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Governance

Operating in the midst of uncertainty

The most common reaction I’ve had over the last few weeks when management have been asked to come up with a plan is: What’s the use? Who knows how things will play out?

In fact, taking control of the situation in the midst of uncertainty is possible.

The answer is to put a plan together for the worst case, best case and most-likely scenarios.

For example, here in NZ, the main uncertainty factors were:

  • Movement of people
  • Movement of freight
  • Gatherings of people within New Zealand
  • What is classified as an essential service
  • Whether an effective vaccine or treatment can be developed.

A best case scenario back in mid-March 2020 might look like:

L4 Lockdown might go for 8 weeks.  L1 after 16 weeks. 18 months to develop an effective vaccine and /or effective treatment. International travel will require mandatory two week quarantine or self-isolation at each border for 18 months.    Supply chains will be delayed for 8 weeks as factories closed all over the world.

A worst case scenario in mid-March 2020 might look like:

L4 Lockdown for 16 weeks.  L1 after 32 weeks.  An effective vaccine and/or treatment is never developed.  International travel will require mandatory two week quarantine or self-isolation at each border for 36 months.  International movement of goods not disrupted. Supply chains will be delayed by 16 weeks as factories all over the world closed.

Most likely case scenario back in mid-March 2020 might look like:  

L4 Lockdown for 10 weeks.  L1 after 20 weeks.  An effective vaccine and/or treatment is developed 36 months.  International travel will require mandatory two week quarantine or self-isolation on arrival in any country for 24 months.  International movement of goods not disrupted. Supply chains will be delayed by 12 weeks as factories all over the world closed.

The impact of each of these scenarios will differ depending on the nature of your business, organisation and industry.  

Post-lockdown what are the key factors that will affect your business?

International travel restrictions will continue to impact any business that relies on international travellers.  Given the above scenarios, some businesses are going to have to either find alternative revenues, reduce overheads and perhaps even put their businesses into hibernation, and hope to resurrect them again as international travel resumes. 

Businesses starved of revenue will struggle to pay their rent, staff and suppliers.  Some businesses will be caught short at both ends, with suppliers demanding payment and customers being slow to pay or even defaulting on their payments.  

It can all seem overwhelming.

We can help with the heavy lifting:

  • Putting a plan together
  • Negotiating with landlords, suppliers and customers
  • Tracking cash flow
  • Arranging finance

Government assistance can be provided to fund these services.

The faster you have a sense of what to do, the quicker the uncertainty goes away.

 

 

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The Board-CEO Relationship: Balancing roles

The other day, I attended a board meeting, where the deputy chair said, our role is to support the CEO, and over half the board members smiled and enthusiastically nodded.

Yes, amongst other things, I thought.  

I was heartened to hear later that the chair, had had a conversation with the deputy outside of the meeting to correct him.  

The board also has to

  • Keep the CEO and his management accountable,
  • Ensure that the company has a clear and well articulated Just Cause, Strategy and Annual plan, 
  • track whether the organisation is heading toward meeting those goals; and 
  • Ensure that the the plan adapts if new information comes to hand that necessitates a change in direction.

The Board’s relationship with the CEO is a complex one with multiple roles.  Some of these roles seem contradictory.  On the one hand, the Board needs to maintain the CEO’s morale while on the other hand, it has to be firm if it believes the CEO needs guidance.  There is a difference between a cheerleader and being supportive.  

Boards can’t become just another component of CEOs’ fanbases, nor can they be hunter-critics, forever having CEOs watch their backs. 

The board room environment should always remain respectful but challenging.  Raising a question should not be treated as a threat.  Nor should a question be used as a tool to undermine management.  This is where honesty and integrity are important.

Without these, trust can’t be formed and discussions become a dysfunctional Hunger Game.  

The basis of a good relationship between Boards and CEOs must also be founded on role clarity.  Boards must know what their roles, their duties and responsibilities should be.  CEOs must understand their roles too.  And it isn’t to “run the board” and manipulate directors to expedite a desired decision.  

Allow a business decision to stand or fall on its merits.  If a decision needs manipulation to achieve it, was the case strong enough to bring it to the board in the first place?

