ITL #526 The year of the polycrisis: bad habits boards need to break4 months ago
How can businesses steer clear of crisis? A white paper offers some sage advice. By Kate Alexander.
2023 is fast becoming the year of the polycrisis. Many business commentators agree, and a white paper gathering the views and advice of a group of global business leaders, PR and communications experts is highlighting the top 10 habits boards need to change to ride out the turbulence.
Titled ‘2023: The Perfect Storm?’ and subtitled ‘23 Habits your Board Should Change in the Era of Polycrisis’, many of the key findings of the white paper can be linked to active issues and crises boards are publicly facing now or have dealt with in prominent ways in the recent past.
Here are 10 of the common bad habits of boards (and sometimes senior executives and founders) with recent real-life examples of how these mistakes have tripped up companies or brands when misfortune has struck:
- Not having a (disaster) plan in place. What happens when a crisis hits, and the way in which it is handled is perceived by the public, inevitably comes down to how well you are prepared. There are countless examples of something going wrong and being badly handled due to a lack of preparation before the event or bad execution afterwards. From consumer product contamination to power lines burning out because of overload – the actions taken and how they are communicated can make or break public perception for years to come.
- Acting without sober preparation and planning. Issues and crises can be anticipated, even if the actual nature or detail of a crisis is in most cases a surprise. When a red flag is raised, the board should focus on understanding the flag’s root cause. Contextual knowledge is critical to managing any tricky situation, and a patient mindset with a clear action plan agreed with – and committed to – by management will help avoid more heat than light!
Example: Silicon Valley Bank
If you are on the board of a bank, what’s the worst disaster you can think of? Probably a bank run – and it’s clear SVB was unprepared for a wave of customers all wanting to get their deposits out at once. The catastrophic bank run that caused SVB’s collapse was in fact triggered by a convoluted, disastrously timed media release. In the words of TechCrunch, SVB “utterly flubbed some important messaging at the very worst time imaginable.” The SVB press release came soon after the announcement by the crypto bank Silverdale that it was winding down its operations – but it apparently did not occur to SVB’s board or executive that by announcing its plans to raise money to shore up its business, to a client base weighted towards start-ups and venture capital firms, might lead to panic. It looked to be a classic case of acting without sober preparation that factored in the current zeitgeist and relevant market news. Within days the bank was no longer, and the US federal government had intervened to shore up customer deposits and stem wider financial fallout.
- Retracting into the boardroom bubble. People who are affected by the crisis want to hear from the business leaders about the situation and the prospects. Withdrawal or silence will cause alarm.
- Lack of emphasis on communication or the avoidance of difficult conversations. Board members should have robust lines of communication with each other and with shareholders, management, and external parties. Topics arising in board meetings and in business can be contentious and being able to navigate these discussions productively is critical for success.
- Letting ego into the boardroom. Being a director is not about the amount you hold and earn from being a director but the reputation you have for adding considerable value to the business in good times and bad.
Example two: Simon Henry and DGL
In this recent New Zealand case which made headlines, the misfortune was of the CEO’s own making and was entirely avoidable. The issue involved a New Zealand-based CEO and founder, Simon Henry, and the board of his high-value company DGL Group, a chemical manufacturing and distribution company. Henry and the board were castigated publicly after Henry made offensive and derogatory remarks about a female entrepreneur and her brand in a media interview and it took days for the board to condemn his comments, even as the Race Relations Commissioner and the Prime Minister, among others, denounced the remarks and a wealth management CEO blacklisted DGL shares.
Analysis of the matter found Henry, as the company’s majority shareholder, had an outsize influence on the board, whose slowness to respond to their CEO-made crisis likely contributed to the company’s subsequent tanked share price and share market delisting. Whether the CEO’s ego was a factor in the making of the crisis is for onlookers to decide – but by any measure, for the leader of a listed company to comment disparagingly in media about another company’s prospectus, as Henry did, is highly unusual and would prompt a well-run board to establish firm boundaries for the CEO’s media engagement henceforth.
- Failing to meet often enough – or at all. The board must meet regularly to discuss and understand what is happening in the business and react and plan appropriately.
- Reversing strategy too often (flip flopping) or not adhering to the strategy that has been set in the first place.
- Not understanding the key stakeholders of the organisation, both internal and external. Fundamentally these include staff and customers but extend to partners and suppliers, the media, the general public, and investors or shareholders.
- Failing to strike the right balance between empathy and frenzy. An emotionless CEO can be as harmful as one who loses their temper and/or expresses panic.
- Trying to declare ‘crisis over’ too early. Getting back into business-as-usual mode as soon as possible might not work for all those affected by the crisis.
For more on these 10 habits and 13 other habits boards should change in the era of polycrisis, along with solutions directors can start applying now, download the white paper here.
Kate Alexander, Corporate & Financial Communications, Alexander PR.mail the author
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