Key Questions to Advance Racial Equity in Business Practices

In response to the increased and widespread call for racial justice in recent months, US companies have put out statements in support of the Black Lives Matter movement. While a good first step, management teams and boards need to ensure that companies are now walking the talk through their own business practices. Corporations can be a significant force for good in society, and they must work to advance racial justice by challenging and, when needed, changing practices inside their organizations that may contribute to institutional racism. With this in mind, NACD recently released Key Questions to Advance Racial Equity in Business Practices.

In this new guide, we outline considerations for boards in their review of specific business practices and norms that may inadvertently institutionalize racial inequities.

Role of the CEO

NACD’s recent conversations with directors have revealed a universal component: The role of the CEO makes or breaks a company’s diversity, equity, and inclusion (DE&I) goals. Boards must ensure that they are not only providing oversight of the CEO’s actions on DE&I, but that the full board is making their expectations around diversity clear and known to the management team.

Thus, the board must treat goals around diversity just as they would treat any other business goals. This means they should consider asking management to develop a few critical metrics to track the progress of the company’s workforce diversity against specific goals to evaluate the company’s culture, values, and inclusiveness. Finally, the board should consider tying compensation to DE&I; doing so will encourage the CEO and broader executive team to focus on DE&I.

Specific questions the board should ask itself and management include:

Are we expecting and incentivizing the CEO to create and maintain a racially diverse executive team and workforce? How does the company define diversity in their hiring strategy? Do our hiring decisions drive racially equitable outcomes?Human Capital Management

Human capital management and talent have been growing priorities in the boardroom. Talent must be considered through many lenses including racial diversity. The board should consider the company’s current employee diversity makeup and understand where and why they may have weaknesses.

Is diverse talent only present at the bottom levels of the organization? Is the turnover rate of diverse employees higher than that of non-diverse staff? The board should have a direct line of sight into the company’s talent and performance management approach to assess the effectiveness of recruitment, development, and promotion aimed at diversifying all employee ranks.  

Questions the board can ask itself and management include:

Is there pay variance between people of color and other employees?Do our current compensation practices contribute to or aggravate pay inequities in the organization? If so, what’s the risk of reputational harm and how would we address these inequities?Have we probed whether management has minimized the risk of racial bias in promotion and advancement decisions for staff?Suppliers

Boards can make important demands to evaluate and improve third-party diversity, including of suppliers, vendors, and contractors. Oftentimes, simply posing questions to management on the racial or gender diversity of third-party suppliers can bring awareness to the issue of inequity. It can also force suppliers to reconsider their own practices regarding diversity, equity, and inclusion.

Boards can ask the following questions to garner a deeper understanding of supplier diversity issues:

Does our company have any internal corporate policies regarding the racial diversity of our suppliers?What percentage of our company’s suppliers and third-party providers are minority-owned? Have targets been set on our percentage of minority-owned and -operated third-party suppliers (including financial services companies, law firms, ad agencies, and manufacturing plants, among others)?The Board

While the board’s oversight of the business’ DE&I efforts is imperative for progress, none of these efforts can succeed without the board looking inward as well. Boards must consider their own makeup and culture as they work to assist in navigating that of their businesses. This is the time for directors to evaluate what skillsets they may be lacking on their boards, and if the culture in the boardroom fosters inclusion.

When looking at succession planning, or during active director recruitment, boards must consider the following questions:

Do we typically look for or favor traditional executive experiences, such as serving as a CEO or a chief financial officer? Are there skillsets that our board is missing that could be filled by a diverse director?How do we identify, recruit, and onboard new directors? If we are working with a search firm, is the nominating and governance committee insisting on racially diverse candidates?Momentum around racial justice has risen and receded many times in history. To stop this ebb and flow, and instead create lasting change, now is the moment for boards and their companies to not only take a visible stance against racial injustice, but to take real action to dismantle institutional racism.

Black Lives Matter. COVID-19. Fiduciary Duties. Onboarding.It’s essential that directors know what to focus on and when.

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Has COVID-19 Made It Essential to Have a Crisis Executive on the Board?

Harvard University professors and crisis experts Arnold Howitt and Herman “Dutch” Leonard have been researching and teaching crisis management in a series of Executive Education Programs at the Kennedy School of Government for decades. In a 2012 crisis seminar, they made the following statement which is apropos to our current national health crisis:

“Devastating crisis events of massive size, which we refer to as landscape disasters, have been occurring with distressing regularity…. What kinds of behavior are most valuable and effective in the moment—that is, during rapidly unfolding, urgent, and high consequence events…?”

Although Leonard and Howitt’s emphasis has been on executive education for senior government officials, every organization, both public and private, will encounter an enterprise crisis at one point or another. COVID-19 is that current “rapidly unfolding, urgent, and high consequence event.” In real-time, companies across the globe are realizing a successful response is critically dependent upon their board of directors and senior management working in concert to affect a positive outcome.  

