People + Strategy sat down with three prominent directors for their timely insights on the role of board members in helping organizations navigate the challenges of leadership today, including when and how to engage on social issues.
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Balancing Acts in the Boardroom
What is the role of board members in helping organizations navigate the challenges of leadership today, such as when and how to engage on social issues, and how best to manage all stakeholders? Dawn Zier, Directors Roundtable Editor, and Adam Bryant, Articles Editor, interviewed three prominent directors with deep board experience for their timely insights. Their comments were edited for space.
People+Strategy: How do you think about the balancing act of whether companies should engage on the social issues of the day?
Kathy Waller: The pandemic has changed everybody's perspective on what to ask of and expect from a company. Now employees on both sides of any particular issue want their company to show levels of support for their position. That creates an incredibly hard challenge for an organization, unless its stated mission clearly aligns with a particular stance.
If that's the case, and your employees and your customers expect you to weigh in, then by all means you should. If the particular issue of the day has nothing to do with your mission, then that's a more challenging question. That doesn't mean you shouldn't weigh in. It just means that you have to be much more careful about how you weigh in, because somebody is not going to be happy with your position.
Often the most effective way to frame the issue is make it about supporting your employees. As long as companies can keep it about the employee versus the politics of the issue, they'll be in better shape. That can be hard, because people will try to push them to taking a political stance. But that's not what companies do. They're not in the business of politics, but they are in the business of people.
Sukhinder Singh Cassidy: This is a tough one because we live in an age where employees want to feel included and feel a sense of belonging at work, and that means seeking out environments where their values are shared. So CEOs and leaders generally are called upon more than ever to answer the question, what are the values of our organization? And how do you articulate your values without getting involved in every issue? This may be the most difficult thing for a CEO.
The fine line for a CEO and a leader is to be transparent about values and to run the organization in a way that you believe is authentic and fair to employees, which is different than picking a point of view on every issue. You have to stand for something. You have to have a point of view on your values. Then when you say, "On these issues that are deeply reflective of our values, are we going to take a stand or not?"
‘If you’re invited to step over that line and become more engaged, then it’s better.’—Kathy Waller
Duriya Farooqui: The gap in political leadership has really put CEOs and companies in an awkward, powerful and at times unnecessary position of having to assert their societal values. Companies' circumstances can vary a lot. They may have employees in many different states and countries that are being differentially impacted. They may be headquartered in a conservative or a progressive state.
Given all the nuances that they have to balance, it's critical for companies to be people-centered in their internal communications. Companies that have weathered this period well have reassured their employees that their rights, their access and their well-being is really important to them.
The first step is to acknowledge that something unusual is happening in the world and to let employees know that we are thinking about how best to address the impact of this, even if we don't know the answers right away. Clarity is the goal. In the case of Roe v. Wade, what does your health insurance cover? What do you have access to? What do you not have access to? When your workforce is thrown into a place of extreme uncertainty, how do you bring some certainty back?
My perspective is that companies need to think about what's in their control. You're not forcing a particular belief on anybody. If you come from a people-centered place and think about how to support and protect your employees on a day-to-day basis so that they can be productive, and they can have reasonable access to both physical and mental health, that's what you can control. CEOs sometimes have to thread the needle. And if you thread the needle too much, then it can feel like a non-response.
‘When your workforce is thrown into a place of extreme uncertainty, how do you bring some certainty back?’—Duriya Farooqui
P+S: As a director, how do you balance going deep on issues without overstepping and starting to run the company?
Cassidy: Issues are typically brought to the board by the lead independent director or the CEO. They are inviting the conversation. I think the definition of a good CEO today is that they are both anticipatory and paranoid. CEOs are bringing us in more as they are dealing with issues they've never had to grapple with before. Then the question is, how far do you go? Because we all want to help. If the CEO does have blind spots, you have to make sure the board agenda covers everybody's concerns.
Farooqui: It makes asking the right questions, and bringing the right level of urgency, even more important. It's our role as directors to do that when appropriate—to ask questions about topics that perhaps have not been common boardroom conversations in the past. In the UK, they have a regulatory requirement for one or multiple directors to be the designated voice of employees. What that means is they have listening sessions with employees to ensure they are being treated as a stakeholder in decisions. You still may have to make hard decisions, but the impact on employees and culture is being considered.
Waller: The best CEOs are using their boards as trusted advisors, and I believe in being invited to step over the line. Companies know if I have a particular expertise on something or that I can help in some way, and they do ask me to participate and weigh in. If you're invited to step over that line and become more engaged, then it's better. I'll certainly share my opinion about something, but ultimately it's not my call. It's management's call.
P+S: How do you think about risk assessment when there is so much uncertainty in the world?
Cassidy: I wrote a book on risk-taking called, Choose Possibility: Take Risks and Thrive (Even When You Fail) [Harvest, 2021]. Researchers talk about two types of risks. One is called subway events, and the other is called coconut events. Subway events are when the volatility is anticipatable, and your job is to anticipate it, in the same way that you never quite know when the subway is going to come, but you know it will arrive within a certain time range. The role of boards is to anticipate what's anticipatable.
