We update our 2020 research, as directors and CEOs share with us their experience of operating, innovating and guiding their organisations in 2021.
by Karina Marcar, Brabourne | Boards. Governance.
Brian Freestone, ArkTalent | Engaging Human Capital.
“Last time [in the 2020 COVID-19 lockdown], the world stopped. This time around, people are expecting business to operate and COVID is just on top of it.” CEO, September 2021
These words were spoken with palpable fatigue.
In September 2021, we revisited our July 2020 research on the impact of COVID-19 on governance.
Our research objective was to develop some of the key themes that had emerged in 2020 from our discussions with non-executive directors. Our 2020 findings had included a strategic focus on purpose, a re-setting of relationships with management and an increased confidence in accelerating the pace of execution.
In 2021, we wanted to better understand the ongoing experience of executive teams, so we also extended our participant group beyond non-executive directors, to include CEOs.
Whether as sub-text or overtly discussed, the strain of the extended pandemic period is showing on both directors and CEOs. Quite simply, they are exhausted, especially after the prolonged lockdowns in Sydney, Melbourne, Canberra and New Zealand in 2021.
What we found
COVID-19 is shifting into a mind-set of business as usual.
Boards are concerned to strike a balance between support for management – with CEOs confident from weathering 2020, yet fatigued - and maintaining adequate oversight. The pandemic has also exposed underlying deficiencies in some business models.
Both agility and focus on purpose remain important.
These organisations see themselves on an ongoing innovation path, often coupled with a heightened awareness of customers and staff as stakeholders.
Failure to deliver substantive innovation represents a significant strategic risk.
There is greater customer focus in business product and process innovation, recognising the importance of ease of use of digital platforms, irrespective of industry sector.
Risk management has the board’s attention. Cyber, people and supply chain risks have been elevated.
There is increased discussion in the boardroom around staff well-being and talent retention.
While there have not been unexpected resignations at board or senior management level, there has already been some movement below senior management. The importance of succession planning at deeper levels of the organisation includes a concern that the re-opening of international borders will result in a net loss from Australia of skilled staff.
Key developments, by topic, and some questions for boards are set out below. If you would like to see our full findings, you can contact us here.
Our 2021 participants
Our 2021 participants came from major organisations listed on the ASX, private groups, government bodies and not-for-profit entities. Organisations were headquartered in Australia, New Zealand and the United States. All but one of our 2020 participants was able to assist us again.
We would like to extend our thanks to the study’s participants for their generous and open engagement in this work. We are deeply appreciative of their contributions to this research, their organisations and their people.
Key developments, by topic
Board and management dynamics
The re-setting of board and management relationships in 2020 may have shifted more control to management in 2021. There is an increased confidence in CEOs and a more supportive stance from boards.
Directors are aware that they will need to carefully balance being supportive of management with trying to ensure that there is adequate questioning and oversight.
Strategy
Boards are trying to move to treating COVID-19 as business as usual, when formulating strategy and understanding underlying business performance and prospects.
Boards’ understanding of stakeholder relationships is more nuanced, with particular focus on customers and staff. This is part of the overarching focus on corporate purpose that has been maintained during 2020 and 2021.
Strategic mergers and acquisitions activity appears undeterred, as part of pre-existing strategies.
People
Fatigue requires management at all levels of the organisation, including the board.
It is important to understand the cultural “tone from the middle” and its impact on organisational effectiveness.
There is a need for succession planning at deeper levels within the organisation, with a potential net loss of skills as borders re-open.
Innovation
Organisations increasingly consider that business process innovation is business-as-usual, and part of their risk management process. Disciplined project management is key.
Innovation is also being driven by an increased focus on the customer, particularly online experience, and irrespective of industry sector.
Risk management
Risk management is receiving more board attention. Risk management frameworks are being re-examined. Some entities have split their audit and risk committees. The Chief Risk Officer has elevated status within the C-suite.
There is a heightened focus on cyber, people and supply chain risks. People risks include a tight skilled labour market and challenges in monitoring wellbeing and performance.
Board processes
The importance remains of ensuring in-person board meetings, supplementing online meetings as part of the governance tool-kit.
There is a need to embed the 2020 gains made in quality and focus of information flows to boards, to avoid unnecessary creep in the volume of information.
What is your board spending its time talking about?
Are we balancing supporting management with ensuring that the right questions are still being asked?
Who do our customers compare us to, for ease of dealing with us? Reference companies might be businesses outside our sector.
Are we still treating COVID-19 as an exception or are we testing our underlying business model?
Are we treating and respecting our staff as an asset? Are we monitoring lead indicators for their well-being and retention? Are we succession planning deeper into the organisation?
What is the “tone from the middle” of our organisation? How are we supporting and developing middle management?
Are we looking beyond our organisation – including to government and our competitors - to help us understand and manage cyber risk?