Building Board Crisis Management (and Prevention) Capacity
Despite great intentions otherwise, nonprofit – and for-profit – boards frequent the news. While the Planned Parenthood crisis is front and center now, headlines have covered all sorts of “scandals” in recent years (ie. Penn State, Target, Enron, Sweet Briar College). Even the ALS board faced the spotlight during last year’s wildly successful “Ice Bucket Challenge.” In every case, scrutiny came suddenly and thoughtful, informed board responses were paramount. This being the case, a well defined board crisis management plan is of the up-most importance.
Of course, not every crisis hits the headlines, but even an internal crisis can jolt and jeopardize an organization. Consider the board that quietly excuses its CEO for cause. Or one that faces a firestorm from constituents for failed communication about a shift in strategy.
Lack of Planning
Ironically, as common as crises seem to be these days, planning for them is not. According to Deloitte, 80% of business leaders expect their companies to face a crisis within the year, yet barely half have plans to manage them. Even among those that do, there is a lack of planning around the board’s role in particular, which differs from that of management in a crisis.
Board-level Crises
Management reports to the board, of course, but the board is “outranked” by shareholders (or stakeholders, in the nonprofit sector), regulators, and legal authorities. So, as Deloitte explains, a situation that calls for their involvement likely warrants board response. Such organizational crises might include issues around reputation, share price (in the corporate sector), charitable purpose (in the nonprofit sector), major litigation, regulatory sanctions, viability, and leadership scandal.
Storm Preparation
Naturally, boards that include directors who have experienced organizational crises – no matter the outcome — are better prepared for storms. Also important is clarity about lines of authority during a crisis to alleviate confusion.
No matter what role the board will play, it must have access to “timely, accurate information,” emphasizes Deloitte. And getting that can present its own challenge. If the board typically relies upon management for organizational information, there likely will be a need to develop “new antennae…and a renewed willingness to ask tough questions.” The board might rely upon third parties or non-leadership employees for data, but determining “what information to watch is a matter of strategy; making it happen can become a question of technology and processes.”
That rings true not only for crisis management, but also crisis avoidance. Board members can — and should — exercise their authority in determining what and how information will be captured, presented, and accessed. Board management software, obviously, can play an essential role in effective crisis planning.
Since crisis planning is a growing responsibility of every board, here are some tips from Forbes:
Advice to Boards
- Know the buck will really stop with you. Public expectation is more clear now than ever about board culpability.
- Proactivity matters. Boards need to anticipate and get out in front of problems, or risk losing credibility.
- Re-balance levels of intrusiveness vs. hands-off governance. The former governance mantra, “noses in, thumbs out,” is obsolete. Due to the “ubiquity of crisis and denial” and speed of communication, boards can’t wait to be told what matters.
- Risk committees are necessary, not sufficient. Best practice is to look not only at risk metrics, but also consider anecdotal data throughout the organization.
- Full board must monitor emerging risks. “Some new form of dashboard” is necessary for reviewing emerging issues and risks.
- Don’t put too much credence in crisis planning. It’s essential, and useful for outlining appropriate board and management processes in a crisis, but planning won’t protect you from the “black swan crises that come from nowhere.”
- Don’t let lawyers control everything. Involve counsel, but recognize the responsibility for managing public opinion is shared among other experts.
- Adjust your expectation of timing: Immediacy must rule. Today’s news travels within seconds, so boards must respond accordingly.
- Make sure your board is high-functioning before a crisis occurs. Unresolved conflict and ineffectiveness make crisis management worse, so optimize board performance now (and always).
- Finally, the Board can provide a firm moral center to its organization in crisis. An effective board can help an organization emerge from a crisis even stronger.
— Sonia J. Stamm, Governance Consultant at BoardEffect
