How is a company’s good governance related to resilience? In a crisis situation, you no doubt invest considerable time and energy to just keep your business afloat and move it forward. But your network of advisors or your board of directors (BoD) can help you chart the right course through choppy waters.
Here are 5 main benefits of exercising (or adopting) sound governance practices when faced with any crisis.
1. You have allies you can count on
If you’re in business, you probably already have valuable allies you can discuss important business management matters with. Whether they take the form of a management committee, a mentor, trusted family members, an advisory committee or a BoD, it’s well worth your while to keep them even closer. They can be especially helpful if an internal crisis, or economic or social conditions put your company at risk.
Some business owners have a negative perception of BoDs. Certain stubborn prejudices persist, including the reputation for being cumbersome, even meddling. While your BoD has compliance, reporting and risk management responsibilities, it’s also meant to generate value creation for your business. During a crisis, you should work even more closely with your advisory committee or BoD. The more transparent your communications are, the better your advisory committee or BoD will be able to support you. What’s important is maintaining a strong relationship with your allies.
At the height of a crisis, some business owners even opt to increase the frequency of their BoD meetings to once a week! If your company doesn’t have a formal governance structure, you should continue to rely on your usual partners and be sure to share any challenges with them to get diverse perspectives.
2. Maintain focus in the heat of the moment
When there’s a crisis, it’s natural to start by putting out fires and reacting to nasty surprises. Once you’ve gotten a handle on the situation, take the time to talk to your advisory committee or BoD to make sure your organization can absorb the repercussions. Besides the profitability of your operations, one of the most important things to watch out for is the state of your human resources.
In the wake of a crisis, you may have to let key players go. These kinds of changes often affect staff morale. And with telework becoming a new normal, it’s hard to get an accurate picture of how motivated employees are when you’re often interacting virtually.
Your BoD plays an essential role in guiding you in these kinds of decisions. Put their expertise to use to develop a plan that will allow you to re-focus your business on fundamental objectives and maintain your human resources. Once you’ve identified specific problems to solve, your BoD will help you determine the indicators you need to closely monitor, and those you’ll need to add to the dashboard. Good governance buffers against uncertainty.
3. Recover your long-term vision
A crisis can generate growth for some businesses and reduce operations for others. If you find yourself in the latter group, the business’s DNA should be your main concern. It’s no easy feat to maintain operations when a crisis hits. How do you find meaning in this crisis? What are the potential impacts on your company’s business model and operations? Your advisory committee or BoD has a key role to play in helping you project further into the future.
The board might even help you better anticipate upcoming crises. In February 2020, for example, businesses that had directors who were aware of the COVID-19 pandemic in Asia and Europe were able to anticipate and adjust their practices and strategies before the market was affected here.
A BoD shares your company’s fundamental values and is guided by clear principles already established with you. In other words, its vision of the organization’s future should be aligned with yours. Even if you follow your contingency plan to the letter, situations can change so quickly that it’s worth turning to your BoD to take a step back. It’s an opportunity to reaffirm your vision and together establish a crisis management plan that will ultimately help you take your business in the direction you’ve chosen.
4. Explore new solutions
Despite everything, do you find yourself dealing with new organizational, financial and people challenges? Join forces with your BoD. If you have to make the difficult decision to let staff or partners go, for example, you could turn to your advisors or members of your BoD to find the best possible solution.
Or, if you’re dealing with a talent attraction or retention issue, your directors can put their specific expertise and networks to work to advise you on how to implement creative retention/attraction strategies.
5. Make informed decisions
As a business owner or member of a management team, you make decisions every day, many times a day. But when the climate is cloudy, how do you see through the fog to be confident you’re making the right decisions during a crisis? Is it a good idea to expand into a new, promising sector? Should you seize the opportunity to acquire a competitor weakened by a difficult economic situation? Should you look for new forms of support to drive your latest innovation? How can you retain top talent? How do you communicate effectively to support employee morale when uncertainty hits?
In 2020, during the wake of the COVID-19 pandemic, we saw many inspiring cases of collaboration between business leaders and their BoDs. There were great examples of innovation in the restaurant sector, one of the most affected by the crisis. One business owner who had to close the doors of all his restaurants was able to pivot his operations, with the support of his external advisors. He set up a boxed-lunch catering service, designed specifically for teleconference participants. Thanks to this creative solution, his chain was able to generate revenue and retain staff.
You could reduce your worries and concerns by developing the habit of asking your trusted partners or BoD for their advice on how to handle certain challenges and situations. By maintaining close, transparent relationships with them, you’ll maintain the assurance and confidence you need to manage your business.
In conclusion, remember that your network is there to support you and your management team. During a crisis, close relationships with your BoD or advisory committee can help you pursue your main objectives and stay the course. Exercising sound governance during a crisis gives you the best chance of overcoming the next challenge, and any that may arise in the future.