatever still lies ahead.
Laura Sanderson and Rusty O’Kelley III are senior members of Russell Reynolds Associates’ Board & CEO Advisory Partners.
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