May 28, 2020
If the last few months have been about keeping the business going, the weeks and months ahead, for most companies and their boards, will be about understanding—and preparing for—where the company is heading.
To help boards focus their oversight of the company’s immediate response to COVID-19, in late March we published Navigating the pandemic: A board lens, highlighting five critical areas:
In overseeing the early stages of the COVID-19 response, the directors we’ve spoken with have emphasized the importance of stabilizing operations, echoing the four priorities emphasized by the CEO of a major consumer business when COVID-19 hit: “Look after the people, look after supply, look after demand, look after cash.”1
They’re also applying that adage to their oversight: Look after the board’s operations. Understanding the scope of COVID-19, its impact on the company, and management’s response plan has required boards to bring a new level of intensity to their oversight and to rethink how they should exercise their oversight—e.g., the frequency of communications with the CEO and management, use of virtual meetings, need for a special committee, role of the lead director, etc. “Just as the company had to adjust quickly to changing conditions, so did our board,” noted one lead director. This boardroom focus, intensity, and calibration have been vital to helping companies move from responding to the immediate fallout of COVID-19 to resilience and stabilizing operations.
It’s clear, however, that preparing for a recovery and weighing the longer-term implications of COVID-19—for strategy and risk, the operating and business model, and the future of the company—are quickly moving front and center in boardroom discussions. What is our plan for recovery? And what will the “new reality” or the emerging business environment look like? How long will we be in change-and-pivot mode? As one director observed, “Our management team and board have become the equivalent of entrepreneurs.”
As Mark W. Johnson and Josh Suskewicz wrote in a recent Harvard Business Review article:2
Inflections that you might have had five years to anticipate in a normal environment might unfold in a matter of weeks or months. Trend lines, such as those towards telecommuting, telemedicine, online shopping, and digital media consumption, are suddenly much steeper. Global supply chains are broken. Healthcare delivery is likely to change in ways that will make the last decade’s adoption of Obamacare look trivial. Many of your B2B customers may be shut down; millions of consumers are out of work. Some of the fundamental assumptions underlying your current business model may have been (or may soon be) upended. In short, the business environment that you land in when the pandemic comes to an end—which could be one to two years from now—may be very different from what it was before the crisis began. You need to begin preparing for it now.
That said, COVID-19 poses very different challenges for different companies and sectors, and the recovery will not happen uniformly across all sectors. To illustrate, we find it helpful to consider four recovery scenarios at the company/sector level:
Because the impact of COVID-19 and path to recovery will vary considerably by company/sector, there is no one-size-fits-all recovery plan; plans must be tailored for each company. In shaping their plans, many management teams and boards are thinking in terms of phases. Continuing operations, calibrating as conditions change, and planning for a business environment that may look very different than it did mere months ago, is a complex undertaking.
As we’ve emphasized in our work with lead directors, painting a vivid picture of the future and deep engagement in the strategy process—while maintaining the objectivity, independence, and skepticism of good governance—will be vital as the old rules and norms of business are shaken up (or shattered).
1 “How Alan Jope runs Unilever from his study,” The Economist, March 26, 2020.
2 Mark W. Johnson and Josh Suskewicz, “Leaders, Do You Have a Clear Vision for the Post-Crisis Future?” Harvard Business Review, April 17, 2020.