The COVID-19 crisis presents a unique opportunity for boards and leadership teams.
It is critical to accept that this is the new reality, and we must focus on operating the company. Your board may want to stabilize your employee base. Your CEO may want to give clear leadership messages to build morale and focus the organization on how to be successful during this unique and extremely anxiety provoking time.
Communicating with employees in a caring and genuine manner and with extremely high frequency (i.e. potentially every couple of days from the CEO) will help ground the global organization, lower anxiety, create confidence, and build a cohesive team that leads to loyalty.
This is the moment when you are actually going to “operationalize your cultural values” of respect, inclusion, engagement, purpose, and mission. Reinforce and restate your company’s vision. Galvanize the organization on what success looks like and focus on the future.
How you engage is just as important as what you say.
Board & Management Decisions
There will be important decisions that the board, and specifically its compensation committee will have to make together with management.
For example, organizations with an hourly staff will need to make tough decisions such as determining if you need to lay them off, offer full pay, furlough them with full benefits, offer ongoing continuity of COBRA, etc. If this does happen, it is critical to re-energize and refocus the remaining employees. Regardless of what has to happen, the company mission has not changed, the trajectory has perhaps been slowed down. Your employees need to hear it from the CEO and all levels of management that everyone is in this together with a companywide commitment to move forward.
If your company needs to conserve cash, you may want to come up with creative compensation structures, such as allowing some of the leadership team to take some of their base salary in RSUs. You may also offer this same opportunity for directors to take their directors fees in RSUs to drive alignment and conserve cash. The longer you can conserve cash, the longer you can invest in your employees. Philosophically think of your payroll not as a cost, but as an asset and investment in the company’s future. You have unique opportunity to create loyalty.
External Actions for the Board & Leadership Team to Consider
Hopefully, you don’t need to transition either the CEO or anyone on the Executive Leadership Team. When it comes to position transitions, it creates some interesting issues, which boards need actively reviewing and disseminating. Some other internal questions to ask are:
- What is your succession plan in the case your CEO becomes ill/unavailable?
- Is your next in line (“name in the drawer”) the right person to hand the reigns over to in a crisis?
- How strong/ready is the bench?
Other things to consider are what are the available opportunities from his new transition? There is the potential in this business interruption to see where you can double down on positive things. See where you can reinvest in the business. Consider using online learning to forward build and cross-train different parts of the organization.
At a time when normal business operations are being reinvented in real-time, Boards may want to ask their CEO’s to consider communications through multiple lenses. Organizations can create tailored social media external facing communication for customers, employees, the community, and investors, which is a chance to share your messages on your company’s values and “global corporate citizenship”. Additionally, discussions on ESG programs have not paused. Through social media you can reinforce the culture, the values and communicate the important actions your company may be taking during this crisis. For example, OYO Rooms is taking their unfilled hotels and making them available as quarantine sites and offering free stays for medical personnel.
Undoubtedly, your company is doing many great things. It’s a good moment to share what you are doing with all your external constituencies through social media explaining how you are supporting your community, customers, employees, and investors.
Have a second target set of communications to your customers. Customers want to hear that you have an organized active, staffed, live support, and a help desk to solve their problems. Customers want to know your commitment to them is unwavering and that you are leaning in to make sure that any and all support is in place. Become a true partner.
Internal Actions for the Board & Leadership Team to Consider
Don’t forget your internal communications programs; these need to be extremely regular, daily would be most ideal. The compassion with which you treat your employees, and the internal communications you promote within the company, between employee groups will help cement the cohesiveness of your organization.
Be analytical, thoughtful, programmatic, and specific to put together internal campaigns addressing the employee concerns that will emerge. Here’s what that employees care about is:
- Am I going to be paid?
- Does the company have the financial strength to make it?
- Will the company take care of me (and my family) if we get sick?
- How can I be part of the solution?
We often hear the phrase “middle management.” Now is the time for the board to challenge the CEO/ leadership team to inspire their middle management to become the true “middle leaders” that they are capable of being. Ask them to articulate expectations for regular online staff meetings with a view of near term KPIs linked to the future vision for the business. People need to take heart and focus on coming through this as a more cohesive and collaborative team.
The Board’s Involvement in Assessing Operations
There are many board matters that need to be addressed starting with how the company is reviewing its annual operating plan. Ask management to share their “plan A” which may be a neutral plan, “plan B” which is a significant slowdown/drop (i.e., minus 30%), and a “plan C” which is a worst-case scenario.
The board will want to review all of the basic questions such as:
- Will you take down your credit line, cancel share buybacks, suspend dividends, pay them or space them out?
- Will you be missing your earnings for Q2, Q3, Q4?
- How will you clearly message your earnings forecast?
You want to be transparent. You want to give informed guidance. It would be valuable to study how your peers have communicated any re-planning or misses and evaluate what has been most impactful. This may be an opportune time to get a specialist IR firm to help with the external messaging. This may be particularly helpful if your company is going to be vulnerable/attractive to an activist. Getting in front of this, and having a banker assist you with a vulnerability assessment, may be a useful step to consider for the board.
If your company has a strong balance sheet, it may be a time to “bring out the shopping list” and see what assets/companies you may want to acquire. It is a moment of corporate self-introspection.
If your company is a flat grower, perhaps looking at your company through the lens of how a PE firm would evaluate your company would be a useful exercise. If you don’t see the prospects for the business getting better in the next few years maybe the board should ask itself if it the right time to sell the company.
As you evaluate extending your cash runway, this may be the time to review the productivity and profitability of your company’s range of products and services and geographies. In some ways the crisis gives you “air cover”. It may be a moment to look at making some of the important cuts and tradeoffs to preserve the company for the long term. Perhaps you have products, SKU’s, or geographies that are underperforming. This may be the time to make those hard choices. No one ever looks back and says they “cut too deep or cut too soon”.
The board should pay attention to specific compliance and risk mitigation oversight. Everyone is working remotely, with company provided mobile tablets and PC’s as well as with their own devices. Use this as a moment to remind everyone of your IT security policies. People need to be especially alert for phishing attacks. You certainly would not want to have a cyber/data breach on top of everything your company is dealing with.
This is the moment in time for boards to be actively engaged and be a support system/consigliore and thought partner for the CEO, as the CEO finds his or her way through these uncharted waters. Great leadership and great board oversight will add a huge value to companies in times of crisis. This is the opportunity to bring out the best in everyone!