This raises a question: After the dust settles from the current pandemic, will shareholders expect that a company’s board of directors include an executive with a crisis management background, or should that remain within the company’s business continuity management portfolio?

The “Right Stuff” for the New Normal

Amid any crisis, it’s difficult to predict what the new normal will look like, but it can be agreed upon that there will be changes and corporate governance won’t get an exemption. We’re not arguing for or against the inclusion of a crisis executive to a governance board, but rather initiating a discussion on the topic. We recognize that one of the key rules of good board governance is, “Noses in, Fingers out!” But good management requires solid experience. And now is the time to address the possibility of new experience needed in the board room.

Let’s examine more closely what qualities you’d expect an executive with a crisis management background to possess and how that could impact a board of director’s and corporate management’s response to a global crisis such as COVID-19. The Top Ten Essential Qualities of A Crisis Manager, authored by Mohammed Chughtai for Forbes magazine, describes qualities one could argue are relevant to any leader, not just a crisis leader. That said, academics seem to universally agree that these essential qualities are specific and critical to crisis management:

an excellent communicator who understands the business;decisive leadership; andcalm, proactive, committed, creative problem solving.A board of directors’ approach to overseeing the management of a crisis consists of being able to recognize the three major attributes of a crisis: threat, decision time, and uncertainty. What is the threat to the employees or shareholders, or to the financial stability of the corporation, and what is the uncertainty that needs to be reduced as soon as possible? These skills do not need to reside in one individual, but they are needed to recognize the dimensions of a crisis and to develop a coherent strategy to address the issues that need to be changed in the early stages of a crisis warning. (See Warren Phillips and Richard Rimkunas, Crisis Warning, Gordon and Breach, 1983).

Directors of companies need to recognize that these three attributes are present in every event that a company faces in a crisis. Some events come with high threat, short decision time, and high uncertainty (surprise). COVID-19 would seem to be one of these types of events. Deliberative situations characterized as ones with high threat over an extended time and with surprise, like shareholder demands for change, are a different type of event requiring quite different skills. The military and most hospitals practice extensively on response routines for these challenges. Companies do not normally do so. The challenge to a board of directors is to identify the most likely events, to recognize the nature of their corporate culture, and to identify how to recognize these events and how to oversee the management of each type.

Good corporations recognize the most likely challenges like shareholder demands, accounting errors discovered in an audit, or the loss of a major asset in the company. They are well prepared for these issues both in the board and in management. They turn to expert advice from outside the company and usually run regular exercises to make sure everyone is up-to-date on crisis responses.

A company’s reputation and financial success is dependent upon how it responds to a crisis—but all crises are unique. As nominating and governance committees consider the composition of a board of directors in a post-COVID-19 environment, they should consider which skills they need in house and which they can or should contract from elsewhere. The key here is to ensure that skills in house are able to deal with the high threat, short-term time demands, and uncertainty until the dimensions of a crisis are well-defined and the need for response is agreed upon.

We add one more suggestion. The need to buy time to protect the assets and the culture of the company will vary with the dimensions of the crisis. This means that a broadly experienced board, with solid dialogues with management on how to respond to challenges, must begin long before anything erupts.

In order to be ready for any emergency, boards must invite area specialists to review the company’s economic stability, information technology risks, potential for corporate buyout offers, culture, and human resources health, among other challenges, for diagnosing potential weak spots in the corporate management philosophy and posture. We also advocate regular exercises on potential crisis hotspots to keep everyone ready, willing, and able to get their hands dirty when a crisis emerges.

CACI International, like so many businesses around the world, is laser-focused on successfully managing its response to the COVID-19 pandemic. The CACI board of directors and management, in coordination with other defense and aerospace firms, have and will continue to engage the executive and legislative branches of the US government as it responds to the pandemic. The goal of these engagements is to inform and influence executive and congressional actions in response to the crisis to ensure that the critical national security work of the defense industry continues without disruption.

Warren R. Phillips is lead director on CACI’s board, and Daniel P. Walsh is senior vice president and strategic advisor at CACI.

Black Lives Matter. COVID-19. Fiduciary Duties. Onboarding.It’s essential that directors know what to focus on and when.

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Pandemic, Social Upheaval Reshape Some Executive Pay

The social and public health crises that have defined the first half of the year have changed the rules of business and expectations of corporate leadership. Consequently, how compensation committees are now approaching their work and rethinking executive pay practices was the focus of NACD’s first virtual Leading Minds of Compensation peer exchange. Christopher Y. Clark, senior director of partner relations and publisher of NACD Directorship magazine, and Lindsey Baker, associate director of partner relations, moderated the event, which featured the following panelists: Robin Ferracone, founder and CEO of Farient Advisors and director of Trupanion; John Fletcher, director of Repro Med Systems, Axcelis Technologies, ClearPoint Neuro, and Metabolon; Brian Lane, partner at Pay Governance; Wendy Lane, director of Al-Dabbagh Group, Lane Holdings, and Willis Towers Watson; and Steve Van Putten, senior managing director of Pearl Meyer. Highlights of that discussion follow.

