In this picture (from left to right): Prof Ludo Van der Heyden (academic director at the INSEAD Centre for Corporate Governance) , Rob Lewenson (governance and engagement manager at Old Mutual Investment Group), Barbara Folscher of the iOpener Institute, Prof Arnold Smit (programme director of the ADP on USB-ED's behalf.
The biggest mistake a board of directors can make is not to recognise a crisis when it occurs - to keep on talking as if everything is fine, when in fact the "ship is burning." Boards have to practise for a crisis, so that when it happens they know the "drill."
This is according to Prof Ludo Van der Heyden, academic director at the INSEAD Centre for Corporate Governance, with its world renowned International Directors Programme operating from three campuses across Europe, Asia and the Middle East.
He was the keynote speaker at the Africa Directors Programme (ADP) presented by USB Executive Development (Pty) Ltd, USB-ED, the private executive development company of Stellenbosch University, at a recent event in Stellenbosch.
The programme is designed and presented by governance and leadership experts with international experience and has the Old Mutual Investment Group as corporate partner, INSEAD Corporate Governance Initiative and the USB Centre for Corporate Governance in Africa as academic partners, and the IoDSA as institutional partner.
Highlighting what should happen at board level when there is trouble in a company, Prof Van der Heyden said that there are five major points to take cognisance of:
- Know at what point there is a problem in a company. The first step in this regard is to acknowledge that there is a crisis, followed by steps to contain the "fire" and then extinguish it and then exit ensuring that the crisis will not repeat, or should it repeat that the company has learned the lessons from its past.
- One of the important aspects – often insufficiently paid attention to - is to avoid a restart of the "fire" and learn from it so that ultimately the company can return to normal non-crisis mode.
- For a crisis one needs to develop tools, practises and certain reflexes or habits to deal with it. One does not become an accomplished firefighter without considerable training and practice.
- Accept that a crisis invariably comes with a bit of a surprise. Surprise actually means that you were not prepared for it - if you were prepared for it, it would not have been a surprise. One thus ought to be careful to be open for such surprises and not think one knows – for events will contradict you, which will invariably add fuel to the fire.
- Crisis situations are challenging times for boards, who aim for and are assumed to be in control when in fact the crisis clearly signals that the opposite is true. The media will focus on the latter, when the board may be tempted to assert the former when it is in fact not true, thereby fuelling the crisis, for now creating a further issue of trust in the board. When dealing with the media, a crucial decision is for the board to make sure, e.g., that the right person is talking to journalists. That is not necessarily the chairman or CEO. Only one person should talk to the media, who will dine on diverging signals sent by various corporate actors. When dealing with a crisis, engagement with public, shareholders and customers is utmost important. The best way is to be authentic, talk about the process of dealing with the crisis and how the organization is coping with the crisis. Take it slow, under promise and over deliver and remember that in crisis you have only one shot at sorting things out – a single mistake might be fatal.
- Boards should make sure that they understand the underlying problem that the crisis is revealing. That is the danger, as we tend to see the world as we are and not as it is (Anaïs Nin). A crisis exposes our biases, misunderstandings, failures.
"The real problem with boards are not that they might be clueless of what is going on around them. Boards that know they are clueless are not the problem. The big problem is when boards think they are not clueless and in reality they are.
"Boards are there to take responsibility, the buck stops with them and this goes hand in hand with fair play," Prof Van der Heyden said.
There are five dimensions to a board, consisting of:
- The physical - are we doing the right thing? And do we have enough resources to cope?
- An intellectual dimension – do we understand the crisis?
- A spiritual dimension – are we doing things for the right cause?
- A time dimension - have we learned from the past?
- And do we bring a message of hope regarding the future?
Prof Van der Heyden said that as with all other countries, South Africa also has problems. "But South Africans are addressing its problems by talking about it - there is no shortage of talk. The worst thing you can do is not talking about it.
"We are living in a very diverse world and the solution is to recognise it. South Africa is doing this. However, there is also in a crisis a need to take decisive action.
"I think this is starting to happen and needs to accelerate, otherwise South Africa might be in a bigger crisis than they envisage today."
He said that to be a multi-cultural person, it would be best to know at least three cultures. Research has actually proven that the number three in this regard is the magic number (not two). This is also important for boards, as the triad of owners, independents and executives brings better dynamics to the table.
"The most boring people are those that exist only at the extremes. These are the people who only know two colours (black and white), speak of only right or wrong, good and evil, or yes or no.
"The most interesting people are those that "exist" in the middle, that are coloured and can speak of black and of white, with authenticity, who provide bridges, and who after careful consideration can "flip" or change the way to look at an issue.
"This "flip" is so much easier when there are people with a multi-cultural, multi-sector, and multi-function mind-set at the boardroom table, and also with gender diversity," Prof Van der Heyden said.
"But the best board people are those that have diversity in them.
Addressing participants attending the ADP, Rob Lewenson, Governance and Engagement Manager at Old Mutual Investment Group and former participant, said that it is seldom that one feels such a personal connection to the work you are doing after attending a programme.
"You not only learn a lot, but get a feeling of who you are. That will be your best asset going forward into the future," Lewenson said.
Programme director of the ADP on USB-ED's behalf, Prof Arnold Smit, said: "Directors often underestimate the full spectrum of duties involved in exercising board leadership. The ADP strengthens their ability to maintain an ethical mind-set whilst governing their companies with wisdom and courage in difficult times."
Prof Marc Le Menestrel, programme director of the ADP on INSEAD behalf, said "Directors tend to think in a corridor, blinded by the light at the end of the tunnel and unaware of the many doors that exist on each side of the path. Our task as teachers is to pause and have the courage to explore these doors, if only to realize that there are many ways to govern, and that emotional maturity transforms one tiny corridor in a multitude of smarter and wider paths."
For enquiries about the Africa Directors Programme, please contact Zahn de Bruyn at +27 (0)21 918 4350 or firstname.lastname@example.org USB-ED website: www.usb-ed.com