Covid-19 is providing the biggest test for at least three-quarters of a century of boards’ ability to lead and direct their businesses in all weathers - sunny and stormy.
Strengthened relationships with stakeholders from working closely with them during the crisis
Coronavirus is providing the biggest test for at least three-quarters of a century of boards’ ability to lead and direct their businesses in all weathers - sunny and stormy.
In pandemics, as at other times of heightened risk, change and uncertainty, there will be winners and losers. Sector rankings and capital market ratings will change. Some will sadly not survive, others will be weakened whilst the best-led will emerge stronger for the experience. They will have a reinvigorated and sharpened commitment to their purpose and a strengthened relationship with their principal stakeholders. This will have come from working closely with them in adversity and seeking to take account of their needs, sometimes competing, in a fair way. The business focus will be on getting through the immediate crisis in ways that lay the foundation for the longer-term success of the business.
Moving to crisis management whilst maintaining strong support and challenge
Winning boards will be able to move quickly to a crisis management footing whilst continuing to be an engaged board – combining strong support for, and challenge to, the executive team. This will, however, be done in a way that reflects the new environment. Offering authentic support to management teams working all hours, facing difficult choices amid the uncertainty, and coping with remote working at a level not experienced before will be crucial.
Structures may have changed with a core group of board members emerging to take decisions quickly when needed but all board members will still be properly involved and contributing to the board. The independent directors will bring their experience from their other board appointments to bear, acting as a sounding board for the executive team, and, where necessary, providing a challenge for proposed emergency measures offering caution against over-hasty decisions, encouragement to faster action or additional angles to consider, depending on the circumstances.
Renewed board emphasis on authentic workforce engagement
Resilient boards will not waste time now wondering why they were not better prepared to withstand the crisis. Such inquiries will be better left to after it has passed. They will know that those who are brave under fire are not necessarily the same as those who are most visible in normal times. They will recognise the emergence of new future business leaders previously below the radar.
Similarly, they will be aware that, at a time of potentially existential crisis for many businesses, it is possible to build on current strengths and embed necessary changes quickly. The emphasis will be on ensuring strong relationships within the boardroom and across the wider team, ensuring team members feel engaged with the leadership team and that their health, safety, and well-being, physical and mental, are its top priority. Good boards will encourage leadership by example: employees will be conscious that difficult decisions are necessary and will generally support them as long as they feel sacrifices have been fairly spread across the business and that those at the top have fully shared in them. Care must be taken to make furloughed employees still feel part of their business. Board members will know their stakeholders, and especially members of the workforce will long remember how they were treated when they were most vulnerable.
An openness to changing relationships with customers and suppliers
After the well-being of team members, customers’ changing needs (and how they can be addressed) must be the principal consideration for businesses, possibly differently. There may also be opportunities to work with new customers and new goods or services may emerge but with a focus on what is achievable at present and what will generate resources to keep the business healthy now and in the future. Similarly, strong boards will oversee necessary changes to supply chains and encourage closer working together fostered along the chain.
Transparency and more time on engagement with investors and providers of finance
There will be a relentless focus on cash and risk management, including on cyber security, with transparency on these issues with investors and other providers of finance. Increased engagement will be sought with them to understand their current needs and to gain their understanding and support for difficult decisions such as any cuts in dividends and decisions to postpone investments or not to have share buybacks. In addition, the necessary extra time will be spent on issues related to preparing the annual report and financial statements such as those relating to going concern, stress testing, explaining the approach to dealing with the crisis, actual and expected market changes and how Government support has influenced the reported figures. Strong boards will take real care on reporting on future prospects and the audit committee will make sure they generally spend more time with the auditors at this year-end than previously.
Creating a learning organisation knowing their future potential is without limit
The best boards will also make sure they are a leading-edge learning organisation: adapting quickly from experience both positive and negative; taking good insights from wherever they occur at all levels in the organisation; rolling out best practice ideas in one part of the business more widely and learning quickly from what is happening elsewhere in their sector.
As the rainbow rises to mark the passing of the storm, gradual and painful though it will be, the all-seasons board will calmly look back with quiet pride in what they achieved knowing that having survived that as a team their future horizons are without limit.
Publication date: 02/06/2020 - Article written by Antony Carey, Mazars UK Partner