Coconut events refer to the risks that are like a coconut dropping out of the sky and hitting you on the head and killing you. People think it will never happen to them, and yet coconut events—like the 2008 financial crisis, COVID-19, the war in Ukraine—happen throughout our lifetimes. These things are really hard to anticipate, so your job is to be responsive and agile and never think that things like that are not going to happen to you.
Waller: Although we don't own all the risks as directors, we certainly make sure that some committee is responsible for all the risks that have been identified. But then we also have sessions where we have a step-back discussion to assess whether we are focusing on the right risks and whether there are certain risks that perhaps we should be considering. But as directors, we have to be mindful that doing risk assessment also carries costs in terms of time and resources. So we have to be careful about that balancing act, too.
Farooqui: Risk assessment and awareness becomes more important when the set of potential outcomes becomes wider, because when the difference between the best-case scenario and the worst-case scenario is pretty big, you want to make sure that you are prepared for both outcomes. If you consider hospitality businesses, that's all they were thinking about during the pandemic.
The key question was, are you making the right choices about how to resource when demand is contracting as strongly as it is? But then how long is that going to be the case, and what's going to come back? If you are not ready to resource for the return, then your company's market share and position may be jeopardized.
So it became even more important to consider all scenarios around risk assessment. And this is where the relationship between the board and the CEO becomes important. Can you have those open conversations in a way that you all want the best outcome possible, but also be prepared for the different options and how the company is going to make decisions? That way, you're not having to call a board meeting every time there's a change in the trajectory, because you've agreed on a framework, and you've validated the way the leadership team is going to approach the different scenarios.
‘When you look at ESG over the long-term, people would not disagree about its importance. The question is, what constraints will be put on your short-term ability to deliver profits? The inherent conflict is that the market is not going to give you relief in the short-term over longer-term issues.’—Sukhinder Singh Cassidy
P+S: What about the balancing act on ESG?
Farooqui: The most important thing for leaders and boards to figure out on ESG is pace. Some levers are not costly to pull. You should be able to diversify your board pretty quickly. And many companies already are investing in the communities in which they operate.
The biggest balancing act, which companies are struggling to get right, is on climate, particularly if they have an infrastructure-heavy business like airlines. How do you balance that your core product relies on fuel with taking on the responsibility to help mitigate climate change? For some companies, the tradeoffs are harder. How do you pace yourself so that you're making investments at the right time and you're leading on climate in the industry but not at the expense of having a competitive advantage and delivering returns?
Cassidy: It's about short-termism versus long-termism. When you look at ESG over the long term, people would not disagree about its importance. The question is, what constraints will be put on your short-term ability to deliver profits? The inherent conflict is that the market is not going to give you relief in the short term over longer-term issues. They still expect the same profit. So if you're going to make your way to net zero, for example, how do you do that in a way where the market will accept that path? To me, this is about timeline management—they will reconcile in the end, but they won't likely reconcile in the short term.
P+S: How do you think about that balancing act of being compassionate about the pressures that the C-suite team is facing while also setting a high bar for performance?
Waller: At the end of the day, performance does matter. The company needs to be profitable and to grow over the long term. But we certainly do show compassion for extenuating circumstances and for things that are probably more temporary in nature. People are dealing with a lot, and if somebody has been a good performer in the past, you want to show support to help them manage through whatever issue it is they're facing.
And with all the changes that companies and leadership teams are facing, and there have been many instances where CEOs decide to step down suddenly, boards are getting more involved in discussions around succession pipelines. You have to make sure that you have a robust succession plan right now, particularly for the CEO role. That conversation can create its own challenges, particularly if the CEO doesn't bring it up himself or herself.
Because you don't want to send a signal that you're trying to push your CEO out the door by any means. But you also don't want to be caught flat-footed if your CEO chooses to do something else or becomes ill. Any number of things can happen. So it can be another balancing act of keeping your CEO happy while you're trying to talk about your CEO's successor. It may take you a few conversations to get everyone to be open to the idea, but ultimately you have to do what's best for the company, and that includes having a robust succession plan.
Cassidy: There's a trade you expect with people. I want leaders to be agile, and the trade is giving people flexibility. For example, it's hard to make the right call on various COVID policies, and companies are often reversing decisions they make. And that's completely understandable. Leaders have to do what they need to do to make sure that they don't burn themselves and their teams out, but they also have to be responsive to issues. When you have that balance, you can give people a lot of latitude.
I still believe the average team is not agile enough. Generally speaking, I would like to see every team prioritize agility as their number one value. But I still see a lot of people who get hired for the job they've already done, without being able to anticipate the challenges they're going to face. I don't think companies value agility enough in executives.
So my questions to HR leaders are: If your company doesn't have agility as one of its values, should it? And what would need to change in your organization to hire people who are more agile and to create more flexibility?
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