Magazine article New Zealand Management

STRATEGY: Recession ,Co A Strategic Issue for Boards

Magazine article New Zealand Management

STRATEGY: Recession ,Co A Strategic Issue for Boards

Article excerpt

Byline: Doug Matheson

The impact of the recession has become the key strategic issue for current boards. Directors are grappling with uncertainty of a magnitude few have experienced before. To meet the challenges many boards must change the way they work.

The most important aspect of dealing with the impacts of the recession is the mindset of the directors Co their reaction to the situation the organisation faces will determine how the board considers the issues and how it acts.

Director reaction is influenced by:

1. Their perception of their ability to influence the future of the organisation in the new environment they face, and

2. Whether their concentration is on survival of the organisation or on revitalisation of the organisation.

The following model depicts the factors involved.

Individual director reaction will range from feeling they are just the victim through to taking an active leadership role in bringing about a revitalised organisation.

Where the focus of directors is primarily on survival with a feeling they donCOt have much influence, they see themselves as victims and tend to complain and criticise the situation the organisation faces but actually do little. They leave it to management to take action, and hope the environment will improve.

Where the focus of a director is primarily on survival and they feel they have high ability to influence, downsizing or such like will be their concentration. Putting employees off, reducing activities, cutbacks or close-downs will appear to be the only way forward. The board will make decisions that will help the organisation survive but do little different or new to enhance the long term.

When directors are committed to revitalisation of the organisation but perceive they have little ability to influence, they can best be described as followers. They tend to be passive about the problems the organisation faces, accept them as something the organisation canCOt do much about, and go along with management recommendations for operational changes and improvements that will help.

The reality in all organisations is that the directors and board are in the position of highest influence and their primary responsibility is leadership. As such, considering the consequences of a recession such as we currently face is not the time for directors to abdicate their responsibilities Co it is time for governance leadership. The directors and the board must think and respond strategically.

Directors must rise above day-to-day operational matters when considering strategy. They must think conceptually and envision the future that could be, and discover ways the organisation can get there.

The board must ensure the organisationCOs strategies, as well as performance, protect and enhance long-term shareholder/stakeholder interests Co that is the primary responsibility of the board. While acknowledging that for some there may be few options, the boardCOs responsibility and role is identifying any long-term strategic options to protect interests of those they serve and their employees.

ItCOs not bad news for every organisation. In times of turmoil there also arise some opportunities.

Companies with a diversity of products and markets, and organisations with a diversity of services will inevitably be more resilient to the impacts of the recession. While the demand for many products and services has declined because of the recession, there is an emerging interest in new and different products and services. Successful organisations diversify and respond to such changing needs.

The board and management must not get locked into their past business model when it no longer is relevant. The world has changed Co they have to discard the old and create a new business concept. TheyCOve got skilled employees, knowledge and facilities. The most successful organisations will position themselves for the future by continuing to fund training and development of critical competencies and innovation. …

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