Corporate governance and crisis leadership
Corporate governance is the manner of boards in setting a direction for corporates by coming up with certain rules and standards to be followed by board members, employees, and leaders.
We can call it a system with full power which should have guidelines for different issues inside the organization. The fact is that these rules cannot be the same in all corporates or to make it clear it is not "One Size Fits All"!
The reason is that each organization has its own identity, values, business atmosphere, and fingerprint and therefore agreements, rules and solutions must be tailor-made based on these items.
Unfortunately, COVID-19 touched almost all businesses globally and the winners are those who were ready for it. The readiness is not about having a big amount of cash in our bank accounts-though that is a great help- but it's about defining a predetermined system to enable us to pass the crisis with the minimum cost and pain. This system can be strategically implied and creatively involved in our corporate governance to build a competitive advantage for us when we are in crisis. On the other hand, it can turn the threat to an opportunity only if our corporate governance system has the following features:
Transparency is the secret key to gain the trust of people. In crisis leadership, it is crucial to get everyone on board and this needs proactive planning by giving the correct and true information, data and analysis to employees. Basically, we cannot build trust by ordering people but we should have enough practical reasons for them to believe in what we say with no doubt.
Successful companies, never hide or manipulate information! The most trustful partners of them are their employees, customers, and their shareholders. That is why when they stretch their hands for help during any problem, most of the time they get the proper response with no hesitation.
Transparency needs time and practice. It is about sending certain information through effective channels to all stakeholders on a regular basis. These channels shouldn't be designed as one-way roads but they should be involved with questions and dialogues to ensure the quality of the relationship.
We should create regular events at different levels to inform people with numbers, statistics and honest analysis about what we have done as a report and what we are going to do as a future plan.
In this atmosphere, if we ask employees to ignore a part of their salaries due to a bad financial situation, they agree by heart. If we ask our shareholders to inject some money into the system, even though they find it risky but they do it based on their previous experience.
In one word, transparency is the mortar for building trust and trust is the key to leadership success in crisis.
Responsibility is not only about apologizing when execution plans go wrong!
It's about being aware of the consequences of our decisions. Each decision creates a direction for company affecting all stakeholders.
The combination of board members, their professional and personal interests, level of knowledge and experience is very important. In some companies even though the board members seem independent but in the end, this is the chairman who decides and others vote only because they have to follow the chairman. This creates purely an irresponsible decision-making process in which one of the results of it will be incapability in solving problems in a crisis.
In practice, responsibility is using all time, abilities, information and facilities to make the right decision considering all possible consequences while after decision making we should minimize the execution time to gain the best result.
If a corporate is able to define responsibility as the above concept by setting proper guidelines and algorithms then its governance system supports the corporate in crisis perfectly.
You might be surprised by reading this! Yes, we need creative corporate governance!
Let me explain to you, please.
The entire goal of a corporate governance system is to set up rules to facilitate and ease the execution of decisions but if we assume that setting up rules is equal to composing micro-managing guidelines to minimize the risk of implementation then we are wrong!
Rules are useful as long as they show us certain directions but if we must follow them without thinking out of the cubicle then we have killed all the creativity expected from us in the execution of decisions.
Luckily, management studies provided a solution for it. The solution is agility. Agility is not creating chaos and letting people act as they like. It is enabling teams and departments to move towards a goal with less hierarchy and more freedom of action based on continuous learning from experiments and considering the system as a whole.
Creativity should be a daily practice in the entire organization and as a great support, it should be communicated openly with all stakeholders so that when we encounter a crisis, our people are fully ready to listen to solutions out of the box with no bias and resistance. This is not against the instructions of corporate governance but it is exactly a big support for it!
Our business atmosphere is changing rapidly and therefore the nature of crisis around it gets more complicated. If we wish to be successful then we must redefine many of the basics and the tools in management studies.