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“In a crisis, when the stakes are high and scrutiny is intense, the board has a unique role. Stepping in may be uncomfortable, but stepping aside is not an option.”
– Deloitte, “Stepping in: The board’s role in crisis management.”
Crisis management is a key consideration for every board. However, it’s not always easy to define the board’s role during a crisis or to what extent they should be involved in organizational affairs.
So, in a nutshell, what is the board’s role in crisis management, including setting plans or the strategy? And what kind of topics should the board be discussing in order to best support their organization during a crisis? In this post, we’ll outline what the board’s role should be and provide you with some ideas to help get your board discussions rolling.
During a crisis such as a PR crisis, it’s critical for boards to find the balance between action and oversight. Resist the urge to jump in and hinder the management’s teams ability to get their jobs done, and instead become the critical support that all CEOs need when working through difficult situations. Even if the board’s support must be given virtually, your remote leadership can still play an important role in managing a crisis.
One of the best crisis management examples from a board taking swift and transparent action is Johnson & Johnson’s Tylenol Crisis. In 1982, several people died after consuming cyanide-laced Tylenol capsules. Johnson & Johnson’s board of directors immediately recalled 31 million bottles of Tylenol and introduced tamper-proof packaging. This prompt action saved the company’s reputation and set a new standard for product safety.
In addition to its above roles, boards should be actively involved in developing crisis communication and crisis response plans to best support their organization. They should also be evaluating their crisis management performance throughout the entire process. Let’s dive into each of those topics in further detail.
A crisis communication plan is always two-sided, since it has both an external and internal component. Make sure both plans are aligned so that messaging is consistent. When helping to build your crisis communication or management plan, remember that it’s always best for organizations to communicate in one unified voice. To achieve that, the management team needs to determine who will be the key spokesperson to communicate both externally and internally.
As your board helps to develop these plans, designate relevant response teams, involve different board committees and take advantage of board portal software to enable efficient communication and collaboration between directors.
External communication plans are intended for customers, vendors, partners, donors, and the media. Make sure that you send messages of reassurance and unwavering commitment to any of your key stakeholders, and most especially to customers.
When developing your external communication plan, your messaging should focus on actions taken. It’s also helpful to share the positive actions that your company has accomplished amidst the crisis. If you can share any “feel good” stories on social media, for example, it’s a great time to do it!
Internal communication plans are just as critically important as external ones, since you want employees to stay energized and focused during these uncertain times. Establish an internal communication strategy to ensure that your organization is communicating regularly with employees about payroll, the organization’s financial situation, changes to benefits, how they can help, and any other relevant information.
A recent study by the Institute for Public Relations indicated that nearly half of the communication executives and senior leaders surveyed identified CEOs as the primary communicator to employees about the COVID-19 crisis. Crises like these are an excellent way for CEOs to demonstrate the human side of leadership to employees by being transparent, authentic, empathetic, and optimistic.
However, the CEO doesn’t have to be alone in communicating to employees, and in fact they shouldn’t be. It’s a great idea to encourage middle managers to become secondary crisis communicators to employees, as they likely already have established relationships with their teams. After ensuring that they are regularly provided with sufficient information, middle managers can become important resources for answering employee questions and providing updates on an as-needed basis.
Boards are responsible for ensuring that their organization has a practical crisis response plan and a sound crisis management strategy that includes considerations before, during, and after an event. When responding to a crisis, boards should actively oversee that plan to ensure its success.
Crisis response plans are complex and may have many components. Let’s explore a few of those.
In partnership with the CEO and executive team, evaluate the biggest risks that your organization is currently facing. Research how your government can help organizations like yours during a crisis, and apply for any extra funding that’s available to you.
When evaluating your organizational risks, start by monitoring cash flow, capital expenses, and collections for liquidity risks. You may want to reduce or suspend dividend policies or downgrade or withdraw previous earnings guidance due to the unpredictability of a crisis. Consider additions and revisions to risk factor disclosures, and review your directors’ and insurance policy language that may be impacted by financial distress or potential restructuring.
In addition, with so many board members and employees working remotely, remind everyone of your IT security policies. Ensure that all board members are using secure board management software to communicate, collaborate, and store board materials.
The board can play an important part in assessing operations during a crisis. One exercise you can do is to ask your management team to present three different crisis scenarios to the board:
For each, consider the financial implications – ask yourselves questions such as, will you be able to continue to pay dividends, by how much will you miss earnings in each quarter, and how will you message your earnings forecast? Assess your organization’s ability to prepare for these different outcomes and develop plans of action to deal with each.
Often, exercises such as these will expose other issues. This may be a good time to review the productivity of your products, services, and geographies. The management team may also be faced with making decisions regarding layoffs or pay cuts. The board can help by making suggestions and brainstorming creative ways of preventing any difficult decisions, such as by developing new temporary compensation structures in lieu of layoffs.
While working through this exercise, study your peers to see what they’ve done and how successful their efforts have been thus far.
Sometimes, CEO vacancies are planned, but they can also be unplanned. If you don’t already have a CEO succession plan in place, or if it’s not as complete as it could be, consider making it a priority. By the time a succession plan is needed, it will be too late to start building one.
A smooth transition from one CEO to another is a critical moment for an organization, and is essential to maintain the confidence of investors, business partners, customers, and employees. As we move forward into the uncertain future, ongoing succession planning can help the board to be better informed and will align the development of the senior management team with the strategic needs of the company.
Beyond the CEO, consider building mini succession plans for other key members of the management team or board members in the event that they become unable to complete their duties.
During any crisis, it’s important to continue to look towards the future. No organization wants to deal with a crisis, but sometimes, these situations can enable organizational transformation for the better. Your “new normal” may look very different in terms of governance, strategy, and regulation, but it can often expose new competitive advantages that were not available before. Boards should be ready to support, direct, and be part of this change.
The board should also be helping the CEO to determine what opportunities exist to transform and modernize operations, and they can also recommend new strategic investments that could help the organization succeed post crisis. Be on the lookout for restructuring within your industry too, as mergers and acquisitions could have future implications for many organizations.
As you work through the crisis, consider the success of your organization’s response. Are your plans working? Is information flowing well, ensuring adequate and timely communication with stakeholders? Even if things aren’t going as well as they could, consider why things went wrong and what could be done to improve in the future.
Every crisis presents an opportunity for growth and improvement. Take note of your successes and failures as they happen, discuss them with the board, and create a crisis management “playbook” that will help your organization in the future.
Board portal software can support boards of directors in their crisis management efforts by providing a secure platform for communication, centralizing information, enabling quick decision-making, providing remote access, and ensuring the security of information.
Since 2003, we’ve been helping organizations across every industry run secure board meetings and connect remote leadership teams, even during challenging times such as Covid-19 or during natural disasters such as floods.
With advanced security, complete features, and standout time savings tools like our automated agenda builder, meeting minute builder and comprehensive reports – see why hundreds of admins and board members choose Aprio board portal software. We stand out against our competitors for providing a user-friendly, secure board portal with unmatched expert service.
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