What are the key issues underpinning modifications to compensation plans in the current business environment? What are the impacts of those decisions?

John Fletcher: Some crises are a one-time occurrence or of limited duration. The coronavirus pandemic is a different kind of challenge. In the current environment, corporate board members must deal with a high level of ongoing risk, an unknown duration, and an uncertain outcome. In that context, we have compensation committees who will be considering the following issues:

Executive base pay. Should compensation committees insist on executive base pay reductions? If the company is doing furloughs or layoffs, should executives be paid back and under what conditions? When compensation is an element of variable pay, and is less likely to be earned at this time, should that base pay percentage be increased?

Executive incentive. Should compensation committees adjust performance-based pay to align with an adjusted financial outlook? Virtually every company has adjusted its outlook for 2020. Should companies revise their performance goals now, rather than performing a retrospective? If so, should new goals solely reflect quantitative metrics, or are there relative or qualitative measures?

Performance metrics. Are there alternatives to modifying performance metrics and ensuring employees are motivated? Should companies move to quarterly goals? So far, the biggest impact has been in Q2, with some impact in Q3. We don’t know what will happen in Q4.

Perception of compensation changes. If performance measurements and metrics are changed, how will shareholders, employees, and proxy advisors perceive those changes? Did the compensation committee take into account the interests of all constituents when making what were thought to be sound decisions?

What do you expect the impact of these business challenges will be on CEO pay practices?

Robin Ferracone: On the salary piece, I’m anticipating the question of when pay will be restored. A lot of companies are waiting to see if they’re in the clear to bring pay back to what it was. I expect this year we’ll see little increase in compensation—and possibly a general decrease in compensation. The talent market has been destabilized and there’s more supply than demand.

I do want to point out that we have a black swan event and there’s a lot one can learn. I’ve got one client that has a call center. They find there are fewer calls because there is less demand for services; however, because of that, they’re finding that they’re able to respond to calls more quickly and that is improving customer retention. Even companies with durable models can learn something, and that can impact both the measures and the goals in the incentive plan. For those companies that are not so fortunate to have durable business models, there is soul searching to do.

This will have an impact on the measures and what the goals are. I’m expecting to see more qualitative measures to refocus people on the values and ESG concerns that organizations have right now. Secondly, think about the goal ranges and make sure they’re wide enough, durable enough. And use discretion in plans appropriately. One of the things we will see more of is a questioning of long-term incentives. Should we put in more restricted stock as opposed to performance shares? Finally, I think disclosures are going to be case-by-case this year. I think we’ll see better disclosures with a lot of disclosure on the human capital component.

What should compensation committees be considering, beyond the next one or two years?

Steve Van Putten: At the moment, everyone is focused on the near-term impact of this very unusual year. We still need to make hard decisions about temporary pay reductions, if and how to use discretion for 2020 bonuses, and what to do about multi-year incentive goals set in 2020 that are no longer attainable.

Looking to 2021 and beyond, it’s likely we will still be experiencing significantly reduced visibility and increased volatility. When I think about the key areas of attention for compensation committee members beyond the immediate concerns, one that may not be top of mind is whether you have a loss of retention or motivational value in the program. Even if, as we saw with the stock market, prices recovered fairly quickly, it’s likely that the goals you set in early 2020 were either materially impacted or are no longer attainable. And keep in mind that while it may be slow, executive turnover is still happening.

From a director standpoint, what should you do about that? First, don’t overreact. I would start by understanding the magnitude of how your potential and realizable value have been impacted. Also, be certain that those multi-year goals really aren’t attainable because it may be that you have time to catch up and reach those goals. In that regard, proxy advisors are likely to scrutinize any modifications to your long-term rewards.

Given all of that complication, how do you move forward? One thought is to increase the use or weight of restricted stock in future awards. The rule of thumb is that performance-based rewards should represent at least 50 percent of LTI [long-term incentives]. The second [thought] is to address the heightened uncertainty and volatility head-on by allowing yourself more time to set performance goals, but be prepared to consider the use of discretion again.

For companies with a depressed stock price, is it time for a stock option exchange?

Brian Lane: It needs to be considered holistically. For those industries that are still option-heavy—like biotech companies and private companies—a depressed stock price can have significant complications for outstanding equity that is predominantly stock options—and you lose the retentive and motivational value associated with outstanding equity.

