10 Dec 2020 Shock? Take Stock
Boards often find it difficult to create the space to stand back and reflect. And we often note that opportunities to highlight the positives and to say “well done!” are crowded out by the pressing issues or problems. So the end of the year – especially this very trying year – is a good time to do a bit of both.
A huge amount has been achieved, in the face of unprecedented and immense challenges. Teams at all levels have shown incredible resilience and flexibility in keeping the show on the road – and the boards we’ve worked with this year have all been good at praising management and understanding the pressures. Company secretarial functions deserve a special mention too, putting great effort into keeping things working as smoothly as possible – not just the meetings but all the governance processes too. Board and Committee Chairs have invested a lot of extra time too. And boards as a whole deserve to pat themselves on the back for showing flexibility, perseverance, patience and empathy as a virtual meeting environment slipped pretty seamlessly into place. So directors should use this time of year to loudly say “well done all round!”
At the same time, they also need to use the pause to look to the future, working out what might be needed across 2021. Here are some suggestions on what we see as good practices for the year ahead – and some thoughts on where boards might slip up.
Good practices to consider…
Ask “what have we neglected?” It shouldn’t mean self-flagellation – it’s inevitable that the prioritisation required by the urgency of the challenges will have pushed some issues further down the agenda or out of the picture altogether. But it’s important to stand back and think through what needs a renewed focus.
Things to avoid…
Slipping into 2021 without taking stock, just sticking to the standard forward agenda as part of ploughing through the difficult circumstances. Chairs, Company Secretaries and CEOs need to put their heads together and come up with ideas to try out on the whole board. And who knows, maybe other good ideas will emerge from that discussion…
Good practices to consider…
Reflect on how the pandemic has changed the business and societal environment. Trends that had been emerging around section 172 are now even stronger. So stakeholders are moving even more to the front and centre. With the vaccine light visible at the end of the tunnel, “normality” might resume by this time next year. But what will that mean? Boards need to start taking a view on the longer-term impact on the ESG agenda, customers, suppliers, communities, the workforce…
Things to avoid…
Pictures are rarely clear at the best of times – boards always have to deal with uncertainty and ambiguity. But it’s already clear that things are going to be different. Putting off thinking about it isn’t a good idea, especially when some of the outcomes are already evident: a huge macroeconomic hit, transformation of retail, a shift in working practices, slow recovery from a deep trough for some sectors… For some this means changes to business models. For others there may be less internal change, but they will not be isolated from a changed environment.
Good practices to consider…
Make more time for scenario debate. The impact of big shifts – deep recession, fiscal shock, imbalanced economic recovery, supply chain changes, Brexit – needs to be thought through in a structured way.
Things to avoid…
Continuing to regard scenario debate as a bit of a waste of time given the unknowns and what will change in any case. That’s not the point: scenario planning and stress testing are all part of making sure there is an opportunity to think through strategy, future business models and sustainability. And with that can come the benefits of strategic and economic modelling.
Good practices to consider…
Keep searching for the opportunities. For some that’s a harsh and unwelcome suggestion: an awful year looks bleak well into the future. But, for others, boards need to be encouraging management to get their heads above the water to see what market and internal restructuring opportunities are emerging.
Things to avoid…
Missing the opportunity to challenge thinking. Boards especially have a responsibility to make sure the questions are being asked and the thinking followed through. Management teams and executives remain in the thick of it, so it can be difficult for them to look ahead. But directors who are more detached can help set out a forward-looking agenda – especially those who have been through difficult times before.
Good practices to consider…
Help management stay on top of the welfare issues. We’ve been struck by how many boards have worked with management teams to make sure staff welfare has been a top priority. Things need to stay that way and not just because of the continuing pressures. Workforce expectations could well come out of this quite differently, with connected trends in the “stakeholder agenda” and ESG coming to the fore.
Things to avoid…
Assuming declining COVID-19 cases and a full opening up means the workforce is over the crisis. The mental health agenda has changed: the consequences of “working from home” are as yet unclear, and some employees will have been directly affected in terms of health, financial security, bereavement… And it’s about the pressures on their families’ mental and physical health too. For boards, it’s not just about the duty of care, but also the future wellbeing of the workforce and the moral and strategic implications.
Good practices to consider…
Take stock of how governance is working in the virtual meeting and working from home environment. The responsibilities of directors haven’t been lessened by the circumstances (think health & safety, risk management, reporting standards, collective responsibility as a unitary board, consideration of stakeholders…). And regulated entities are already starting to get questions about how decision-making, accountability and many other aspects of governance are working in present circumstances.
Things to avoid…
Allowing short cuts to be taken or stop gap measures to become routine. Especially back in March/April, some pragmatic compromises may well have been unavoidable as Chairs and CEOs responded to unprecedented challenges. And in a virtual meeting environment, it’s easier to let things slip. But if that’s happening it needs to be checked. Even where board processes are unchanged, boards need to ask themselves whether the downsides of virtual meetings (more constrained discussion, little informal interaction…) are negatively affecting the nature of debate and the way decisions are taken.
Good practices to consider…
Improve virtual meetings through better technology. Sound and vision can be improved a lot, very easily with only a modest investment in webcams and microphones. Any hesitancy over the spend should be countered by the thought of how much used to be spent on travel to maximise the quality of discussions by ensuring they took place in person!
Things to avoid…
Making do. That’s not the right response when it’s clear that virtual meetings will continue for many, even as part of the picture once in-person meetings become possible. Also, we see a tendency to accept poor quality of participation “due to broadband problems”. That shouldn’t be an excuse for failing to try to make things better, even if they won’t be perfect.
Good practices to consider…
Take the opportunity to give the board papers and management presentations a radical rework. Boards who have insisted on short papers and eliminated presentations of the paper to avoid taking up valuable virtual meeting time, are feeling the benefits of being released from years of frustration. Succinct “positioning overviews” combined with effective signposting and detail relegated to appendices are the way to go, along with squeezing out presentations and “paper walk through”.
Things to avoid…
Missing the opportunity to make a change – “don’t waste a good crisis”. It’s rare for things to be shaken up to such an extent that what seemed intractably difficult now seems obvious. The shift to virtual meetings is one of those. Management and company secretarial teams might not have had the breathing space in 2020 to make as many changes as they’d like. But 2021 is the time to take those steps, before the window of opportunity closes.
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