If the Board doesn’t know its role, duties and responsibilities then training is required.  This happens more often then you think, particularly amongst School Boards, volunteer organisations or organisations with elected public officials.  

For schools, the NZ School Trustees Association provides plenty of resources and training opportunities for board members.  The NZ Institute of Directors provides an equivalent service for all sectors not just education.  Having used both resources, its remarkable how much the two sets of material resonate with one another.  Probably over 90%.

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Startups should not be charities

Often a start-up takes off with a whoosh, with great enthusiasm, an idea is shopped and everyone wishes the new team well.

The goodwill often results in generous gifts of time, expertise and materiel. Advisory boards, and independent directors provide their services for free or next to nothing.

On the one hand, the generosity and support is well-meant and heartwarming.

But on the other hand, it can breed a culture of entitlement and a lack of professionalism.

Directors show up because they are doing the organisation a favour, and people promise to do things but they don’t or their late because, it was a favour.

Start-ups usually don’t succeed overnight, and freebies offered initially in the hope of gaining real paying customers soon becomes tiresome when the initial glow fades and the wait for a hoped-for paying customer stretches from days, into weeks, and into months.

Start-ups need to get out of the charity-mode as quickly as possible and start paying wages and fees like a real business.

That means do what it takes to get the funding so that the start-up can conduct its activities as a business. Build your team of advisors and employees. Pay them. Get that first customer. Work out how to win more customers and scale the business. Reward for success.

This is vital to building a “we mean business” culture in your organisation, at all levels, within employees and also at the board table.

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Your greatest enemy when you think you’re on top | Kan & Company

2 minutes

When an organisation is leading its industry, market share, product ratings and customer service ratings and has done so for a number of years, these facts can have a detrimental effect on the organisation’s culture and thinking.

The organisation’s appetite for risk falls because when you’re on top of the mountain, every direction looks downhill.

Consequently, innovation is stifled and management happily book the sales and resultant profits without realising that the wonderful culture that built the strong competitive position is being eroded day by day.

No one sets out to become complacent. It creeps up on you.

Over time, the drive for performance is no longer fuelled by excitement. Routine, boredom and self-interest set in. Anecdotes of office squabbles, workplace accidents, rework and burnout increase.

The answer lies in leadership seeking to reinvigorate the culture, so that everyone feels safe, that they belong and that they matter.

But convincing everyone that rejuvenating the organization’s culture will not be easy. Everything is going great. We’re doing well. Sales are all-time highs, profits are good. Everyone acknowledges that we’re the best. Why change something that isn’t broken?

This is the challenge for leaders, to convince those around them of a risk or danger that is yet to happen. It is the responsibility of leaders to be looking ahead and what you do today will bring about the future you seek.

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Seven surprises for new CEOs | Harvard Business Review

I found this article resonated with me a lot.  A keeper.

23 minutes

Bearing full responsibility for a company’s success or failure, but being unable to control most of what will determine it. Having more authority than anyone else in the organization, but being unable to wield it without unhappy consequences. Sound like a tough job? It is—ask a CEO. Surprised by the description? So are CEOs who are new to the role. Just when an executive feels he has reached the pinnacle of his career, capturing the coveted goal for which he has so long been striving, he begins to realize that the CEO’s job is different and more complicated than he imagined.

Some of the surprises for new CEOs arise from time and knowledge limitations—there is so much to do in complex new areas, with imperfect information and never enough time. Others stem from unexpected and unfamiliar new roles and altered professional relationships. Still others crop up because of the paradox that the more power you have, the harder it is to use. While several of the challenges may appear familiar, we have discovered that nothing in a leader’s background, even running a large business within his company, fully prepares him to be CEO.

Through our work with new chief executives of major companies, we have found seven surprises to be the most common. (See the sidebar “Learning the Ropes.”) How well and how quickly new CEOs understand, accept, and confront them will have a lot to do with the executives’ eventual success or failure. The seven surprises highlight realities about the nature of leadership that are important not just for CEOs but for executives at any level and in any size organization.

Read more.

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