The VUCA world is the new norm with Boards operating in an environment characterised by Volatility, Uncertainty, Complexity and Ambiguity. As the world navigates unprecedented change and disruption, VUCA Directors dedicated time last week in their board meeting to discuss the impact that COVID-19 is having on Boards and Directors. This included board performance and dynamics, communications, increase in demands and time pressures, relationships with Executive and facilitating digital board meetings. VUCA Directors collectively sit on 16 Boards, 6 Advisory Boards and various Audit & Risk Committees in organisations ranging from Universities, Mutuals, Industry Associations, NGOs and family businesses. As practising Non-Executive Directors, they have shared their observations during this challenging time. Whilst COVID-19 has significantly impacted people’s lives and livelihoods the challenges in the board environment have also been monumental. This extends to how Directors are responding and adapting to this crisis whilst governing the organisation and keeping an eye to the future.
Let’s start with digital board meetings. Have they become a challenge?
- Frequency of meetings have increased sharply
- Committee work is temporarily becoming less important
- Decreased opportunity to socialise and discuss ideas prior to board meetings
- Using technology has made it harder to read body language and gauge the dynamics
- Change in communication methods makes it difficult to read the mood of the “room”
- Achieving equity in discussion has become a challenge, with dominant Directors speaking over peers
- Increased need for patience, flexibility and consideration of others
- Need to agree on meeting protocols or “rules of engagement” to create a positive experience
- Changes to board reporting, such as key financial metrics now required weekly
- Chairs have to acquire new skills in leading virtual meetings
In time of disruption, relationships and performance are critical. What has changed?
- Chairs required to be more active and visible and show greater leadership
- Increased communication between Board and Executive
- CFO required to attend full board meetings
- Increased time together has strengthened or identified fundamental flaws and differences in the Chair and CEO relationship
- Crisis has highlighted the extent to which the CEO and the Executive team have been proactive, decisive, resilient, agile and effective in leading the business
- Highlighted the CEO’s leadership ability and commercial acumen under stress and pressure
- Highlighted the value of high-quality CFOs who can quickly analyse different scenarios and operational impacts
- Highlighted value of high-quality GM-HR advice supporting Executives with the tough calls and identifying and implementing government support strategies quickly
- Management of key stakeholder relationships is paramount with banks, creditors and supply chains
What is the impact on organisations, now and beyond?
- That Boards and Executive who were agile in response to the crisis have moved to discussing strategic implications beyond COVID-19 and will come out of the crisis stronger and in better shape financially
- Increase demand on ITC infrastructure, including workforce working from home, has highlighted the lack of investment and forward planning in this area
- Highlighted cyber-security as an enterprise risk with remote access being the norm
- Frequency of meetings and the impact of the crisis on the business has led to some Boards being far more operational than normal
Board Reflection Boards should reflect on their overall performance and effectiveness through this crisis and that of the Chair and individual Directors. Reflection is healthy, it adds value to performance and culture. Here are some questions that will help Directors reflect and seek continuous improvement as they navigate unprecedented change and disruption that COVID-19 has created. Board behaviour
- How do the Chair and Directors improve upon virtual meetings to ensure meetings are focused and productive?
- Are the vocal Directors still vocal, are some Directors taking a back-seat?
- What is the right balance of time allocated at board meetings between “what needs to be done to survive/change current business model” Vs “what does the future state model look like post COVID-19”?
- Are Directors clear on the safe harbour principles and changes to Director liability and insolvency laws?
- How do we balance Board involvement in the business in a crisis, governing Vs managing?
- Should we review special delegated authorities, to increase the CEO’s powers for immediate/urgent decisions?
- Is there increased tension between Board and the Executive team as Directors want to drill down into more detail and receive more frequent financial reports?
- Does the Board need to have greater empathy and consideration of the mental health and wellbeing of its CEO and Executives?
- Does the Board and Executive have the right skills, optimism and courage that is required to re-imagine and re-shape the future post COVID-19?
- Have you stress-tested the relevance of the long-term plans for the business?
- How have the assumptions on which we based our strategy changed?
- Are 100 day plans more appropriate than 3 year rolling plans?
- What lessons, learnings and opportunities are we able to leverage for future growth?
- How has working from home, helped or hindered the business and how might changes to workforce practices positively impact your organisation?
- Should Boards reduce their remuneration in these tough times?
- What do Remuneration Committees do with regard to pre-agreed KPI’s made in June 2019?
- How do Boards acknowledge and reward long hours and great management performance in a time of decreasing profits?
- What options are available for reducing wage costs (short/medium term) whilst still maintaining employee loyalty and skill retention for the future?
- What are the financial scenarios for taking accrued annual leave, long service leave or unpaid leave?
- Has government support and subsidies been fully explored?
- How is the organisation behaving in this environment, paying bills, extending creditor arrangements?
- How are you upholding Employer of Choice status?
- Have you embraced competitors and suppliers for support in short term if practical?
- Are Executive seeing the Board as a valuable source of ideas?
- Has the Board become totally compliance driven and adding minimal value?
- Has the Board acted with integrity and courage in support of its Executive?
At the heart of high performing boards is open and clear communication, including the courage and ability to ask the hard questions and have the difficult conversations. We hope our observations as Directors highlight those questions that Board and Executive should be asking of one another. For more information on VUCA Trusted Advisors services and expertise, please visit our website vuca.com.au or speak to one of our Directors. You can learn more about us here.