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Henley Business School Andrew Kakabadse - Henley Business School Finland

How will your board rise to the challenge of unexpected challenges?

Professor Andrew Kakabadse maintains that ‘so many board directors are ill-prepared and ill-equipped to face even regular challenges, so they find themselves completely out of their depth when major disruptions occur. Our programme addresses many of the issues this research has raised, but the culture within organisations needs to change.’

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Much of our established management thinking is based on companies operating in a steady state environment, or one of incremental change. But businesses are increasingly facing extraordinary disruptions and there is growing pressure for greater accountability in how leaders address these issues.

Many boards are arguably not equipped to deal with extraordinary disruptions and are often found to be unaligned with their management team. Previous research has shown that as many as 30% of top management teams in the UK, 39% in the US, and 56% in the Australian Public Service recognise that fundamental divisions exist within their top teams when considering future planning and direction.

The latest research on the way that boards respond to extraordinary disruptions, conducted by global professional services firm, Alvarez & Marsal, in conjunction with Henley Business School identified the following nine key findings, and have developed practical guidance for leadership teams, by establishing a set of core disciplines to increase the chances of success:

1. There are four distinct types of extraordinary disruption

Transformational: planned, internal disruption such as turnaround, or strategic transformation.
Reputational: unplanned and internal, such as fraud, misconduct, management conflict, product integrity and safety.
Hostile: unplanned, external disruption, for example: credit crunch, hostile bids, cyber-attacks, active investors.
Creative: The organisation is itself the disruptor, eg start-ups disrupting established players.

2. Boards must be strong enough to ‘call out the issue’ at an early stage

Boards are often focused on the known risks and therefore need to allocate the time required to identify the ‘unknown unknowns’. They should be alert to blockers that impede the ability of board members to call out the issue, and establishing a board culture that encourages open communication is critical.

3. Disruptions require difference approaches

When addressing extraordinary disruptions the Chairman and/or CEO overwhelmingly take on even more critical leadership roles. Leadership styles utilised by business leaders to address each type of disruption.

4. The four leadership qualities that must be in place

Leaders need particularly high levels of emotional resilience, exceptional communication skills, and high levels of IQ, EQ (Emotional Quotient), XQ (Execution Quotient) and integrity.

5. Leaders must maintain 7 core disciplines

Combining these disciplines throughout an extraordinary disruption brings about a greater likelihood of success:

  1. Ensure a constructive chairman-CEO relationship
  2. Articulate the purpose, take calculated risks and generate pace
  3. Be evidence-led
  4. Maintain strategic alignment and engagement between the board and management
  5. Get the right people in place
  6. Ensure effective stakeholder management (including political and social dimensions)
  7. Use trusted, independent advisors

6. Conventional governance prescriptions may not apply

Whilst Corporate Governance Codes are based on principles, their application can be prescriptive and designed for the incremental, rather than the extraordinary.

7. The CEO superman is in decline

During extraordinary disruption many leaders feel overwhelmed, emotionally challenged and sometimes unable to cope. Conventional leadership will not hold all the answers – more collaborative and contextually intelligent leaders are needed.

8. The role of the chairman becomes pivotal

The Chairman of the Board is often called upon to assume a stronger leadership role during extraordinary disruptions and has a critical role in maintaining strategic leadership and alignment.

9. A simple process framework for success

Successful boards follow a dynamic process in dealing with extraordinary disruption. We have presented this process in a framework divided into three stages; in reality these may occur concurrently:

Leadership and discipline - Diagram 2

Professor Andrew Kakabadse maintains that ‘so many board directors are ill-prepared and ill-equipped to face even regular challenges, so they find themselves completely out of their depth when major disruptions occur. The Henley Boardroom Skills programme addresses many of the issues this research has raised, but the culture within organisations needs to change.’

Read the full report here.

Professori Andrew Kakabadse - Henley Business School Suomessa

Professor Andrew Kakabadse

Professor Andrew Kakabadse is Professor of Governance & Leadership, Programme Director for the Board Directors’ Programme and Boardroom Skills programme as well as Chairman of the Henley Directors’ Forum. He has undertaken global studies spanning over 20,000 organisations (in the private, public and third sector) and 41 countries. His research focuses on the areas of board performance, governance, leadership and policy.

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