In these challenging times, there are a few suggestions to help boards and CEOs leading companies to help ensure their survival beyond the pandemic.
Shift the Mindset to Crisis Mode
First, the CEO has to shift their mindset from being a visionary peace-time growth-focused CEO to become a wartime, crisis management, operationally-focused CEO who is building at least a twenty-four-month runway for the company to get through the crisis.
Practice Good Corporate Hygiene
The second is a general recommendation for boards in times of crisis: Do not forget your corporate hygiene around cybersecurity policies and training, and around potential legal action. It is easy in a time of crisis to have so much attention focused on operational emergencies that you make yourself vulnerable.
With everyone working in a remote, distributed, virtual world with a “BYOD” (Bring Your Own Device) policy in effect, there is a high likelihood that someone forgot their anti-phishing training, or someone doesn’t have the right firewall, or someone accesses something they shouldn’t be able to access. This is the moment for companies to remember to do some cyber retraining and housekeeping. This is when cybercriminals are at their most enthusiastic – this is their perfect storm.
Vulnerability to lawsuits also rises when corporate hygiene falls by the wayside. In times of crisis, when stock has taken a huge decrease, shareholder lawsuits are an inevitable result. Class action attorneys will be on the lookout for any deep drop in share prices, scrutinizing records, looking for any mistakes made by the company. Maintaining control over corporate messaging and investor relations are critical right now. Also, this is a moment that requires taking meticulous minutes of board meetings; it will be essential to have documentation of how deliberative and thoughtful in decision-making the board has been throughout this time to protect the shareholders.
Use “Radical Candor”
Third, during this time boards benefit by being direct in recognizing their strengths, weaknesses, and lifecycle stage. Companies that are small, slow-growing, and/or legacy companies might need to be honest with themselves that if they are performing in the bottom half of their peer group, they are vulnerable to either an activist campaign or an unsolicited M&A overture. On the other hand, directors of profitable and high-growth companies need to ask each other and management if it’s time to leverage the balance sheet and acquire competitors to build a bigger “moat” between them and their peers. Either way, now is the time to be brutally honest with yourself and with management and use that assessment to inform operational decisions: determine if now is the time to cut (and how deeply), or is now the time to invest and grow?
Make Thoughtful Decisions around Headcount, Products, and Geographies
Fourth, if the company has no choice but to make cuts to its workforce, it is better to do it all at once and let the workforce re-stabilize. Making cuts a little at a time can make the entire workforce anxious, and could have the unintended consequence of making more people leave than you wanted. Be thoughtful in your decisions around headcount, be thorough, and do it all at one time.
Additionally, during the crisis you have an opportunity to do a thorough review of the organization and prune back the under-performing areas – both in terms of individuals, products and services, and business locations. Even a high-growth company could benefit from trimming some fat. This is also a unique opportunity to find strong talent out in the market that otherwise might not have been available.
Look at the total breadth of products or services, because there are always under-performing offerings. Maybe they’re less than 1% of the business, or low margin, or consume a disproportionate amount of money and resources. The same is true for geographies – not all regions are as profitable and valuable for the long term. Take this opportunity to exit under-performing products or services and geographies the same as you would your headcount.
Refresh Your Crisis CEO Succession Plan
Finally, boards might not be sufficiently focused on succession planning in case the CEO should become ill. We saw Boris Johnson go into the ICU, and James Gorman of Morgan Stanley test positive for COVID-19. Every board has the proverbial “name in the drawer,” the envelope no one looks at for if the CEO is in a car accident or the worst happens – but that person is usually a “steady Eddie” who would keep the company performing according to plan under normal working conditions. The question boards need to ask: Is your CEO succession candidate the right person to assume responsibility during this crisis? You need someone who can keep the company focused, connected, cohesive, and moving forward while being a real-time crisis manager, someone with operational experience and a strong EQ who can be successful in this high-urgency time. It might be an opportune time for directors to ask to review who their emergency successor is and if that’s the right person for this time of crisis.
Hopefully these suggestions can help boards find their footing through these difficult times. Boards will face a myriad of challenges in navigating the changes occurring now, as well as those still to come. This unprecedented time of challenge also comes with opportunity. Companies that remain clear-eyed and focused will have the best chance for success.