There are many things for the compensation committee to consider when evaluating whether a stock option exchange makes sense, namely the fact that you would be repricing management equity awards at a time when your other stakeholders don’t have the opportunity to do the same (e.g., shareholders can’t just as easily reprice their investments).

There are two key implications of that connection between the shareholder experience and the executive experience. First is the need to disclose the business rationale for why an option exchange is being considered, and to that end, understanding whether your institutional investors have released policies or guidelines on option exchanges can be helpful. Second is that the proxy advisors tend to take a pretty hard line on option exchanges, particularly ISS, which has a prescriptive list of features they want to see in order to view an option exchange favorably. Weighing the ISS provisions against what makes sense for the company is really important, as is considering the benefits of an option exchange [for management] in comparison to the experience of shareholders and other company stakeholders.

How do you see the connection between the compensation committee, talent, and the intensified focus on civil rights and workplace equity?

Wendy Lane: Companies are making more explicit recruitment commitments. Think about it: If you have a bias at the beginning, it just gets worse down the line. [Private-equity investment firm] Blackstone Group historically recruited from other Wall Street companies, but is now saying it’s only going to do that as a last resort and instead recruit from historically black colleges and universities.

There’s a really interesting retention program that Intel is doing called WarmLine, which is a way to get a sense of which employees are thinking about leaving and what their disgruntlements are and this has enabled the company to better retain minorities than they had historically. And many companies have more explicit diversity goals when it comes to hiring. Intel set a goal in 2015 that by 2020 they were going to have full representation in their leadership and technology ranks. They achieved that in three years, and in part it was probably because executive pay was tied to a diversity metric, and in part because they made that public declaration. Now, we’re seeing lots of companies making explicit commitments online and they’re backing those up with executive pay practices. My understanding is that CEOs now have about 10 percent of their compensation based on diversity and inclusion metrics and I’m sure this is going to multiple that.

Black Lives Matter. COVID-19. Fiduciary Duties. Onboarding.It’s essential that directors know what to focus on and when.

Become an NACD member today.

NACD: Tools and resources to help guide you in unpredictable times.

Redefining ‘Business as Usual’ in the Boardroom

In May and early June, the KPMG Board Leadership Center surveyed more than 300 directors to gauge the near- and longer-term implications of COVID-19 for board oversight and business operations, strategy, and priorities. Five major themes that may be useful for board leaders to keep in mind as they help guide their boards and companies in the months ahead emerged from the survey results.

1. Understanding the scope of COVID-19, its impact on the company, and management’s response plan has required boards to bring a new level of intensity to their oversight. Boards are rethinking how they should exercise their oversight—for example, through the frequency of communications with the CEO and management, the use of virtual meetings, the use of board committees, and the role of the lead director.

While ultimate responsibility for overseeing the company’s response to COVID-19 resides with the full board, 23 percent of directors said that their boards established a special committee or tapped a standing committee to focus on the company’s response. The committees most commonly tapped were the executive committee (40%) and audit committee (20%). Nearly half of surveyed directors reported that their boards spread responsibility to oversee the company’s response to COVID-19 across all of their standing committees, based on the committees’ areas of responsibility.

More than a quarter (27%) said that their board has held formal (virtual) monthly meetings during the pandemic, with 17.5 percent holding formal weekly meetings. Most directors reported an increase in informal communications with management, with 46 percent reporting weekly or more frequent informal updates.

2. During the immediate response to COVID-19, employees and business continuity were key considerations across management and the board. During the first six months of the pandemic, management’s updates to the board have focused on information around employee health and well-being, financial performance, changes in strategy, scenario planning, and the company’s changing risk profile. Directors cited employee and customer safety (90%) and financial performance (93%), including liquidity and access to capital, as top areas of focus at the board level. Seventy-one percent of directors said they’re focusing on scenario planning for the period of recovery and beyond. More than 40 percent reported that their boards are focusing on the company’s changing risk profile.

Those surveyed reported that human resource issues stemming from COVID-19 have been the subject of substantial discussion on their boards, particularly in the areas of employee safety (90%), employee engagement and morale (74%), and normalizing work-from-home arrangements (64%).

The most challenging operational changes during the immediate pandemic response, according to the survey, included employee health and safety (42%), business continuity (38%), and remote working (36%).

3. Management teams and boards are planning now for the longer term (12–24 months out) as companies and the economy begin to recover. More than half (55%) of directors anticipate that their companies will have to rethink near-term strategy, and 48 percent anticipate the same with regard to long-term strategy in a substantial way as a result of COVID-19.

When asked to identify the recovery path for their companies or industries, 40 percent of director respondents said that they will recover along a protracted path, requiring capital reserves to transform operating models and keep up with new consumer expectations. Forty percent also said that their companies or industries will suffer from the effects of an economic slowdown, but will recover more quickly as consumer demand rebounds. An additional 14 percent responded that their companies or industries have not experienced a downturn as consumer behavior shifted in their favor during COVID-19. Finally, 5 percent said that their companies or industries will struggle due to permanently lowered demand for their offerings, insufficient capital to ride out an extended recession, or poor digital transformation execution.

