11 Jun When the values of the Chair destroys company value
Only a few bright sparks saw the Global Financial Crisis coming. And no one saw the COVID-19 pandemic event coming. So for most of us, they were particularly catastrophic Black Swan events.
While stock markets haemorrhaged and the global economy pitched sideways, the boards of millions of businesses around the world all stared down the barrel of the same question “what the hell do we do now?”
How the Chair handles this question is often the difference between a company weathering the GFC or Coronavirus storm, or keeling over and drowning.
Many of you may have read Nassim Nicholas Taleb’s Black Swan theory which explains how hard-to-predict, rare events can shape the course of history in remarkable, unpredictable ways.
Whether a CEO suddenly resigns, an unforeseen scandal erupts, or a pandemic breaks out, if the Chair fails to adequately respond in a crisis they can often destroy billions of dollars of company value in a heartbeat.
In other words, how Chairs react during a Black Swan event matters a lot. And it can depend on leadership style and values.
What happens inside the boardroom during a Black Swan event?
Dangerous Chair Leadership Styles
There are two leadership styles to watch out for.
The first are dominant Chairs or board members who manipulate the situation rather than address the incident in a balanced way, so employees and customers can engage in the long term. They do this by:
- Worming and reframing information;
- Deliberately avoiding transparency;
- Failing to admit mistakes and learn from them;
- Refusing media training and biting back in the press; or
- Bullying the CEO.
This kind of behaviour is a sure-fire way to poison company culture and ensure the business remains paralysed amidst a crisis.
The second style are passive Chairs or Board members. Those who remain silent and are incapable of sharing their point of view. Around here, we call them ‘lamington eaters‘!
These Chairs or board members harm their company by:
- Watering down their points of view;
- Wasting time watching to see what other board members do;
- Skewing decision making towards dominant voices;
- Lacking the capability or experience to contribute to effective decisions.
When either of these two leadership styles get in the way of a board’s reaction to a Black Swan event, we can almost guarantee the company will struggle to course correct.
How should a Board react to a Black Swan event?
By definition nobody can foresee a Black Swan event. However, there are some practical steps a Board can take to manage during a crisis.
- Establish the roles of Board and Management
- Get information flowing into the Boardroom from multiple sources (not just the CEO)
- Focus on customers as well as employees. Decide what your customer obligations are and communicate what you’re doing
- Self-assess post the crisis – talk about how the Board went informally and assess explicitly using formal mechanisms
Even if you take all the right steps an ineffective chair can mean a poor outcome.
How to change the leadership style of the Chair?
No matter how successful someone has been in their personal career, stepping onto a board or taking on the position of Chair requires a unique set of skills, style and approach.
If you are worried you Chair is not effective, ask yourself these questions:
- Has the Board offered the Chair feedback?
- Are there programs to develop the capability of the Chair or Directors?
- Is there a structured approach for decision-making?
- Do you have an approach for selecting or performance managing your Chair?
History remembers leaders who faced up to the storm calmly and with grace. From this, not only will others respect you, but you’ll find actually navigating the situation will become smoother.
Though if you can see another Black Swan event coming, we’d appreciate a heads up.
ABOUT STERLING BLACK
Sterling Black is a specialist Board and CEO leadership firm. With over 25 years’ experience we give clear recommendations on whether your current leaders are, or can be the leaders you need. We help Boards build the capability to deliver on their vision and plan for expected or unexpected CEO events. We understand how to get CEOs to engage with a development process, how experienced executives best receive feedback and how adults learn.
Contact us today for a confidential discussion.
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