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Private Company Board Responsibilities in Times of Crisis

A series to promote discussion and feedback within the PDA

Over the next 6 weeks you will be receiving a series of papers on Private Company Board Responsibilities in Times of Crisis.  The topics will include:

  1. Introduction and Supporting Leadership in Crisis
  2. Finance
  3. Supply Chain
  4. IT
  5. Sales and Marketing
  6. Work Force and Community

Your comments on these topics are encouraged.  We will be providing a mechanism for your feedback.

The following is an Introduction to PDA’s series of articles.

Directors dealing with crisis

What is the role of corporate directors in a crisis? Directors guide businesses and provide oversight. They set standards for management and monitor performance. They select the CEO. However, they do not make managerial decisions. The main tools that directors use are questions for management, and bringing perspectives from different industries, geographies and even different eras which may be of crucial importance.

When a crisis emerges, management is consumed with tactical considerations. Problems seem to arise from every direction and there seems to be no time for strategic considerations. It is easy for management to become myopic in such times, and the directors can play a crucial role in helping management survive the crisis while not losing long term momentum.

This series is intended to help directors by providing questions that directors can ask of their management teams to help them focus on specific aspects of their businesses. Armed with questions such as these, a director can customize the inquiry with a specific management team and help them navigate the current crisis that has threatened so many private businesses.

Supporting Leadership in Crisis

Directors should consider that the questions fit within a broader context, where executive teams coping with crisis are subject to myriad distractions. Unburdened with the day-to-day issues facing management, directors can play pivotal roles in helping companies survive.

As board members we typically have 10 to 15 years more business experience than the CEOs of our companies and 20 plus years more than most management members. We have experienced crisis upon crisis during our business careers. Reflecting on the recent 20 years we have dealt with the 2008 Great Recession, wars in the Middle East and Afghanistan, a 2002 recession, the terrorist attacks on the World Trade Center,  a 2000 meltdown of the Tech markets. For many of us, this is just the beginning of a much longer list.

It is easy to forget that people in their early thirties, now moving into midcareer, have not experienced a recession in their working lives. Many of those whom they manage only know of the 9/11-World Trade Center attack through history books. Crisis is a new subject to both. Managing professionals and employees through crisis is a rare skill.

Major crises seem to come out of the blue, a total surprise. We find ourselves unprepared for the scope and magnitude. A major crisis may threaten health on many levels: business, social , family, and even individual. When fear creeps in it slows our response time and quality of decisions. Formulating competent plans and making productive decisions bog down, increasing the damage and the time required to recover.

In the current situation crisis management, risk management, and other formal approaches are championed by pundits and authority figures giving board members advice. Most of the advice is mechanical or technical, discussing response teams, task forces, emergency communications and the like. However, when looking back over a number of crises, one common thread is the value of calm, rational approaches. Decisions must be made quickly, and they have to be disseminated credibly to all involved. Rumors, misinformation, political agendas, and other distortions of facts can slow healing and forward motion. As in any management situation, the command of the story is in the hands of those with the earliest and most credible information.

Board members, experienced business people who have navigated crises in the past, are in a prime position to coach CEOs and management teams through the current crisis.

We are offering a series of articles which will include lists of technical assistance in the form of questions for board members to ask management. The work focuses on the role of board members as helpful questioning overseers. Yet, we should always keep in mind the major value that a longer business career and past crisis-handling experience allows a director to bring to the company.

In business interactions a simple assumption that is frequently made is that everyone has the same amount of information on hand. This is never true. When we assume that all others have our same level of understanding the facts, knowledge and experience, it is easy to make suggestions that go over the heads of others. Wisdom can fall on deaf ears, due to misunderstanding or collision with a cynical barrier erected by those who are worried, unsure, and concerned about their immediate safety.

Don't fall into the trap. Assume that you do have special knowledge which you need to successfully transfer to others. Assume that your perspective is different. Don't spend hours educating and pontificating but choose your words to clarify the perspective from which your commentary arises and articulate your suggestions carefully. Have listeners reflect back to you what you have said, so that communication is thorough.

In the past decade there has been a lot made of the differences among the generations present in our work force: Traditionalists, Boomers, Gen. X, Gen. Y, Millennials and Gen Z. Some of this commentary devolves into criticisms of work habits of different groups, but a lot is constructively focused on differences in communication styles and expectations. Notably, expectations come from experience. We should all understand that millennials and Gen Z have a different experience and world view from the Boomer generation, which complicates communication.

So, what is the charge for a director? A director must find ways to coach, through questions and advice, provide oversight to and assist a CEO in leading his management team through perilous uncharted waters. It turns out to be a tall order, but our experience and the confidence that we can muster based on successfully navigating difficult times in the past can carry the day. Do all this because you can, because you care, because the CEO and the management team need your help. Even if you ignore the technical suggestions and just reach out with humanity, understanding the fears and anxiety that crisis creates, you can help to defuse those problems, and you can bring value to your organization.

Please give us your feedback. This is ultimately a community effort, that of our community of private directors. Let’s make a difference!

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