It is often said that we learn more in tough times than we do in good times, that “what doesn’t kill you, will make you stronger”, that “we live in interesting times” and such like – one might suggest these one liners are designed to encourage us to endure those tough moments we all experience in life. Covid-19 and lockdown certainly brought unanticipated challenges for Boards.
While New Zealand is through the challenge of the initial lockdown plenty more challenges lie ahead for governors of organizations to navigate as we manage our way through the global pandemic and the havoc it is playing on our economies and societies. It is an opportune time for governors, Boards and businesses to reflect back over the past 4 months and think about what have we all learnt, what new ways of working should we hang on to, how do we need to adapt to the ongoing challenging environment that Covid-19 has created?
In my own case, being on the Board of a variety of companies in different sectors (tourism, construction and building products, education, fertility and others), I saw differing degrees of impact of Covid-19. Every company I am on the Board of had its revenue adversely impacted, and significantly so. In some cases virtually all revenue was at risk for some time, in other cases while there was no revenue during lockdown we anticipated a recovery to differing degrees once we moved down levels albeit anticipating a tough operating environment as we moved into a recessionary period.
In every case, all the businesses needed to – and did – cut costs and develop new strategies to look to survive and ultimately come out of both the pandemic and the recession stronger. It is too early to tell if those strategies are successful but at this stage the various Boards I am on and management teams have confidence we are on the right path – and if we get signs that these are not working – alert to the need to adapt.
All Boards moved at pace during the immediate crisis. We went from the usual monthly Board cycle to weekly meetings, and in some cases, twice a week.
The weekly Board meetings tended to focus on the crisis and the issues the business needed to deal with as a result as a matter of urgency – topics such as whether the business needed to close during different levels; if it could operate, how could we do that safely and within government guidelines; whether it made business sense to open in an environment where there may be few customers; whether to apply for government subsidies; whether to pay staff and for how long when the business had no or little revenue; whether to make staff redundant and, if so, the approach to be adopted around that; supporting staff to work from home and how to pay those working from home or who could not work; whether to ask staff to take pay cuts and the extent to which the Board should also do so; whether funding lines and terms were sufficient, appropriate and for how long; and whether equity capital should be raised. Listed companies also needed to think about what disclosures needed to be made to the market – should earnings guidance be withdrawn, should the Board determine not to pay dividends, and what else were we dealing with that was material and should be disclosed.
All these topics are ones that called for directors judgment. How they are handled goes to a company’s ability to immediately survive but also its reputation which is important for long term survival. No-one knew how long the lockdown would continue for and how bad the recession would be that would inevitably follow. Certainly the ability I had to draw on the experience that other companies and other directors were dealing with was invaluable. The director community shared experience and insights across the Boards they sit on but also more broadly in the director community.
Board papers were often prepared at short notice and directors needed to be flexible enough to receive late papers. Similarly, management needed to adapt to more interaction from Board members outside Board meetings over difficult issues that might need consideration. Most Boards have now moved back to the regular Board cycle with the expectation that Board packs will arrive several days before meetings but with the proviso that if we need to meet out of cycle meetings and receive urgent papers we will do so.
All meetings were held electronically whether by zoom, Microsoft teams or other electronic platforms. We all learnt new Boardroom etiquette for meeting electronically (on mute when not talking, etc). Board meetings were very efficient. Money – as well as time – was saved through no need to travel for meetings and the like. Most chairs tried hard to see that all Board members had an opportunity to offer their perspective and ask the questions they needed to get comfortable with a recommendation or decision. However, on stepping back now into physical meetings – while meeting electronically does work – you do miss the more natural flow of discussion and the ability to naturally bounce off one another that a physical meeting provides. While one can always ring a Board colleague for a chat about an issue in advance of an electronic meeting, the physical meeting and the time around that allows that to happen in a less formal way.
One of the interesting things that I am reflecting on for every business I am involved with is – what did we learn during Covid and our response to it that we should hang on to?
For example, at Tourism Holdings, we had focused in the main in the countries we operate in on international tourists. By and large that customer has disappeared for now. Instead, our team pivoted to the domestic market. Our New Zealand campaign was a knock out success – the response has been huge. Similarly in the US the interest in domestic tourism has exceeded expectations. A question for us as a business then is whether we more permanently move our business to cater more consciously to domestic customers alongside international tourists when they return. At Fertility Associates, the changes we made included extending our opening hours to have more time between patients from a social distancing perspective but also to meet customer demand for more consultations outside usual working hours.
In other businesses it has caused us to focus more closely on costs – have we got fat and flabby over the past decade? How can we make ourselves more lean?
In a number of the businesses I am involved with we have asked ourselves should we go to our shareholders and raise more equity to shore up our balance sheet. Indeed many companies have done that. But asking your shareholders for more $ in lean times is pretty tough – if shareholders don’t have funds available to participate it does mean that their investment in the company gets diluted (often at a time when the share price is depressed also). So it’s not a decision to be made lightly if there are other pathways available to see the business through. In the companies I am involved with we have not yet had to ask our shareholders to put their hands in their pockets to support the business with new capital but remain alert to the need to do so if circumstances demand it.
In summary, what are some of my key learnings?
- Stay calm, focus on the things you can control;
- Continue to be willing to ask the hard questions. Often management is juggling multiple balls and they do need directors who can be somewhat more distant to ask the questions they overlooked or did not focus on significantly;
- When others are terse it may not be about you but them and what they are coping with;
- Electronic meetings have their place. Ideally all participants join electronically or all physically-hybrid meetings are hard;
- Physical meetings create opportunities for better interaction and exchange;
- Approach matters with a hypothesis but we willing to be open to adapt;
- Signals by the Board matter more than you might think;
- There will be ways we did things in the past or strategies that we should change going forward. We may have closed off business opportunities by our past approach;
- There is invariably always more cost you can take out of a business to make it more lean; and
- The lessons of my past provided me with the additional resilience needed during this time.
To finish, a fellow director recently sent our Board a quote from Jack Ma at Alibaba: “Today is difficult, tomorrow even harder, but the day after tomorrow must be better”.
Cathy Quinn is a director of a range of listed and unlisted entities including Fletcher Building, Tourism Holdings, Rangatira Investments, Fertility Associates, is a member of the Auckland University Council and the advisory board to the NZ Treasury. Cathy practiced as a corporate lawyer for 34 years until retiring from the MinterEllisonRuddWatts partnership in December 2019. Cathy was a long term legal adviser to a range of businesses in the dairy sector. Cathy remains involved in the dairy industry as a director of a dairy farming business in the Waikato. Cathy was made an officer of the NZ Order of Merit in 2016 for services to the law and women. Cathy was named Verve Clicquot businesswoman of the year in New Zealand in 2010.