Board and Management Partnerships: A New Paradigm Post-Covid?

Australia | Editorial

Raghu Narain
Head of IB
Asia Pacific

Exploring the role boards play in assisting management to successfully navigate the next new normal

Covid-19 has brought to forefront the immense value-add a strong, well-functioning board can bring to an organization – and conversely the adverse effects that one lacking these attributes can manifest. The relevance of an ongoing, constructive, engagement with a strong collaborative board has increased in current volatile and uncertain environment. Post-Covid, our clients with strong boards and governance are heavily leveraging their board’s experience to create or sustain competitive advantage. Similarly, in our own multi-boutique M&A model, as board members, we are actively collaborating with management teams of our boutiques to help craft the future.

 

Typically, a board of directors’ functions with more longer-term objectives in mind, to safeguard the viability, value and reputation of a company and its stakeholders. It also has the responsibility to constructively challenge the management. But in a crisis situation, our assertion is that boards can play a significant role in assisting management in tackling immediate problems, undertake tactical reviews, and involve board members in active people and leadership management.

 

While there is no cut-and-paste formula or one-size-fits-all approach that boards can follow to navigate these uncertain times, there are four key overlapping focus areas that, if managed carefully and consciously, can have a very positive impact on the future success of an organization.

 

1. Immediate Crisis Management

Given the unprecedent nature of Covid and consequent impact, many management teams are struggling to operate in the new normal. This impact is felt not only on the financial and business operations of the company, but also in the prevailing mind-set and wellbeing of the C-suite and staff running the company. Highly engaged board members can offer support, and empathy, lessons from previous crises’ and help influence or directly engage with business crisis management. It is advisable for CEOs to proactively solicit help from seasoned Board members to ensure management can best approach the current situation and plan for future.

 

A few topics that astute boards and management teams might collaboratively think about together:

  • Are we treating our employees and their families with empathy and helping develop post-Covid resilience, whether from a financial, business or wellbeing perspective?
  • Is there an immediate need for liquidity and cost cutting scenarios and have those options been fully explored and balanced versus the long-term sustainability of the business?

 

2. Strategy and Vision

As reality is fundamentally changing for  businesses post-Covid, increasingly exacerbated by geopolitics and shifting supply chains, the case to redefine the strategy and align the vision of the business with the new and uncertain future, is essential to success/survival. Several of our clients are engaging in divestment activities--for marginal, non-core assets or simply become more asset  light by recycling assets--as they assess their future plans.

 

This recrafting of strategy and vision is where the value of board diversity really shines through. For management, having access to a group of professionals with a collective high level of experience across a breadth of industries, functions and geographies, allows for the situation to be examined from a variety of perspectives and challenges to be assessed in a much more multidimensional manner, oftentimes leading to innovative solutions – as we have seen in the M&A space in recent weeks. Of particular note is technology. For businesses, consulting with board members who have technology expertise to enhance the digital footprint of the business can be value enhancing exercise. For instance, we are actively working with our M&A boutiques to assess the deepening of technology expertise, cross leveraging our collective tech expertise globally and finding additional areas of growth related to technology.

 

We, for example, have identified Green and ESG in the context of M&A as a key differentiator for Natixis and its boutiques and are actively working on deepening that expertise.

 

Related to this dimension, a few questions CEOs and boards can think about together include:

  • Are we crafting a new vision/strategy for the business in the new normal?
  • Are we in alignment to develop a future vision of the business with all stakeholders?
  • Have we explored areas that can create lasting competitive advantage for the business?

"We have identified Green and ESG, in the context of M&A, as a key differentiator for Natixis and its boutiques and we are actively working on deepening these expertise."

3. Governance

The spectrum of governance can range from business-as-usual to high engagement with the Board. We see Chairpersons of boards demanding higher engagement from all the board members to set proactive governance agenda. The historic differences between CEOs and boards need to be set aside in the current context. An environment of collaboration can lead the company out of crisis. However, if there is underperformance by management subgroup(s), board should take action quickly. The post-Covid world is unforgiving and boards are encouraged to align the vision, immediate crisis management and governance to protect the stakeholders of businesses and exercise their prudence. Particularly as decisions that management may ordinarily have had the luxury of months or years to discuss, debate and pass, may need to be actioned in days.

 

Finally, from a longer-term perspective, boards need to ensure that they are in a position to articulate and adopt the right governance framework so that future strategy and vision of the company is able to be realized in a sustainable, profitable manner. CEOs and the board need to collectively think together if the individual board members’ skillsets are appropriate for the go-forward strategy of the company. The expectations arising from active board engagement should be debated and agreed.

 

4. Tactical Moves

This category of engagement involves finding upsides and incremental value during chaos. Boards’ depth of experience can be crucial in exploring tactical moves. A few areas of exploration can be:

  • Should the business acquire additional capabilities, assets as a pre-emptive action with opportunities arising from post-Covid fall out?
  • Is there a need to redeploy resources in a new, high conviction market/expertise?
  • New ways of working, collaboration with competitors, alliances that develop asset light context and dramatic but well calculated business actions are ways to explore tactical moves.

 

Thorough debates with qualified board members and key influencers on tactical moves can generate value upside which previously may not have been evident.

 

In summary, from our own experience with our boutiques and our clients, we observe that a “Boards and Management Partnership” paradigm is evolving. It is imperative to get positive engagement from boards as a guide to CEOs; and critical for boards to engage collaboratively with CEOs to help navigate the company from post-Covid crises and develop a sustainable future.

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