During periods of crisis, boards need to be more involved, have more frequent communication with management, and generally be closer to the business. But if overdone, this involvement can become both time consuming and distracting to a management team busy running day-to-day operations in an unusually stressful time. Where should the line be drawn?
In my career I have been both a board member and a chief executive during times of significant disruption, such as the 2008 financial crisis and now the pandemic and its ongoing fallout. Having sat in both chairs and currently advising both sets of constituents, I have been reflecting on the role a company’s board should play during times of extreme disruption. In my experience, it is a mix of art and science. There are a few basic concerns that boards need to address quickly:
• Are the employees safe, and is the company demonstrating care for its people?
• Is the company secure financially? What are the available levers to ensure adequate liquidity and flexibility?
• Is the company able to responsibly provide its goods and services to customers, and avoid losing market share and/or customer goodwill?
• Are customers safe, both physically and from a data perspective, when they do business with the company?
• Is the company acting and communicating its values and intentions in a way that is viewed as responsible both by employees and society at large?
These are all questions where the collective experience of a board can come in very handy. Also, the breadth of visibility available to board members can be useful in generating ideas based on what they are seeing in other situations.
These primary concerns will consume time and require several meetings, which can be done efficiently using subcommittees. But once addressed, the board should move into update mode on these and shift its focus to more strategic matters. Giving management room and time to operate within defined parameters and utilizing an agreed-upon schedule of updates will be much appreciated.
At this point, the role of the board can become more forward-looking and focused on the bigger picture. Doing so could include answering questions such as:
• How can the company visibly set direction and provide leadership in employee and customer safety, and what can it do to position itself to grow and be seen as an exciting place to work?
• Has the finance function modeled scenarios for varying levels of performance and agreed with management on what the company will do based on how things transpire? Is the function ensuring that its own structure is optimized based on the changing landscape?
• Have key roles been identified or created to lead through the crisis and does the board have confidence in the executives chosen to sit in these roles to be the best equipped leaders? Is this an opportunity for a high-potential promotion of a junior executive who, due to their culture carrier or other unique characteristics, will positively impact employees, customers, or both?
• How could the longer-term structure of the business change with regard to sources of supply, redundancy of required parts and services, and other elements of flexibility – while appropriately balancing cost with risk?
• What is the mix and composition of the company’s existing workforce and where could it be six and 12 months from now?
• What can the company do to grow its market share, convert new customers, and become more relevant and important given the times? How is this best demonstrated and communicated to stakeholders and the marketplace?
• What can and should the company do to be visibly committed to leading positive social change considering the situation? How does the company move to being positive and proactive while balancing the needs of all constituents?
In a disruption such as that caused by Covid-19, management often does not have the time or mental and emotional bandwidth to consider these second-order questions. They are rightfully focused on managing the significant day-to-day challenges of making real-time decisions and reacting to the rapidly changing, unpredictable stream of situations that demand attention, focus, and energy.
The current crisis is rife with examples of such unpredictable situations. These include ascertaining how and when to bring people back to work; understanding the magnitude and timing of government assistance for businesses, suppliers and customers; sorting out whether and how to serve customers reliably and safely; and how best to communicate with suppliers, investors, employees, customers and society at large. These and many other metaphorical fires require company management to be fully present and engaged.
In situations like the current one, the board’s role can be one of ready advice and a calming voice of reason. At the same time, however, the board can and should contemplate and eventually engage management on the second-order, longer-term questions. There may be a need for additional financing options or the potential acquisition of a competitor. The company will need to decide what stance to take on a matter of social importance or on the need to reshape the global supply chain to a more regional and flexible approach. These are all strategic matters that the board should have the experience and bandwidth to be thinking about, so that it is ready to engage with management in a strategic and productive way as and when appropriate.
Having sat in both chairs, I can say that these are the moments, and the manner of engagement, that are most appreciated by management and drive the most value from a board in disrupted times.