Governing through and beyond Covid-19

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Governing through and beyond Covid-19 Ethical BoardroomBy Dr Debra L. Brown, President & CEO of Governance Solutions

 

 

This is the time to be more open at a board level to the leadership of the CEO in major transformation and culture change efforts

In April 2020, about six weeks into the state of emergency caused by the Covid-19 pandemic, I asked 375 board members two questions:

  1. To what extent has this pandemic and resulting state of emergency affected your organisation?
  2. How different do you expect the organisation to look once the pandemic is well behind us?

The results were stunning. A full 89 per cent reported they had already been affected to one extent or the other with 76 per cent of those negatively so. And 93 per cent said that they expected their organisation to be forever changed, with almost 20 per cent of those expecting the permanent changes to be significant.

This means that, at a minimum, 93 per cent of boards will need to relook at their plans and the governance of their organisations. And, I suspect, so too will the other seven per cent!

As leaders at the outset of the pandemic, your thoughts were likely focussed primarily on four immediate pressures:

  • The health and safety of your employees
  • Ensuring business continuity
  • Risks to your reputation
  • Stakeholder communications

At this point in the crisis, you will have moved on beyond the immediacy of these to assessing the impacts and ensuring board and management deliberations and decisions have been systematically implemented and properly documented. You may have been doing things on the fly, but you’ll want to make sure that you have crossed your Ts and dotted your Is. You are keeping an eye on reopening plans and activities, and you are thinking and planning for beyond the emergency, toward the new normal. Some of you may even be fully operational or have grown exponentially through the pandemic.

Regardless of where you are in the pandemic journey, we have identified nine strategic themes you will benefit from considering and applying.

Theme 1: There is urgent pressure to think concurrently through multiple timelines

The crisis has caused leaders to think concurrently about multiple timelines:

  1. This month: reacting to the crisis (to survive)
  2. This quarter: recalibrating in the aftershock (to stabilise)
  3. This year: rebounding to the new realities (to sustain)
  4. Beyond this year: reimagining the future (to succeed)

It is hard enough in normal times for us to think about one timeline, the timeline that we’re in. Now we are having to think in four streams all at the same time. But you will need to.

Theme 2: A collective, singular unique opportunity to lead in the shaping of culture

Covid-19 has given us a singular unique opportunity to shape culture. Culture is formed, embedded, shaped and changed through shared experience. Full stop. Shared experience is how you change culture. If you are not leading your culture, your culture is leading you. There is no better time to lead in shaping your culture than now. This is why: everybody in your organisation is sharing the experience of manoeuvring through this pandemic. Your entire board, leadership team, customers and suppliers are part of this shared experience. Everyone who is attached to your organisation in any way is going through the same thing simultaneously.

We are living in the days where the best approach is, like Nike says, ‘just do it’. Leaders jumpstarted to ‘yes!’. Governments have been able to make quick decisions and implement complex solutions to deliver major programmes in record time. Big moves that have been stalled or in the works for years are suddenly becoming quick ‘yeses’. Moves like shutting down a large office or closing branches happen at the stroke of a pen.

Bureaucracy, low risk tolerance, lack of innovation or other cultural issues have prevented companies from moving quickly with the speed and agility needed to transform. Suddenly, their response has become, ‘just do it’. In some cases, it has been, ‘let’s just try anything!’. Pre-Covid inefficiencies have created post-Covid survival movements.

Here’s the thing: you can only change culture as quickly as your culture will allow. And the shared experience of this crisis has provided a unique opportunity for real culture change, because everyone, at the same time, is recognising the need for it.

Not every organisation is looking for culture change, of course. You may have a very healthy culture. However, if you are looking for culture change, there is no better time than now.

Culture change typically needs two ingredients: shared experience and a burning platform. So often when we try to change our culture, we must fabricate a perceived burning platform to convince people of the need for change. We also find ourselves dragging people along, at times kicking and screaming. With the pandemic, we have an immediate burning platform and most people are ready to jump together. If there was ever a time to lead through the reshaping of your culture, that time is now. But you need to act quickly while the platform is still burning. The board and CEO need to persevere and use this opportunity to craft culture, or it will just slip back when the crisis is behind us. It will quickly revert.