4. Business plans and processes as well as board oversight processes may need to be reassessed. Directors identified the following as areas that their companies and boards should reassess in a substantial way:

Remote working and alternative work schedules (60%)Strategy—both near-term (55%) and longer-term (48%)Crisis readiness and response (39%)Supply-chain/third-party risk (33%)Labor force, including automation and artificial intelligence (31%)Balance sheet, use of capital for buybacks and dividends (28%)Company’s risk profile and ERM processes (27%)When asked about which aspects of the board’s operations, engagement, and effectiveness the COVID-19 situation has highlighted as potential areas for improvement, directors responded as follows:

Understanding the company’s strategy and risk profile (37%)Willingness to challenge management on fundamental assumptions regarding strategy and risk (33%)Need for more frequent meetings and informational communications (32%)Information flow and reports to the board (25%)Allocation and coordination of risk oversight responsibilities among board committees (19%)When asked how COVID-19 will impact their board’s time commitment over the next several years, 13 percent of directors indicated that there would be a significant time increase, while 43 percent indicated a moderate increase and 40 percent a gradual return to normal.

COVID-19 will continue to have a significant impact on board oversight and operations, upping the need for greater time commitment, a deeper understanding of the business model and strategy, and a more intense focus on the issues that matter most to the success of the company.

5. Business leaders are considering more broadly the role of the corporation in society. When asked in which areas COVID-19 is prompting business leaders to rethink how their companies create long-term, sustainable value, 47 percent of directors identified the company’s commitment to stakeholders, including shareholders, employees, customers, supply chains, and communities; 36 percent noted corporate purpose and long-term focus; and 32 percent cited environmental, social, and governance issues most central to the business.

It’s important to note that the survey was launched before the death of George Floyd. The subsequent civil unrest protesting systemic bias and racism, coupled with the pandemic’s disparate impact on people of color, has caused leaders and their organizations to do some soul-searching and to take a closer look at the ESG issues that are most critical for their companies. How a company addresses employee issues (such as diversity and racial inequality, health and safety, sick leave, and work-from-home arrangements) and communicates with its supply chain and customers regarding their challenges related to COVID-19 are important factors of the S in ESG and in creating sustainable, long-term value.

Indeed, in light of the commitments business leaders have made to various stakeholders in response to the above events, companies’ progress on ESG matters—from employee well-being to addressing social justice issues and climate risk—will be front and center as businesses calibrate their strategies and board oversight in the challenging months ahead.

David A. Brown is executive director of the KPMG Board Leadership Center.

Black Lives Matter. COVID-19. Fiduciary Duties. Onboarding.It’s essential that directors know what to focus on and when.

Become an NACD member today.

NACD: Tools and resources to help guide you in unpredictable times.

Expect a Resurgence of Unions Post-pandemic

Everyone wants to know what the world and the world of business will look like once the COVID-19 pandemic abates. Numerous articles have appeared in business publications such as The Atlantic (May  6, 2020), Forbes (April 15, 2020), and The Economist (April 2, 2020) to boldly suggest that business and life will be different for the foreseeable future—and possibly even for good.

Meanwhile, for the past three decades, union membership has consistently declined with membership across the United States now below 11 percent, down from more than 20 percent in 1984. Some boards and executive leaders have confidently moved forward believing that unions are dead and their companies will not be targets of union organizing. Consequently, the topic does not often come up in boardrooms, executive meetings, or strategic planning sessions. Why? Most likely it is because unions are “out of sight, out of mind.”

During the first two decades of the twenty-first century, employee actions and unionization were relatively quiet, even during the recession beginning in 2008. Not so subtly, however, employee protests and walk-outs against management have materialized at iconic brands such as Amazon.com, Google, Whole Foods Market, Tesla, Walmart, Target Corp., and Instacart. These vocal and public actions speak out against the lack of leadership attention to topics such as sexual assault, pay inequity and the racial pay gap, required arbitration in employment agreements, workplace safety, diversity and inclusion, company culture, and other issues important to employees.

Public reaction to such worker actions has been sympathetic, especially among younger generations. Additionally, during the Democratic presidential primaries, these generations largely favored Bernie Sanders’ candidacy. His progressive message resonated as it focused on equality and health care for all, uplifting diversity, taxing the wealthy to provide for poorer Americans, workplace safety, and related initiatives. While Sanders ultimately withdrew from the Democratic primaries, his message lives on in the minds of younger generations. They believe in the right to their personal safety and the government’s role in alleviating the struggle they face living in expensive areas of the country.

