When the Going Gets Slow: Good Directors Get Going: When the Business Environment Gets Tough and Management Comes under More Operational Pressure, Effective Directors Step Up to the Challenge. but How Can They Best Support Their Management Team? Jens Mueller Offers Some Advice

By Mueller, Jens | New Zealand Management, May 2008 | Go to article overview

When the Going Gets Slow: Good Directors Get Going: When the Business Environment Gets Tough and Management Comes under More Operational Pressure, Effective Directors Step Up to the Challenge. but How Can They Best Support Their Management Team? Jens Mueller Offers Some Advice


Mueller, Jens, New Zealand Management


Governance in any organisation is not a fair-weather friend; it is a tool that can help a firm steer through the tough times ahead. We know that many New Zealand firms are increasingly looking for new independent directors to strengthen their governance team. This is not only a good idea to broaden the skill set of the existing directors, but it helps the firm future-proof itself for tough times ahead.

While management looks at the next week or the next month ahead to operate the business' day-to-day affairs, directors focus on long-term sustainable visions for the firm.

Do directors have special x-ray vision for the future? Certainly not. Their chance of hitting the Lotto jackpot is as bad as yours--but a well-crafted board brings together the many years of successful business experience that can lift a business over the challenges of today, to fly towards the opportunities of tomorrow.

I live in the twilight world of corporate failures, having operated several global firms during turnarounds and recovery, and advising during crises and bankruptcies. This is when boards become the most valuable contributors--by helping management maintain a perspective to focus on the truly important aspects of the business' survival. When cashflow becomes tight and the payables grow faster than the receivables, organisations need the best support they can get. Often, this support comes from their boards.

Signs of slowing business growth are easy to spot--and not just in hindsight. Cash becomes tight, sales forecasts are written with more back-paddling than at the Olympics swimming contests, and staff talk more about doom than opportunity. This is when management is most vulnerable. To prop up failing confidence in the business takes exactly that time away that is required to operate the firm, and thus management needs extra support from the board.

While we know that directors do not become involved in daily operations, in times of worry their expertise is often the closest resource available to most managers. Effective directors step up to the challenge and share their expertise with management to work through these troubled times.

How can directors support a management team when business becomes harder? Six simple rules:

1. BE PROACTIVE. No one wants to talk about bad news unless they have to, so take the initiative to discuss with management how events may affect the firm. If the exchange rate is on a roller-coaster ride and is a material factor in the business, help develop contingency plans to avoid accepting sales without proper margin. Are there activities that are not core to the business and can be stopped until things turn around? Are there alliance and networking opportunities to help the business achieve economies of scale?

2. BE PRESENT. During times of uncertainty, critically important information might change quickly. While during usual business cycles the chairperson might speak with the CEO on the telephone once or twice between board meetings, this contact would intensify when the organisation is stressed. Through more frequent contact, the board remains informed, and the management has support available instantly, rather than waiting for the next scheduled meeting to occur.

3. BE TOLERANT. When things do not go as planned, emotions flare up and discussions become tense at times. There is payroll to worry about, there are suppliers waiting to get paid, and there is the concern among management how the organisation will be able to survive. This is a time when formalities pale against substance. When people spend more time dressing up their resumes than bringing new ideas to the business, it is time to connect with them to share thoughts, develop new approaches jointly and be available as a sounding board.

4. BE CLEAR. We communicate not just through words but also how we say them. Staff and management tend to read nuances, gestures and other non-verbal communication to further interpret what may not have been clearly expressed in writing or through speech. …

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