Three crisis management topics every board should discuss
This article is reprinted with permission from the original.
“In a crisis, when the stakes are high and scrutiny is intense, the board has a unique role. Stepping in may be uncomfortable, but stepping aside is not an option.”
– Deloitte, “Stepping in: The board’s role in crisis management”
Crisis management is a key consideration for every board. However, it’s not always easy to define the board’s role during a crisis or to what extent they should be involved in organizational affairs.
So, in a nutshell, what is the board’s role in crisis management, including setting plans or the strategy? And what kind of topics should the board be discussing to best support the organization during a crisis? In this post, we’ll outline what the board’s role should be and provide you with some ideas to help get your board discussions rolling.
A Balance Between Action and Oversight
During a crisis such as a PR crisis, boards must find the balance between action and oversight. Resist the urge to jump in and hinder the management team’s ability to get their jobs done, and instead become the critical support that all CEOs need when working through difficult situations. Even if the board’s support must be given virtually, your remote leadership can still play an important role in managing a crisis.
One of the best crisis management examples from a board taking swift and transparent action is Johnson & Johnson’s Tylenol crisis. In 1982, several people died after consuming cyanide-laced Tylenol capsules. Johnson & Johnson’s board of directors immediately recalled 31 million bottles of Tylenol and introduced tamper-proof packaging. This prompt action saved the company’s reputation and set a new standard for product safety.
In addition to the above roles, boards should be actively involved in developing crisis communication and crisis response plans to best support their organization. They should also be evaluating their crisis management performance throughout the entire process. Let’s dive into each of those topics in further detail.
Topic #1: Developing a Crisis Communication Plan
A crisis communication plan is always two-sided since it has both an internal and an external component. Make sure both plans are aligned so that messaging is consistent. When helping to build your crisis communication or management plan, remember that it’s always best for organizations to communicate in one unified voice. To achieve that, the management team needs to determine who will be the key spokesperson to communicate both externally and internally.
As your board helps to develop these plans, designate relevant response teams, involve different board committees and take advantage of board portal software to enable efficient communication and collaboration among directors.
External communication plan. External communication plans are intended for customers, vendors, partners, donors and the media. Make sure that you send messages of reassurance and unwavering commitment to any of your key stakeholders and most especially to members.
When developing your external communication plan, your messaging should focus on actions taken. It’s also helpful to share the positive actions your company has taken amidst the crisis. If you can share any “feel good” stories on social media, for example, it’s a great time to do it!
Internal communication plan. Internal communication plans are just as critically important as external ones since you want employees to stay energized and focused during these uncertain times. Establish an internal communication strategy to ensure that your organization is communicating regularly with employees about payroll, the organization’s financial situation, changes to benefits, how they can help and any other relevant information.
A recent study by the Institute for Public Relations indicated that almost half of the communication executives and senior leaders surveyed identified CEOs as the primary communicator to employees about the COVID-19 crisis. Crises like these are an excellent way for CEOs to demonstrate the human side of leadership to employees by being transparent, authentic, empathetic and optimistic.
However, the CEO doesn’t have to be alone in communicating with employees and in fact, they shouldn’t be. It’s a great idea to encourage middle managers to become secondary crisis communicators to employees, as they likely already have established relationships with their teams. After they have been provided sufficient information, middle managers can become important resources for answering employee questions and providing updates on an as-needed basis.
Topic #2: Developing a Crisis Response Plan
Boards are responsible for ensuring that their organization has a practical crisis response plan and a sound crisis management strategy that includes considerations before, during and after an event. When responding to a crisis, boards should actively oversee that plan to ensure its success.
Crisis response plans are complex and may have many components. Let’s explore a few of those.
Compliance and risk mitigation oversight. In partnership with the CEO and executive team, evaluate the biggest risks that your organization is currently facing. Research how your government helps organizations like yours during a crisis and apply for any extra funding that’s available to you.
When evaluating your organizational risks, start by monitoring cash flow, capital expenses and collections for liquidity risks. You may want to change some practices due to the unpredictability of a crisis. Review your directors and officers insurance policy language that may be impacted by financial distress or restructuring.
In addition, with so many board members and employees working remotely, remind everyone of your IT security policies. Ensure that all board members are using secure board management software to communicate, collaborate and store board materials.
Assessing operations. The board can play an important part in assessing operations during a crisis. One exercise you can do is to ask your management team to present three different crisis scenarios to the board:
- Plan A: representing a neutral crisis impact
- Plan B: representing a significant crisis impact
- Plan C: representing the worst-case scenario
For each, consider the financial implications. Ask yourselves whether you will be able to continue to pay dividends and by how much will you miss your targets in each quarter. Assess your organization’s ability to prepare for these different outcomes and develop plans of action to deal with each.
Often, such exercises will expose other issues. This may be a good time to review the productivity of your products, services and geographies.
While working through this exercise, study your peers to see what they’ve done and how successful their efforts have been thus far.
Succession planning. Sometimes, CEO vacancies are planned, but they can also be unplanned. If you don’t already have a CEO succession plan in place, or if it’s not as complete as it could be, consider making it a priority. By the time a succession plan is needed, it will be too late to start building one.
A smooth transition from one CEO to another is a critical moment for an organization, essential to maintain the confidence of investors, business partners, customers, and employees. As we move forward into the uncertain future, ongoing succession planning can help the board to be better informed and will align the development of the senior management team with the strategic needs of the company.
Beyond the CEO, consider building mini succession plans for other key members of the management team or board members in case they become unable to complete their duties.
Looking forward to new opportunities. During any crisis, it’s important to continue to look to the future. No organization wants to deal with a crisis, but sometimes, these situations can enable organizational transformation for the better. Your “new normal” may look very different in terms of governance, strategy and regulation, but it can often expose new competitive advantages that were not available before. Boards should be ready to support, direct and be part of this change.
The board should also be helping the CEO to determine what opportunities exist to transform and modernize operations, and they can also recommend new strategic investments that could help the organization succeed post-crisis. Be on the lookout for restructuring in your industry too, as mergers and acquisitions could have future implications for many organizations.
Topic #3: Evaluate Your Board's Crisis Management Performance
As you work through the crisis, consider the success of your organization’s response. Are your plans working? Is information flowing well, ensuring adequate and timely communication with stakeholders? Even if things aren’t going as well as they could, consider why things went wrong and what could be done to improve in the future.
Every crisis presents an opportunity for growth and improvement. Take note of your successes and failures as they happen, discuss them with the board, and create a crisis management playbook that will help your organization in the future.
Ian Warner is president/CEO of Aprio, a board portal company headquartered in Vancouver, British Columbia, that helps credit unions big and small to achieve transparent communication, efficient decisions and well-run board meetings. Before joining Aprio, Ian was COO of Vancity, Canada’s largest credit union, and CEO of Vancity’s subsidiary Citizens Bank of Canada for four years.
Apply It to Your Boardroom
1. What is the balance your board aims to strike between action and oversight during a crisis?
2. What elements does your credit union need as part of its crisis communications plan? Its crisis response plan?
3. How would your board assess its effectiveness after a crisis?