In conveying their message publicly, many millennials and other young generational employees believe they, specifically, have been adversely affected by this pandemic, including with regards to workplace safety, job losses, pay cuts, and losses of or reductions in benefits. While employment conditions may have been excellent prior to the pandemic, with free or low-cost cafeterias, gyms, child care, and many other benefits, these are now gone when working from home or not working at all. These generations’ vocal and public calls to company leadership revolve around taking affirmative, active, engaging, and sustained action in their interest. And if corporate leadership does not, enter the possible resurgence of union activity.

While some boards of publicly listed and privately held companies may have discussed possible unionization or remaining union-free, discussion is only talk—and many companies have not invested appropriately in corporate culture to ensure that employees feel supported from within. Indeed, in a Duke University survey, researchers queried more than 1,000 senior executives about corporate culture. Surprisingly, 69 percent said their firms underinvest in culture, only 16 percent believe their firm’s culture is where it needs to be, and 92 percent said improving corporate culture would increase their company’s value.

What can boards do to engage with management to create and sustain a culture that benefits the company, its shareholders or owners, and employees alike? Here are four actionable, agile, and transformational recommendations:

Place culture at the top of the strategic objectives list. Understand, accept, and agree that without a strong, open, honest, transparent, vibrant, collegial, safe, diverse, respectful culture, companies cannot achieve organizational excellence, successful operational execution, customer loyalty, sustainability, and financial objectives.Ensure every executive leadership and business function has a seat at the table. While this recommendation saw improvement over the past decade, the expertise of the people at the table needs to be assessed frequently. Take a look, for example, at the July/August 2015 issue of NACD Directorship magazine which published an article titled, “The HR Threat to Board Effectiveness.” Just because a business function is represented at the table does not mean that the person representing the function possesses the knowledge, know-how, and expertise across the business to remain effective.Involve, listen, and then act. Too often, companies make decisions at the top and then cascade the decisions downward to lower-level teams. In doing so, the members of the teams may often ponder, “Why didn’t they ask for our input and ideas before making another decision that affects us?” If a board and an executive leadership team have concluded that change and transformation are required in the company, begin the conversation with as many team members as possible by asking the question, “How can we best solve this problem?” Consider forming cross-functional teams to work collaboratively on actionable, thoughtful solutions. Once these decisions are approved by senior leadership and, if necessary, the board, and with a member of the management team as an involved sponsor, give those team members the responsibility to act. And when success comes, recognize and praise them for their achievements.Remember: not just once, but always. Boards and senior executive leadership acting on these recommendations need to remember that these are not one-time events. Transformational change needs to be sustainable change. Thoughtful planning which involves the collective organizational team must be consistent, thoughtful, and open to continuous improvement and necessary change. Involve everyone, not just decision-makers. Let teams take responsibility for offering ideas and acting on their suggestions.Taking these recommendations into account can provide greater assurance that your teams are an engaged part of your company culture and sustainable business successes. And with your team successes, there will be far fewer team members taking their message to the public, to the press, and to the unions.

Hedley Lawson is the global managing partner of and Victor Deksnys is an alliance partner with Aligned Growth Partners, LLC.

Black Lives Matter. COVID-19. Fiduciary Duties. Onboarding.It’s essential that directors know what to focus on and when.

Become an NACD member today.

NACD: Tools and resources to help guide you in unpredictable times.

