Being a Director in a Crisis
As President of the Hampshire Chamber of Commerce I was asked to advise on the role of the company director in the challenging crisis of Covid-19.
The role of a company director is a challenging one at the best of times and, as we know all too well, these are not the best of times. The normal day-to-day business of steering an organisation smoothly on a path of growth and prosperity is replaced by an existential threat and the need for cool-headed crisis leadership.
Nothing tests organisational leaders like a crisis. The bizarre events surrounding a crisis profoundly affect the people in an organisation on a practical and an emotional level as well as threatening your organisations survival.
But there are actions a leader can take before, during, and after a crisis to shorten the duration and reduce the impact of these extremely difficult situations. We all know that in a business crisis the control of cash flow becomes vital, somewhat akin to the role of triage in the world of medicine. Cash flow control is the equivalent of stopping the patient bleeding to death. In business, as in the medical world, stopping the bleed is not enough to survive. Both worlds need the patient/ organisation to get better. We need to be able to fight another day and plan for recovery.
At its core, leading the organisation through crisis requires an understanding of the importance of three key skills and characteristics:
- Communication
- Clarity of vision and values
- Caring relationships
As Directors leading the organisation we need to develop, pay attention to, and practise these characteristics and skills. If done well they help us handle the human dimension of a crisis. At the end of the day businesses are as much about people as they are cash flow.
So, how should directors respond to a crisis?
It is important to recognise that the role of the board changes in crisis. The immediate objective is to contain the situation and then try to get back to ‘business as usual’ as soon as or if at all possible.
Crises have different levels of severity and the board’s response is driven by the seriousness it presents to the organisation and stakeholders.
What are the different levels of crisis severity?
In our recent chamber of solutions business panel sessions, a number of participants posed the question ‘How do I know that my organisation is in distress/ crisis?’ Gene Klann in his book Crisis Leadership categorises crisis in 3 levels:
• Level 1 – the organisation will be publicly embarrassed and the delivery of its vision, purpose and values threatened
• Level 2 – the crisis could result in personal injury, some property loss, possible loss of life/livelihood and possible reputational damage
• Level 3 – the crisis will result in loss of livelihood/life, significant property or financial loss, reputational damage and threaten the organisation’s survival
For many of us in the current situation we are facing crisis at category somewhere between level 2 and level 3.
For many of us the current situation has rocked our world. The best laid plans are severely constrained by external forces, other decision-makers and factors beyond our control or prediction. Anxiety and frustration is high. It would be interesting to see how many organisations in their risk and crisis planning actually foresaw a global pandemic as a business existential threat!
It is clearly wise to plan for a crisis, and tools such as the risk register take on new significance. Rather than being the bland document many pay lip service to it can help the board to do ‘what if’ scenario planning.
Every crisis has a pace of its own. As the Covid-19 crisis shows, the pace at which crises take hold can be fast and furious and their range and scale of impact can be wide – the directors of company need to match the tempo and get into battle rhythm to deal with the crisis lifecycle not just the crisis event, ( i.e. what happens when we come out of lockdown?).
Unlike business as usual the board and/or its crisis leaders are in a very uncomfortable position in that we are faced with uncertainty and an information deficit that would normally provide clarity and therefore risk / threat assessment and mitigation.
It is absolutely vital that the board reprioritises what is now urgent for the survival of the business and plans for the post crisis world and its future. This will include taking into account a number of factors including the needs of the business itself, its vision, its purpose, and its strategy. The directors also need to look outward considering its shareholder’s needs, employees, stakeholders, society at large and its own reputation. In normal operation the tyranny of the urgent often stops us doing this. The ironic consequence of the current crisis is that we now have the impetus and time to do this. We need to look at what needs fixing, where we need to focus and what do we need to do to prepare / grow our business for the future. This is tiring and emotionally and physically draining. Most of us are already weary from running to keep still. If this sounds familiar, remember that this is not new. The Vikings very successfully operated with the following mantra:
You can run and die tired or you can stand and fight
This is the choice we as directors have to make.
Leadership in a time of crisis
A few years ago, the consulting firm, Deloitte, tried to characterise the key tasks of crisis leadership. I have listed and expanded these here.
• Decisive leadership– In crisis time is your enemy, you are dealing with uncertainty and you will never have enough data. Mistakes will occur, especially at the early stage of a crisis. Those mistakes are learning opportunities and actually provide information for your next action as a board. We need to lead from the front; falling back on the excuse of insufficient information is no excuse for not moving forward. As our knowledge of the crisis grows, our confidence in our decision choices increases
• Active communication – Prioritise stakeholders and have a practical strategy for communicating clear, understandable messages. In crisis situations honesty and transparency are critical. Disseminate the facts where they are known and where the facts are not known, say so but explain how you are going to get actionable data.
• Continuous assessment and review – The Covid-19 crisis is continually evolving with new information emerging minute-by-minute. This is true in any crisis event (e.g. Grenfell tower, terror attacks and natural disasters). In situations like this it is important to keep up to date with the latest developments, constantly reframe the crisis, be flexible and review the options available. Know when to ditch the plan if it is not working and have the courage to do so.
• Intelligence gathering – drive towards actionable intelligence, information that can be acted upon. Crisis is full of uncertainty and crucial information can come from a wide variety of sources. Cast a wide net but always check the validity and quality of those sources upon which decisions or actions are based.
• Managing the crisis life cycle – remember the aftermath and not just the event – organisations are judged by how they fare afterwards. A recent example would be the Grenfell tower disaster, the primary crisis was the fire but the secondary crisis was sourcing accommodation for displaced people.
A crisis severely tests an organisation’s leadership, decision-making and strategic-thinking abilities and it is the job of the directors and the board to rise to this test.
Get the basics right
In conclusion, dealing with a crisis means falling back on some of the softer characteristics of leadership such as good communication, honesty, integrity, empathy and courage.
The board needs to exercise its ability to absorb and act on high volumes of complex information. There will be many things beyond the control of the organisation so concentrate on controlling the things that are within your power to control.
The three keys to communication in a crisis are The Three Es: Empathy, Ethics and Emotional Intelligence. Understand the position of your stakeholders, ensure the values of the organisation are aligned with the public mood and learn from your mistakes and successes.
In these extraordinary times it is important to remember that the role of the director is to provide leadership and reassurance from the top and help to steer the organisation away from the rocks and into calmer waters.
David Joel, President of the Hampshire Chamber of Commerce
The original article can be found at https://www.hampshirechamber.co.uk/Director%20in%20Crisis.pdf.
Related articles can be found at https://www.hampshirechamber.co.uk/events-and-news/events/coronavirus/.