News and Views
September 24, 2020
Posted in: WATSON Views
These are unusual times for everybody. As the pandemic unfolds and deeply impacts peoples’ lives and the economy, leadership is more important than ever. Organizations need their boards and senior executives to see them through the crisis. But even if an organization has withstood all the tests of the pandemic and economic downturn, further challenges lie beyond the emergency. Organizations will face a new world with different talent needs and new ways to engage people. This article discusses four questions boards need to ask right now to ensure their organizations are ready for the future.
1) Do we have the leadership we need right now?
Leadership strengths show in a crisis, as do weaknesses. Regularly evaluating the performance of the board and CEO is a best practice. Consider reviewing feedback from the most recent evaluations and pay close attention to strengths of both the board and the CEO. Building on strengths is often more impactful in a crisis than working on weaknesses, as it can set an organization apart at a critical time.
Now is a time when some CEOs shine by rising to the occasion. As a board, acknowledge a strong crisis performance and support CEOs who are less natural at stepping up in times of adversity. Rigour in reviewing CEO performance is more important than ever to bring objectivity to the process. Understanding how well a CEO performs can help an organization decide on its efforts to retain the incumbent. It can also lead to the board putting performance deficiencies into perspective, and in some cases, making the difficult decision for a change.
If a change is needed, approach the situation with empathy. A respectful transition can send a powerful message about values and culture across the organization. It is also important to act swiftly to minimize damage. This is only possible with a robust CEO emergency succession plan in place.
It takes time to find a new CEO, and while partnering with an executive search firm can reduce the effort, it is vital to have clarity on interim leadership. Acting as an emergency CEO can also provide an opportunity for internal candidates to develop and demonstrate their abilities, providing more options for the board when selecting a permanent CEO.
2) Do we know what leadership we will need for our new reality?
The pandemic has been called a “reset” and likened to other historic events that precipitated paradigm shifts, like the Great Depression. What is certain is that change will result from the fundamental impact of the present crisis. The current economic downturn affects industries differently, accelerating change. While the traditional hospitality and retail industries suffer, digital services are thriving. Mere trends and tendencies in a regular economy have suddenly become a reality.
In this context, organizations face new challenges with their talent. Existing leadership will need to evolve skills and capabilities. This is true for all levels:
- The board needs to understand and embrace the new reality early and fast to fulfill its strategic role, setting the direction of the organization and making fundamental decisions for the long term.
- The CEO’s success profile is evolving to meet new needs during the crisis, such as an increased need for change leadership, empathic communication, visioning, etc. The board must carefully consider and communicate their expectations of the CEO.
- Along with organizational changes, the roles of other executives may also evolve (for example, when operational models change). The board needs to provide oversight and strategic direction in this area.
The scenarios and implications are manifold; for example:
- Crises can lead to CEO and leadership burnout, leaving the organization vulnerable once it manages to arrive at a new normal.
- Stakeholders may want to see a fresh face to turn a page, even if the current CEO has been performing well during the crisis.
- A new environment can create an opportunity for activism, building on momentum from difficult times. Employees and shareholders may press for their goals with a new legitimacy, such as flexible work arrangements, social responsibility in the aftermath of a crisis that was nobody’s fault, etc.
As a board, ensure that you keep a clear view of future leadership requirements and manage the development of existing leaders, including board leaders.
3) Are we thinking strategically about the talent, culture, and opportunities of the future?
Similar to leadership evolving, the talent of the whole organization and its culture will undergo change, whether intentional or not. Be deliberate as a board about your talent and culture oversight to ensure the organization realizes its opportunities.
Any strategy for talent and culture must be rooted in the purpose of the organization. Both the board and managements are guardians of this purpose, with the board likely having richer historical context than the CEO, as board tenures tend to be longer. Reflecting on purpose can be very valuable and add meaning when making decisions. This is as long as the purpose is genuine, in contrast to purpose statements that have been written for stakeholders or to attract a certain group of talent. Intentionally consider the organization’s purpose together with the CEO and align on what it means.
One of the changes organizations will face is a dramatic shift in the economic landscape. Many industries have laid off large portions of their workforce or at least temporarily closed operations. This slowdown offers an opportunity to drive efficiency, productivity, and advancement towards strategic goals. Choose this moment to consider the makeup of talent the organization requires, the number of roles, and the types of roles, rather than just making plans to go back to the pre-crisis status quo. It can make a vital difference to the future success of the organization to take a close look at operating models. This can mean considering methodologies like Agile or design thinking, new processes, or new organizational structures. Boards can play an important role in driving the urgency of re-engineering while there is a burning platform.
To emerge from the crisis stronger than before, organizations need to consider their ability to develop. This is something that you can build deliberately. Boards can guide the organizational focus towards understanding core competencies, critical skills, and culture at present and as required for the future. There is also an opportunity to look at the organizational structure to ensure that it has built-in resilience, such as a good range of succession positions, a reasonable number of direct reports to leadership roles, scalability to allow for growth and shrinkage, etc.
It is the board’s responsibility to oversee and guide organizational culture and this has an important impact on the organization’s ability to attract and retain talent. As talent needs may be different in the future, organizations must re-think their cultures. This means fundamental change, to the point of re-inventing an organization, particularly when also introducing new operating models, organizational structures, or strategic goals.
Hey WATSON, If we want to retain and attract great talent, what is one big thing to look out for?
An increasing part of the workforce makes corporate culture a key factor in their employment choices. Culture is gaining importance as a major distinguishing factor for organizations. The difficulty for organizations is to understand their own true culture and to shape it with intention. Too often, organizations display culture statements that do not match the reality employees experience. This can lead to frustration, low engagement, and detrimental turnover. Investing in a strong culture can yield positive results in different areas, such as better leadership, accessible development opportunities, a solid succession pipeline, or higher productivity due to genuine employee engagement. Boards can set the tone and start by performing a culture audit and analysing culture with a talent lens.
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4) Are our talent practices stress tested and crisis ready?
The pandemic has caused organizations to reconsider their emergency readiness. It is best practice to have emergency plans and governance structures with contingencies to be prepared for unforeseen events that either impact the organization or the economy at large. Make sure your organization pays attention to the following:
- Create and maintain emergency governance provisions and structures at the board level and beyond, for executive management and any other critical parts of the organization (e.g., a reduced quorum under clearly defined condition).
- Ensure depth and quality of talent at all organizational levels, up to the board – this can mean a thorough understanding of talent requirements, excellence in selection practices, proactive talent development, etc.
- Apply rigour and agility to CEO succession practices.
- Exercise meaningful board oversight of human capital
- Learn from any cracks that may have appeared during the crisis and strengthen foundations, such as executive compensation, workplace policies, IT security, etc.
- Build on new-found strengths by leveraging learning from flexible work arrangements, virtual capabilities, and community building in a tough environment.
Taking the Next Step
Continuously learning from organizational experience and having a clear vision can make a vital difference over the long-term. Take action by asking the right questions and following through to strengthen your organization to be ready for the future.
Draw on our four questions as a starting point to:
- Assess current leadership
- Explore new leadership needs in the context of your business
- Consider talent and culture strategy
- Consider crisis readiness
To take the next step as a board, put these items on the agenda. Engage experts for help if you believe at any point that it adds value given your organization’s circumstances. Make your organization thrive with talent at its full potential.