5 Essential Adaptive Practices for Agile Leaders

Adaptive leadership has taken on a new meaning during this current climate. It has challenged leaders to shift suddenly, mentally and physically, but also practically. Metrics tracked in February to gauge the health of the business are not the same metrics that need monitoring today. Strategic conversations have shifted to tactical ones. And sensitive topics that would have waited for in-person discussions are now taking place inside a video conference.
Leaders at all levels are drawing upon the critical elements of their leadership brand to help them navigate daily uncertainty. At this moment, the capacity to effectively perform the leadership responsibilities needed at scale in large, complex systems requires the non-linear interplay of priorities, functions, politics, and people. Adaptive leadership has never been more critical toward influencing dynamics in productive ways.
“Executives leading difficult change initiatives are often blissfully ignorant of an approaching threat until it is too late to respond.”
~Ronald Heifetz, the creator of Adaptive Leadership theory
Leadership Competencies of the Moment 
Although we don’t know what will be different on the other side of this present crisis, we do know transformational, adaptive change will have occurred at a deep level. Truly agile leaders need to understand the required shift in their contribution from driving results through hands-on influence to becoming:
Architects of change
Developers of flexible systems and organizations
Business strategists
Risk mitigators
Value creators
These specific leadership competencies require good judgment, sophisticated and courageous people skills, strategic thinking abilities, and a host of other valuable and rare assets. Most importantly, they are critical to the moment we now find ourselves. The following five essential adaptive practices serve as a starting point for agile leaders:
Accept that the playbook didn’t have this scenario in it 
A leader’s ability to tolerate ambiguity, and not act or react instantly, can be especially challenging for those with trained expectations for instant results. As an agile leader, understanding how today’s events will impact tomorrow’s plans is crucial. Adjust to the real business challenges of the moment, recognizing the metrics you previously led with no longer apply.
Use the immediacy of this crisis as “case-in-point” teaching 
As an agile leader, there’s no better time than the present to develop your people with real-world applications. Use the fluidity of this crisis to hear different perspectives. Manage conflict that emerges through consistent communication, providing context and insight to the decisions. Model accountability by accepting your portion of responsibility for what unfolds, the good, the bad, and the ugly. This example will set the expectations (and give permission) for others to follow.
Increase peer-to-peer learning, sharing, and support 
During unprecedented times like these, collaboration and team alignment across functions are incredibly important. Create an outlet to come together with other leaders to discuss the unknowns, share the questions asked, and talk candidly about what’s working and what’s not. Look for the alternate, and possibly better, future that the present challenge opens up and engage your people in defining change in order to meet that future.  Can your organization emerge even stronger and more rapidly aligned to its future than would have been possible without the disruption?
Challenge your assumptions by getting out of your intellectual and emotional comfort zone
Leading right now is a powerful learning experience that is sure to challenge one’s assumptions and routines. Adaptive leadership entails mobilizing others to be a part of the solution, to share in the risk/reward, and to foster individual role ownership and the outcomes produced.
Build-in time and structure for reflection and mindfulness 
Agile leadership in a time of crisis means digesting the experiences one has and consciously connecting the dots, so the lessons live on past this one moment in time. Even in this ever-changing environment, time and thoughtful attention—quietly alone—or in conversation with a mentor, peer, or coach can’t be overlooked. Schedule in the time so that you are ready for what tomorrow will bring.
Ronald Heifetz, who introduced the adaptive leadership model with Marty Linsky, defines it as the act of mobilizing a group of individuals to handle tough challenges and emerge triumphant in the end. Today’s crisis will take momentous effort and will not be easy. Developing these five essential adaptive practices will better enable leaders and their organizations to weather this, and future storms, emerging stronger than before.
 
Written by Kim Bohr
COO and Head of the Effective Organizations practice at Waldron, a CPI Firm
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The Leading Advantage: Realignment and Re-Engagement

Kathy O’Halloran of Power Connections, a CPI Firm, joins the show with insights on how to re-engage employees.  Whether returning to the office or working remotely, leaders will often need to establish new expectations of their teams.  With new goals and objectives comes a need for increased communication, better employer support, and greater levels of transparency.
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The Leading Advantage: The Art of Respectful Workplace Re-Entry

Roberta Bemiller, Director of Leadership Development at CPI Buffalo/Niagara, joins the show to guide leaders through practical re-entry plans. With an analytical, yet caring approach leaders can help their teams prepare to come back to the office or continue to work remotely. Flexibility is paramount in these times, but having good data helps leaders make informed decisions that are right for the organization and their people.
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The Leading Advantage: Reskilling

Kirsty Turnbull of Audrey Page & Associates, a CPI Firm, joins us to discuss Reskilling in the workplace.  Organizations are struggling to find talent that meets the constantly changing demands of the market.  By investing in employees and planning for the future, leaders can create a more engaged workforce that can adapt to new challenges and opportunities.
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There Is No New Normal – Now What?

Join us on July 16th for a complimentary webinar on Re-Onboarding.
 
