Corporate Governance

Courage under fire: the role of the board in a crisis

While some leaders are forged in a crisis, others are broken. From sports captains to captains of industry, how those at the top rise to the occasion when the unexpected happens often defines them and their organisations.

The scale of a major issue draws significant negative attention, reputational damage, and can have financial and legal consequences for institutions and their senior leaders.

But a crisis also affects the lives of ordinary people and the wider community. It may cause injury, loss of life, property and environmental damage, and lasting trauma.

In Australia’s recent devastating bushfires, the Commissioner of the NSW Rural Fire Service, Shane Fitzsimmons, was heralded by many as a great leader. As bushfire emergencies stretched on over weeks, he fronted news conferences multiple times a day, keeping communities updated on the threat and the help available. He was calm, direct, and supportive.

Crises can range from national emergencies to major industry disruption or can simply occur as a significant incident at an organisation.

Leaders must step up and be accountable.

Those who shoulder the consequences with sincerity while taking strong action to put things right are best placed to lead their organisations through to the other side.

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Process works (but not without people)

There’s a wealth of information about crisis preparation, management and response. Organisations need simple systems that will stand up under intense pressure, often supported by sophisticated technology that enables people to work together.

But less is said about how to behave in a crisis.

The best laid crisis management plan can be undermined by an early misstep, making it even harder to get back on track. Two of the most common mistakes are when leaders remain silent for too long, and when they appear tone deaf to the situation.

Three key principles can help leaders navigate a crisis and avert disaster:

  • Compassion
  • Connection
  • Courage

Compassion – put people above profit

Australians’ trust in business held steady last year, but still leaves much to be desired. Only half the general population (52%) trust corporations to do the right thing, according to reputation management firm Edelman’s annual Trust Barometer.

Much of this low rating can be attributed to the way executive and boards’ respond to crises has fallen below community expectations (see much of the 2018 Royal Commission into financial services’ testimony).

When ‘business as usual’ is furthest from people’s minds, getting back to normal should rank ahead of getting back to business.

Treat people as people

Whether they are your shareholders, your workforce, your consumers or the wider community, they are all human beings and never more so than in a crisis. Respect and honesty are central at all times.

It’s not about you – in a crisis, somebody else is doing it tougher. Consider how they might feel, what they need most, and how you can help them.

Get involved

Stepping up as a leader can mean getting down to the dirty work. Whether it’s rolling up your sleeves to barbecue sausages or digging into the detail of documents, a crisis may call for a temporary change of job description.

Specialist skills may be helpful, but if the situation is outside your experience, your contribution may still be welcomed as a demonstration of support from the top or simply another pair of hands at a time of need.

Avoid marketing opportunities

Behaving ethically gets noticed for the right reasons, earning respect and loyalty that money just can’t buy. According to Edelman’s research, public trust in companies is influenced three times more by ethics than competence (76% versus 24%).

On the other hand, using a crisis to boost your brand or your bottom line is likely to backfire badly. At best, it’s in poor taste and at worst, it appears exploitative. Similarly, be cautious of your own involvement becoming a public photo opportunity.

Connection – share information and empathy

While the CEO and senior management typically lead an organisation’s response, the challenge for boards is to balance being available without getting in the way.

Being available signals clearly that you appreciate the severity of the situation. It can also reassure the executive team that they’re not alone and show staff that you’re part of the organisation.

Keep messages short and simple

Communications that are hard to understand create frustration and can suggest there is something to hide, reducing trust. Use clear language rather than speaking in technical terms or industry jargon.

Meet people where they are

Be prepared that not everybody will welcome you with open arms. Stress and exhaustion can be among the reasons. But some people may see you as to blame. Taking a defensive stance is unlikely to help.

Listen before asking questions

Empathy is a key trait of leadership but one that can quickly disappear during a crisis. Leaders are often quick to jump to solutions rather than simply listening, which creates an important connection and support so that everyone can take the next step forward together.

Put other things on the back burner

Quickly and quietly disentangle yourself from other commitments to be available whenever needed.

Courage – tackle the situation and the bigger issue

Business leaders are increasingly expected to take a stand on broader issues. Almost nine out of 10 Australians (86%) expect their employer’s CEO to speak up on important causes, according to the 2020 Edelman Trust Barometer.

If the crisis is occurring at your own organisation, courage can be harder won. It may require acknowledging uncomfortable truths about what and how things are being done. There may be direct ramifications for the board and senior executives. People in the business may be personally affected, with an impact on their health, wellbeing or livelihood.

Provide the resources people need

Addressing a crisis may need extra resources – more people, more equipment, and more money – which may require board approval. When time is of the essence, there may be limited information, and it may not be presented the usual way. Directors need to make balanced decisions and act with care and diligence, but in a crisis the cost of delaying may be greater.

In Australia, and many other countries, governments can declare a state of emergency, giving authorities greater powers to take action. Boards should consider the processes that apply in a crisis, including whether special authority is granted to the CEO and others. These should be clearly documented before they are required, and their use reviewed afterwards.

Consider the difficult questions

The financial services Royal Commission and APRA’s prudential review have made the ‘should we?’ question prominent in every director’s mind. There are several other questions they should ask in a crisis:

  • Can we do more? Is our response to the situation enough? Is it appropriate and in proportion to the circumstances and their impact on affected people?
  • Would I accept this? If I was on the receiving end of our response, would I think it was adequate and feel like I’d been treated fairly? Our response fulfils our legal obligations, but does it meet community expectations?
  • What should I learn? Could the situation have been avoided, or its impact reduced? How can we respond better in another crisis?

Keep up to date

In a crisis, quick and decisive action by leaders is critical. It relies on having all the available facts and being updated as soon as new information emerges.

Diligent enables directors and executives to communicate rapidly and securely wherever they are in the world. Boards can be confident they have the latest information at their fingertips and collaborate in real time from their mobile devices.

To find out more about how we can help your organisation, contact us at info@diligent.com or request a demonstration.

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