Peter Holtmann – The Boardroom in Crisis

Written by Peter Holtmann

Boardrooms are the epicentre of control and governance so what happens when crisis strikes, is the board prepared for the event, or do they compound the problem?

I am sharing some of my experiences managing crises in global corporations to help you better appreciate the value a board in control offers the organisation under threat.

Many of you reading this will never have experienced business crisis and may thank their stars that they never will, others will have lived to tell the tale of how much duress the organisation and indeed the directors are placed under by the shareholders, general public and authorities. The mettle of a director is tested relentlessly during, after or post mortem with scrutiny on the value and quality of decisions made.

First lesson comes from the Scouts, be prepared. It’s never too soon to practice for a crisis, indeed many Business Continuity Plans (BCP) would include the requirement to understand the type of risks faced, the likelihood of its occurrence and the impact if not acted upon. It can result from internal and external factors and impact credit, reputation, strategy, operations and market.

I have entered boardrooms to test the crisis plan and directors are unaware of the presence of a crisis manual, who uses it, how to document against it and when a decision should be made. I have even experienced situations where a director has told the board to “throw out the process as this situation does not fit the manual, we will go with my own plan instead”.

Not recommended. A good BCP covers all likely events and some that are unlikely.

Practice! Even best documented programs need testing in near-live situations to ensure the plan can be enacted. Imagine communication (war) rooms with no phone lines, IT hot boot sites with no hardware installed, directors without deputies or clear crisis roles, and insurance policies with no agreed indicators to enact. All of these real events could have been avoided by testing the process.

Who’s in charge?! Because you are a director doesn’t make you crisis controller. Odds are there are a number of other directors around the table that have the same impression as you and are more likely to argue for control than control the crisis.

I recall going to one event where the board were on the verge of physical assault and the CEO was crying in their chair. At that point in time no one was in control and precious minutes were wasted on ego as opposed to issue.

Create teams. Good plans ensure that there are teams created to address the crisis, one working team that gathers data and enacts tactics and one decision team that deciphers data and makes decisions. All teams have one leader and deputy; they can comprise Board and staff and may also include external stakeholders such as insurers, regulators, law enforcement, strategic consultants and communications experts.

Know the commodity of time as it’s running against you. You have very little time to work the problem so to ensure your decisions and messages are timely compartmentalise your activities into distinct phases.

My preferences is for a ratio of 1:2:4:8. This means you need to have the issue identified within the first hour; have the communication about the issue ready within 2 hours; have the first solution and public response ready within 4 hours; and have the repair commenced within 8 hours.

To some this ratio may seem tight, I assure you with practice comes control, the more you practice and test responses the more control you have. Know how the data comes to you and is validated, determine that the pace you can make a premeditated decision, stress test your communications internally and externally.

Work the problem not the person, unless the person was the problem. For instance, a case was brought to me about a malicious attack on an organisation’s product and reputation by an individual who was claiming to go to press if they didn’t receive swift restitution in the form of large sums of money.

Working the situation it was discovered the origin was from a prison inmate doing his rounds of businesses. I was told an idiom just today “we go in search of the enemy and find it is us”, work the problem down to root cause which will likely be some procedural issue. From there you can build out and work on the immediate problem, then the process to ensure it never happens again.

Think of it in this way, you see someone lighting fires with a match, your first response is to put out the fire, then remove the matches and the fire lighter.

Know Your Topic: This is where it commonly all falls to pieces. Another adage comes to mind of “loose lips, sink ships”.

Find one key message about the situation, the root cause and the recovery and stick to it. I have watched the best, and very expensive, messages unravel because a spokesperson for the company has placed their own interpretation on the issue. This may have occurred because of media pressure or even a lack of message from the organisation, it doesn’t matter the wrong message will undo the work of many.

Having no message, alternatively, is just as bad as having an inconsistent message. When faced with no story the media and public will simply make one up, after all a good story is more interesting than the truth.

Managing crises takes skill, competence and practice by the board. Simply thinking you have the grit and brawn to pull it off when the time comes is not thinking of the organisation’s best interests. If you don’t think you have a well-documented and practiced plan or a lack of competency around the board table call in an expert as the return on investment will save you millions or even billions.

Peter Holtmann is a member of Director Institute with over 20 years of experience in science, education and business leadership. He received his Bachelor of Science from the University of Western Sydney, Australia before extending his career into the design, development and delivery of management and business continuity programs for the manufacture, insurance and service sectors globally.

Peter chairs and attends a number of boards and writes for various publications. He also runs a business coaching and consulting firm.