Life as we know it, personally and professionally, has forever changed. There will be no “new normal”; but rather the re-entry to work and office life will undergo radical reinvention. Companies have accelerated the integration of new processes, technologies, and systems to adjust to the needs of our current environment at lightning speed. As teams around the globe have gone remote seemingly overnight, many employers are realizing that productivity, in many cases, has increased in addition to other benefits such as lower costs, efficiency, greater reach, time savings, and more time with loved ones. Microsoft, Airbnb, and Google will continue to work from home through the end of the year, at a minimum. Twitter said their employees can choose to work from home forever.
Many organizations are viewing the pandemic as an opportunity to flourish, catalyzing positive change, and innovation. This is an opportunity for companies to differentiate themselves as to how they will get employees up and running and provide better positioning to attract and retain talent. Employers will need to double down on energizing their employees and creating engagement and commitment. Now is the time to demonstrate an investment in employees.
Our world of work was gradually becoming more digital –incorporating technology and AI – as well as more focused on psychological safety, incorporating wellbeing and employee safety measures. However, this event has expedited this reprioritization in record time. A McKinsey Global Institute study in 2017 estimated that as much as 14 percent of the global workforce would have to switch occupations or acquire new skills by 2030 due to automation and artificial intelligence. In its recent survey, 87 percent of executives said they were experiencing skill gaps in the workforce or expected them within a few years. New research from Institute for Corporate Productivity (i4cp) found that those organizations with a focus on holistic well-being are seeing greater business benefits, not only with a healthier workforce but with 2x the overall productivity of low performance organizations, 2x the rate of key talent retention, and 7x return on innovation and creativity.
In light of company operating models evolving quickly to accommodate this rapidly changing environment, roles are shifting, new jobs are being created, and certain competencies, such as agility and resilience, have become universally essential. So, what does that mean for employees and leaders as they re-engage and onboard into the reimagined workplace? Each of us will need to reassess our role or, in some cases, work with our organization to create a new role that is aligned with the new business strategy. Leaders are adjusting how they manage others remotely or in a blended environment. Employees are no longer necessarily limited by their job description, but rather will need to craft and personalize their role.
This time of self-reflection and adaptation into this reimagined workplace might seem daunting, but it can also be an exciting time of realignment and reinvention. Consider applying Michael Watkin’s “The First 90 Days” framework, initially intended for new hires, to re-onboarding into this new world of work. Typically, this is a framework for a new hire starting their job, but it’s also pertinent to long-standing employees in this moment. Below are some of the steps that are most relevant to the current environment:
Prepare yourself: The pandemic has validated the importance of companies taking care of their people first, attending to their wellness and basic needs. Make sure to take advantage of any offerings your company provides and continue to take mental health breaks. Equip yourself with resources available to help maximize your reintegration. Skills, behaviors and job tasks that once made one successful may not apply in this new world. It will be important to “let go of the past and embrace the imperatives of the new situation to give yourself a running start.” Build in time to think about how to personalize your job experience: what tasks make sense, what needs to change, what should you stop focusing on, and what will be the nature of your relationship with your boss?
Accelerate your learning: Adapting skills and roles will be crucial to building operating-model resilience. Competencies such as agility, communication, and collaboration are now increasingly important in the selection and development of talent. The unknown is everywhere. Those who embrace this reality will do well in adjusting, flexing, and better integrating into the reimagined workplace. Communication and collaboration have proven to be key during remote work; even though we have been physically distant, in some ways we’re more socially connected than ever before. As Marissa Keshner, Director of Learning & Growth at Amherst Holdings puts it, “How do we take this opportunity where we’re in a completely different time to be a driving force for what we’ve talked about for a while i.e. virtual new hire onboarding? Where can we be creative and use this time to push forward?”Match your strategy to the situation: In the reopening it will be essential for leaders to craft messages to engage and inspire their team with full transparency into the vision of the future – what remains the same and what has changed? This is a time to revisit goals and results with your manager. How do we manage performance appropriately in this new world and what expectations need to be shifted?
Secure early wins: Early success doesn’t just mean improving business results; you can demonstrate value in other ways, such as creating a culture where risk-taking and trying something new is encouraged. Even if your new approach fails, it’s a win that the shifting mindset is one of innovation and learning. Managing remote or blended teams is new for many leaders – the transition to this set-up around the globe has been remarkable and should be celebrated. Before the pandemic, many technology companies had in-person standups – quick 10- to 15-minute gatherings at the start of the day to update each other on what they accomplished yesterday and what they’ll work on today; now it has successfully shifted over to virtual. It’s important to continue finding ways to celebrate these successes to keep up momentum, engagement, and motivation.
Negotiate success: It is critical for leaders to find ways to engage their team in this new blended environment where some employees remain remote and some may be heading back to the office. Consider how and when to include people in conversations, what is the appropriate team meeting structure, and ways to motivate the team to keep morale high. For direct report, find new approaches to have a productive working relationship with your manager and share your expectations of personal development and preferred work style during this time.
Keep your balance: Many of us are finding it can be hard to have work-life balance when your office is your home. Especially for those who are in cities and confined both physically and socially. Instead, it’s time to embrace work-life integration where employees determine benefits that help to achieve their defined balance. For example, many employees may need to shift their hours if they have school-age children. Remember to find ways to relieve stress and make a conscious effort to take your mind off of work once you “close out” for the day. Taking walks and focusing on hobbies will go a long way to re-energize and prevent burnout. Leaders need to model behaviors – exude a sense of calm, share what they’re doing for self-care, and encourage time off when possible.
Though nobody knows what’s next, it’s important to embrace the current spirit of innovation and transformation by taking calculated risks, learning from failure and continuing to stay connected with others.  Approaching this profound change in the work environment as a new onboarding opportunity allows for unique approaches and implementation of long overdue enhancements.  Support your team with flexibility and be open to hearing about new obstacles and opportunities.  This is not a time to fall back on what is comfortable, but to embrace evolution and its accompanying long-lasting and exponential returns.
 
Written by Liana Gordon
Director of Executive Coaching & Development
The Ayers Group, a Career Partners International Firm
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