Theme 3: Beware cognitive biases — especially pessimism, optimism and discounting biases

There are three cognitive biases that have been heightened during this crisis. One is pessimism bias. This is when board members are likely to exaggerate the negative effects of long-term outcomes. These board members will be reluctant to make any changes and will lean towards reverting to the old culture, believing it will be safer, more predictable. They may think, ‘let’s just see if we can ride this thing out’.

The opposite bias is an optimism bias. Those with an optimism bias are more likely to argue that the current problems will pass, and the future will hold more promise. Therefore, we should adapt and make wholesale changes to company and culture to lean into that promise of the future.

There is a third cognitive bias we are seeing in boardrooms today, and that is called discounting. What we mean by discounting is that people are more responsive to immediate consequences than delayed ones, but at the same time, board members may hesitate to implement tough decisions because the adverse consequences are immediate.

Boards with this bias must be careful not to hesitate. Now is the opportunity to leverage this bias, to embrace change where you need to. Embrace it where it’s going to be healthy and needful because employees and the rest of your stakeholders will more readily accept change right now. This is the time to be more open at a board level to the leadership of the CEO in major transformation and culture change efforts.

Theme 4: There are multiple industry shakeups

Another theme affecting boardrooms today is shakeup in many industries. For example, we see a shakeup in the digital landscape. Covid-19 has accelerated this shift.

Transitional shifts are taking only days, weeks or months when previously they may have taken months or years. Some organisations, such as Zoom and other online meeting software companies, e-commerce companies, cyber security companies and internet providers have experienced immediate benefits. They are on the upside of this crisis. Yet, in that same industry there are companies that are facing significant challenges. For example, IT infrastructure companies. They have negative pressure on their supply chains and the work-from-home movement.

It is not just the digital space experiencing shakeup. Travel, tourism, financial services, healthcare, education and dozens more are also impacted. The shift to working from home is affecting almost every industry. I know executives in large companies who have been working from home for months now. Many say they are never going back to the office again. Some say their teams have never been as connected and accountable as they are now. They are more productive, less depleted from long commutes, and happier in general. How is that going to shake up your industry, and how is it going to impact your boardroom? How will your board assess and make decisions during these types of shakeups?

There are tools typically used in strategic thinking that will help, like scenario planning. Don’t jump straight into strategic planning. Strategic thinking is what we do before we plan. Strategic thinking is divergent thinking — ideation to come up with alternatives. Don’t plan before you think, think before you plan.

Theme 5: There is a compelling need for vision casting to give people hope

People need and are looking for hope during a short-term focus on the immediate crisis. One of my favourite books says that ‘where there is no vision, the people perish’. While we are all laser focussed on the tactical, our employees need to catch a glimpse of where they are going. They need leaders who will raise their sights and give them something across the horizon to focus on. They need to see beyond the day-to-day. The team needs to see that there is a plan and that there is a real target beyond the immediate crisis.

That target is your long-term vision. Encourage people to reaffirm and refocus on that vision. The word encourage literally means to ‘give courage’. Especially during a crisis, people need courageand a vision can give it to them.

Theme 6: There is a demand for adaptability and resiliency in the organisation

A great example of the need for adaptability and resiliency is in the forecasting and modelling that we have seen related to Covid. We only see the tip of the iceberg on the news. Governments and organisations are trying to get a handle on what is a moving target. The point is, we need accurate predictions in the boardroom to make good decisions.

Recently we spoke with the CEO of a major airport who recounted that when Covid first hit, the airport predicted it would experience as much as a 50 per cent reduction in activity. Months later he said: “Oh, that we only had a 50 per cent reduction!” There is this moving target boards are attempting to hit. While you are restarting, reinventing, downsizing and upsizing, you need projections; but in the boardroom, in a crisis, you can’t be married to them. You must be able to regroup and adapt.

Theme 7: Commit to excellence in crisis communications

Organisations are getting good at crisis communications. Not that many years ago, when a crisis came up, sometimes the communications became the crisis! Now leaders are really starting to learn how to communicate with simplicity, clarity and effectiveness. They are staying focussed on key facts, principles and objectives. They are communicating what people need to hear. They are helping people understand why it is that these are the facts, what is behind the facts, what the principles for moving forward are, and what the specific objectives of moving forward are. Then, they let others further down the chain focus on the task, tactics and details.

