During May and June of this year, a survey conducted by the Ward Howell Talent Equity Institute was conducted among 266 directors, chairpersons and executives in 23 countries, mostly in Europe. The survey revealed that the pandemic has consolidated some existing best practices and also given rise to several innovative approaches.
The results led to the creation of a model called "3PSC" by researchers. It defines a total of five factors critical to leadership effectiveness.
Purpose
Regularly formulate, discuss and modify the purpose of leadership. This is a basic process that unifies directors, focuses their collective attention, maintains the position of the board of directors in the corporate governance system, and ultimately leads to the right decisions. Survey participants whose boards regularly discussed or adjusted their purpose said they had made better decisions.
People
It was revealed that many company executives lack collective competence. Few had knowledge of epidemiology or health and safety. Company rules and policies prevented them from quickly selecting new directors to supplement the missing skills.
One remedy is to assess the collective skills and knowledge of directors regularly - at least once a year. They should reflect the purpose of the board of directors as well as the company's strategy, its exposure to risks and other elements of the context in which it operates. The board should then propose a plan to address these gaps.
The second solution comes from external sources. Make a list of institutions and individual experts, periodicals and online resources and, if necessary, set aside a "knowledge budget" to cover this external expertise.
Process
Virtual meetings have proven to be a functional tool for urgent decisions, information exchange, and even emotional support. But they are less effective for in-depth discussions, intensive exchanges of information, personal feedback to the CEO, and confidence building.
Technology presents additional opportunities to increase the efficiency of business management. The most promising ways include: specialised software to support the entire board process (not just meetings), access to real-time operational and financial data to reduce management information, and regular industry updates to keep board members in the picture.
Stakeholder relations
The pandemic has emphasised the crucial importance of productive relations between the Board of Directors and the CEO. The message boards surveyed by the respondents increased the intensity of the interactions. They supported their CEOs by listening carefully, advising, mentoring, and approving the necessary investments and sales.
The most effective corporate boards also challenged the CEO and management by questioning their assumptions, asking questions, setting short-term goals and taking a long-term perspective. They treated executives fairly, even though they had to make some tough decisions, such as reducing salaries.
Some interesting examples of cooperation between administrations that have emerged in recent months are worth emulating. Groups of board and management members have been formed to accelerate the company's health, safety and health expertise. Audit committees actively advised CFOs and finance teams on cash flow management and other issues. Remuneration committees, in turn, worked with HR managers to adjust remuneration packages and manage employees and so on.
Chairperson
Board leaders were able to learn several lessons from the pandemic. One is that good decisions can be made quickly when all directors are engaged and ready. It is also the responsibility of the chair to ensure directors keep up with the latest trends and developments. They could do so in cooperation with nomination committees and shareholders to ensure the board has the necessary skill mix or can access knowledge as needed.
As each board is unique, the authors recommend all presidents hold board meetings to discuss their work and the lessons learned in recent months. The meeting should also evaluate the performance of the CEO and senior management. Use the 3PSC structure to organise the discussion as follows:
- Purpose: Did our purpose serve to navigate the company in difficult times? Do we have to fine-tune it?
- People: What competencies have helped us cope with the crisis? What competencies were lacking? How do we make sure we get them? Do we need to change anything in our succession planning?
- Process: What worked well for us? What did not? What do we need to add or remove from the forum agenda? How can we use technology to streamline advice?
- Stakeholder relations:
- CEO and management: How effective was the framework we created for the CEO and management team? Have we managed to maintain a healthy balance between challenge and support? What should we do differently in the future?
- Shareholders: Have we listened to our shareholders? Did we communicate effectively with everyone? What should we change in our relations with shareholders
- Other stakeholders: What important stakeholders do we have? Did we work with them effectively? What can we improve based on the pandemic experience? What worked well? What was missing? How can directors help the chair lead the board effectively?
- Chairperson: How did the chair lead the board of crises? What worked well? What was missing? How can directors help the chair lead the board effectively?
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