READ > Future focused: governance developments on the COVID-19 journey including questions directors can ask to test their organisation’s approach a report by Karina Marcar and Brian Freestone
Research conducted recently has found significant implications for senior talent in this pandemic, both at the board table and in the C-suite. Over 300,000 Australians and permanent residents have returned to Australia during the COVID-19 pandemic. That is a lot of talent. It includes a lot of global experience and expertise. And that does not account for other Australians still based around the world.
Succession planning and talent acquisition
At the end of June 2020, we started interviewing directors of major organisations listed on the ASX, NYSE and LSE, as well as on the boards of private groups, government and not-for-profit entities. Succession planning, for boards and management, is headed to the top of the agenda.
In June, there was some confidence that Australia was getting on top of COVID-19, whereas the northern hemisphere was, and is, dealing with issues on a country by country basis, through to a state or county basis. A US director described a whole board as being “in a high risk category”.
Then came the second wave in Melbourne. There is now recognition that the virus is a rolling maul. The virus is tricky to manage and will test us in unexpected ways. Boards and management need to prepare for ongoing disruption. A recurring comment was the way in which people have stepped up to the challenge. However, poor quality was also highlighted.
Moving forward, boards and CEOs will need to actively monitor management fatigue and develop strategies to ensure management have opportunities to refresh and renew. This is both for the mental and physical health of management, as well as diminishing conduct risks for the organisation. These themes reinforce the need for both boards and management to have deeper and broader succession planning.
The nature of the challenges faced by organisations has also started a re-evaluation of skills and diversity, both at board and management levels. Given the decreasing shelf-life for skills currency, non-executive directors may find that governance will evolve in response to the skills of today’s executives. It also highlights the value of director fit and agility, in working beyond their historical skills area.
This may lead to a push for age diversity on boards, so that the valuable strategic skills held by more experienced directors are coupled with greater currency of skills in younger directors, forming a bridge to management. The recent appointment of 32 year old tech entrepreneur Bridget Loudon to the Telstra board is a case in point. Boards will hopefully capitalise on the ability for more senior directors to mentor younger directors, and be open to opportunities for reverse-mentoring in order to build skills.
Meanwhile, management has had a new appreciation for the breadth of experience of directors, who have been senior executives through previous crises. We anticipate that some of the parochial barriers will be broken down, which have historically impeded executives and directors with global experience re-entering the Australian market. This provides a ripe opportunity for global Australians to revitalise Australian organisations.
Our other findings
COVID-19 has changed the way in which many, if not all, boards and management behave and act. Our findings came from directors at various stages of the pandemic. Some organisations were relatively stable, with their countries having experienced a first wave. Others were operating bereavement call lines to support staff through the loss of family, friends and colleagues – a salutary reminder of what our lives in Australia could look like.
Our findings covered 3 broad areas. Our governance findings included the importance of corporate purpose for decision making frameworks, the enhancing of risk lead indicators and risk correlations, and greater insight in board information flows.
As discussed above, from a people perspective, our findings focused on the need for boards and management to re-evaluate their bench strength and resilience, with impacts on concepts of succession planning at both board and management levels.
Developments for governance of operational settings included the re-setting of board and management dynamics, resulting in a more open way of communicating and leveraging each other’s skills, and a greater confidence in the acceleration of execution pace.
COVID has become a burning platform
The Australian economy was largely in good shape prior to COVID-19. Our view is that the experience of the economic recovery will be faster and sharper than the recovery from the global financial crisis, but that not all organisations will make it through.
Already some firms have launched new products and services or rethought their operating models. Most have made dramatic strides (including government) in accelerating change, especially in technology. This presents unique opportunities for organisations to re-think their resources, their approach to innovation and the governance structures which support and enable them.
Some of you will be thinking “Do we have the right team at the board table and in management?” Others will be privately asking themselves, “Where to from here?” Our view is that, just like this pandemic, organisations are on a journey. And no one can get through this by doing what they have always done.
About the Authors
Karina Marcar is the principal of Brabourne, which focuses on board effectiveness reviews and related governance services. Brian Freestone heads ArkTalent, which advises organisations on how to engage human capital. For more information or assistance, please contact Karina at [email protected] or Brian at [email protected].