Some of our political leaders have been exemplary in how great a job they have done in crisis communications. There have also been some political leaders that have not reached that level of consistent success.

There are some real lessons here for boards.As you govern through this, and any crisis, every time the board meets it should clear on its role in communications, on its message and how well those messages are being received and understood.

Theme 8: Collaboration and opportunity with competition

The eighth theme is an unprecedented amount of collaboration with competition. This is happening at both the political and corporate levels. Businesses and governments are collaborating in areas where they have common problems. Yet at the same time, they continue to compete at local and operational levels.

Some of your competitors either did not or will not make it. There have been many announcements of both large retailers and small headed for the bankruptcy courts. Others are going to capitalise on this opportunity, and they are going to jump out ahead of you.

A slowed-paced strategy does not work in a crisis. Sometimes you might have a strategy in place that serves you well for many years, and then something happens. Everything changes and every moment counts. Your competitors are in crisis mode, just like you.

At times like these, people learn quickly out of necessity. Here are some great questions for you, for your board to ask:

  • How well is our organisation competing at the level of competitive learning and knowledge? Are we keeping up? Are we learning faster than our competition? Are we adapting as a result?
  • What have we learned about our competition that needs to work its way into our strategic future?
  • What opportunities can and should we be taking advantage of?

These are significant questions because the competition is going to be even more fierce from now into the foreseeable future. Even though we’ve had this time of working together collaboratively to solve common crisis-related problems, at the end of the day, there is still that competitive marketplace you are in, and it is going to be fierce.

If you happen to be in a strong cash position and have a good balance sheet, you might be able to take advantage of depressed valuations to move forward with mergers and acquisitions. This allows you to consolidate your organisation’s market share and your hold on the marketplace.

But what if you are in the opposite position? What if you are facing potential insolvency? Part of the board’s responsibility is to manage the end of life of the corporation. Rather than waiting for the organisation to die a painful death, you might need to step up and negotiate a merger or acquisition sooner rather than later so that you can continue to serve your employees, clients and suppliers.

Theme 9: Significant rapid innovation

New attitudes and patterns of demand have emerged during this crisis. Patterns like the work-at-home movement and online delivery of products and services. For example, home grocery delivery is flourishing. We hear from people who say that they would be fine to never go into a grocery store again. They want to avoid the crowds and the germs. Another example is online medical services. Both the patient and the clinician are much more willing to embrace technology. We’re seeing more takeout and less dining at restaurants, even as they open up in some areas of the world. There are more remote meetings and less travel to meetings, and we don’t see that changing for some time, if ever, which heavily impacts the travel industry – it has been predicted that even two years from now, airline travel won’t be at much more than about 60 per cent of pre-Covid travel, 70 per cent at most. Distilleries have pivoted from making beverages to producing cleaning products and hand sanitiser.

Many organisations have become – or have had to become – much more innovative as a response to the pandemic. They are taking a hard look at their business models in light of the ‘new normal’ – everything from supply chain to product packaging for online sales and delivery. You can expect significant societal changes to occur, from working from home to virtual meetings to online shopping. You could see significant changes with all your stakeholder groups, employees, suppliers, consumers and even lenders.

Is your organisation one of the 93 per cent who expects to be forever changed? If it is, pay close attention to these nine themes. Ask yourselves: does our business model still fit the new normal?,;what things did we learn during the pandemic that will allow us to improve our processes, products and offerings?; how might we do that in a way that will enhance our ability to drive value?;and have we given enough consideration to innovation and adaptation?

How you answer those questions will impact how well you govern through and beyond Covid-19

 

About The Author.

Debra Brown is the founder, President and CEO of Governance Solutions Inc. Since founding GSI in 1991, Debra has developed it into a full-service firm providing governance consulting, research, training and tools. Additionally, Debra is the founder and a lead faculty member of The Professional Director Certification Program™, a world class, online director education and certification program.

Currently, Debra serves on major international boards, and has worked in corporate governance in North America and as far afield as Malaysia, Bahrain and Guatemala. She is an acknowledged and sought-after thought leader in corporate governance, authoring over two dozen major research articles published in Canada and internationally. Prior to forming Governance Solutions, Debra spent several years in the Canadian financial sector, working most recently as CEO.