Company boards have a critical part to play during the COVID-19 crisis. Find out what Professor Stanislav Shekshnia from INSEAD Business School thinks they should be doing and why they shouldn’t rush to make strategic decisions.

COVID-19: how should boards be responding?

In Europe, we are two months on from the initial widespread response to the COVID-19 outbreak. First we saw and read many articles about the virus, then its impact on the economy, followed by thoughts on changing working models for employees. Now we are hearing how boards of directors are adapting to this unprecedented crisis. Last week, McKinsey published an article emphasising the need for boards to both support and challenge their management teams.

At The Alexander Partnership, part of our coaching support for boards and board members includes developing thought leadership around the board’s roles and responsibilities. To find out more about how boards should be responding to the COVID-19 crisis and in my role as an Alexander Partner and a Lead Coach at INSEAD Business School, I spoke with Professor Stanislav Shekshnia from INSEAD who is the co-director of the ‘Leading from the Chair’ program and also co-author of ‘Leading a Board – chairspractices across Europe’.

Hande Yasargil: How do you see boards reacting to this unprecedented crisis? Do you see a pattern developing?

Stanislav Shekshnia: I see corporate boards reacting to the current crisis in three ways:

There are boards operating under a ‘business as usual’ paradigm. As the chair of one board put it: “Crisis is the business of the CEO, the board does not need to change how it functions.”

Another reaction for boards is to become more engaged with the business, move to the operational level, and even replace management in making key executive decisions. In the words of a leader of such a board: “When a crisis of this scale hits – we all become executives.”

I am glad to see that the most common reaction of boards across Europe is to adapt their routines to reflect the new reality and increase the intensity of their work without assuming executive functions. As one chair of such a board told me: “The essence of our work has not changed – we provide oversight to management, but the intensity and format have changed dramatically.”

HY: You are an advisor to many boards across a wide geography; what, in your experience, makes for an effective board in these uncertain times?

SS: There are six key areas for board effectiveness during a crisis like this:

  1. First, boards must ensure that their companies have adequate leadership. There must be candid discussions about whether the incumbent CEO and other senior executives are fit to lead the organisation through this unprecedented crisis. If the answer is no – the board has to make swift changes.
  2. Second, the board must address the question of the framework for executive action: “How should we adjust the goals, rules, resources, and values that we had set for executives?” Many boards in times like these, move to short-term targets and meet on-line weekly or biweekly to review them. They focus attention on employees’ health and cash flow as primary targets. They also reduce the CEO’s spending authority and put investment projects on hold.
  3. Third, the board must decide on how to support the CEO and executive team during these tough times. In addition to clear priorities and simple rules, executives need emotional support, expert advice and an attentive ear from the board.
  4. Fourth, the board must re-examine its own processes and seek to make adjustments: most European boards have moved on-line; their meetings have become briefer but more frequent. Less formal discussion and information exchange have replaced management presentations and meetings.
  5. Fifth, the board should examine its own collective competency and decides how to fill in gaps in knowledge and experience in order to deal with the new challenges by engaging external experts, consultants and reading reports and articles.
  6. Sixth, boards must think big and explore opportunities that the current crisis creates for the company. Last, but not least, directors should take the time in board meetings to share their feelings and concerns, to exchange their experiences and to support one another.

The current crisis puts an enormous strain on leaders in all areas, including corporate directors. While experiencing personal anxiety and stress they must help other people to stay healthy, calm, rational and productive, and do so while working remotely. Such challenges require high levels of resilience. Where will it come from? As a board chair and a director, I feel the pressure and experience my own low moments. However, I find that staying in touch with my fellow board members, working with them on complex issues, and receiving their support is one of the best medicines to keep me sane, positive and energised.

HY: If you redesigned the director development programs what would you add as a new topic?

SS: Resilience: at three levels – organisational, group and individual. Resilience is the ability to adapt to complex change. Resilient people and organisations bounce forwards after an external shock while non-resilient ones retreat backwards. Some psychologists argue that each person has a certain level of resilience that can be measured. I support another school of thought: resilience, both at individual and organisational levels, could and should be improved.

Boards of directors need to decide what makes their organisations resilient – financial reserves, tightening operations, redundancy or change in organisational design, and corporate culture are some of the options – and ensure that  there are processes in place to address these issues. The same logic should apply to the company’s leadership and the board itself – do they have what it takes to be resilient when a crisis strikes? Are there effective crisis management procedures in place? Do the CEO and other key executives have capable backups? Does the board know what to do when half of its members are not able to work? We need to teach directors to think about these issues and ensure they are addressed by the management.

HY: What should boards do to design an effective post COVID-19 strategy?

SS: Learning and patience – to give you a short answer. Boards have to learn fast and ensure that senior management learns fast but they must also avoid rushing to make strategic decisions. How many times in recent weeks have we all heard something along the lines of “We will not need an office after the crisis is over.” or “We should reduce our office space by 50%?” This is an example of what not to do – of typically irrational and under-stress decision making.

Let me give you an example of a pragmatic approach taken by a board chair of a large industrial company: “I asked all the board members and all the members of an executive committee to write down their ideas about potential changes and share them, but wait until June to actually make any big decisions. I want us to accumulate a critical mass of knowledge about the new reality, share this information and then make systemic changes rather than fix small details now and regret them in 6 months’ time.” 

HY: Many thanks for your time and insights today.