Sustaining board effectiveness through the crisis

A crisis is a major catastrophic event, or a series of escalating events, that threaten an organisation’s strategic objectives, reputation, or viability. Crises can be classified into two – routine and novel. In the case of a novel crisis, there is no experience to draw from to manage the crisis. In the absence of predetermined procedures, novel crises can test the decision-making capacity and strategic-thinking ability of leadership. Covid-19 is a novel virus and what is called a “black swan event”- unpredictable beyond what is normally expected and has potentially severe consequences.

Crises can strain even the most highly functioning boards. They can also exacerbate existing Board dysfunction or expose a lack of clear leadership. The COVID-19 pandemic, perhaps more than most crises, challenges Boards to maintain effectiveness despite meeting more often, engaging virtually, and making many material decisions more quickly than they normally would. Few Directors have experience with operating this intensely, potentially making it difficult for Boards to do their work effectively and to maintain their responsibilities as fiduciaries. There is much more work now and some directors find themselves in a very different situation than what they had expected when they joined the Board. While some directors may thrive in a crisis, others may not, leading to potential tensions in the boardroom. This upheaval can impact board dynamics and exacerbate difficulties that previously sat quietly under the surface (National Association of Company Directors).

If they have not already done so, Boards and Management teams should work together outside of traditional Board meetings to ensure that Management provides timely information to the Board to support effective oversight and leadership. More frequent Board meetings are not out of place. However, to ensure that meetings do not place an extra burden on Management and act as distraction, the Board should define the frequency of reporting with respect to specific matters. To help minimise management fatigue, the Chairman should now more than ever act as the link between the Board and the CEO, prioritise Director questions to Management and communicate these to the CEO, rather than having individual directors reach out directly. This can help to focus communication on issues that are most important to the full board, eliminate duplicate requests, and triage questions to ensure that less relevant or urgent questions do not distract Management.

Before asking Management for additional information, the Board should consider the opportunity costs when Management gathers information and prepares multiple Board reports. Fatigued Management teams will produce lower-quality information that may be repetitive, inaccurate, or incomplete.

The shifting dimensions of crisis place a renewed importance on Board agility. Boards should prepare to move beyond rigid and traditional structures to allow for faster decision making and for ensuring that the diversity of skills and experiences in the boardroom are fully exploited. Boards must optimise how they use their time between board meetings to build effective collaboration between Committees.The Board should consider empowering Board Committees to deal with more routine matters to enable the full Board to focus on more strategic and high priority matters.

Virtual meetings are likely to be shorter and more frequent than traditional pre–COVID-19 Board meetings. It would not be out of place to have Management reporting and status updates sent as pre-read to maximise Board discussions on the issues that matter most, rather than spend time receiving Management Reports. At this time, it is critical for the Chairman to ensure that that all voices are heard and look for ways to engage all members when nonverbal cues may be more difficult to identify at virtual meetings. This may be especially challenging for directors new to the Board who may struggle to find their voice and contribute as effectively as they might have done in a traditional, in-person setting.

The current crisis places a premium on both quick decision making and thoughtful scenario planning. However, this comes with its own set of risks. Boards are in a unique position to help Management recognise potential blind spots and pressure test critical assumptions that underlie strategic planning. Boards can also look critically at their own work as a means to help inoculate themselves from errors that might arise from both groupthink and cognitive bias. Boards that proceed too quickly can be dominated by loud voices that unintentionally shut out other opinions that could sway a Board majority.

They should improve the rigor with which it tests both its own assumptions and those of Management, especially when they are considering COVID-19 recovery scenarios, changing customer preferences, and reopening for business. Further, when reviewing COVID-19 scenarios, Directors should ensure that predictions are clear, time-bound and can be evaluated based on empirical facts.

BISI ADEYEMI

Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to [email protected]

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