Sus­tain­ing board ef­fec­tive­ness through the cri­sis

Business Day (Nigeria) - - COMMENT -

Acri­sis 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, in­per­son 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.

Newspapers in English

Newspapers from Nigeria

© PressReader. All rights reserved.