More important than ever
Supervisory boards take on a crucial role in times of crisis: they support the management in dealing with current challenges and strengthen the company for the future. This requires, first and foremost, professional and determined action – especially when times are difficult. Prof. Susanne Kalss and Prof. Werner Hoffmann, Academic Directors of the Governance Excellence program for supervisory board members offered by the WU Executive Academy, explain what’s most needed in a difficult phase and the special part that supervisory boards (can) play in challenging times.
Coronavirus crisis and no light at the end of the tunnel: the repercussions of the global pandemic have caused the economy to stumble and companies to face immense challenges. What’s important now is stamina, making use of growth opportunities, and rethinking many existing processes. This is where supervisory boards enter the stage. Corporate oversight has already been redefined and thoroughly professionalized during the past years, and the crisis is going to renew the need for this development.
What should supervisory board members observe when it comes to their responsibilities; will they fundamentally change? Werner Hoffmann, professor and Head of the Institute for Strategic Management at the Vienna University of Economics and Business, and Susanne Kalss, Head of the Institute for Corporate Law at same university, serve as Academic Directors of the WU Executive Academy’s Governance Excellence program for supervisory board members, which will be admitting a new cohort of students in fall. They agree that corporate oversight will have to step up its game, even more so as the current situation does not compare to other crises.
Prof. Susanne Kalss
Usually, a crisis occurs in the aftermath of management errors, for example a misjudgment of a technical development. But managers cannot be blamed for the ongoing crisis. Tourism revenues, for example, have plummeted overnight.
So what is important now? Werner Hoffmann and Susanne Kalss define the top six criteria for how professional supervisory board members should interpret their role against the backdrop of the current situation:
It was never the role of supervisory board members to act as shadow CEOs, but now more than ever, they have to act as “vigilant mentors and critical advisors to the management board,” Kalss underlines. This is especially important in cases where managers are paralyzed from shock and feel overwhelmed by the looming challenges their responsibilities entail. In such cases, the supervisory board must strike the right balance between critical distance and active engagement.
Analyzing our mistakes can help us learn from a crisis. It could lead to the realization that the company was not sufficiently prepared for remote work, or that reactions in certain areas took too long. It could also uncover a need to overhaul contingency plans and make sure they are constantly updated – because this will certainly not be the last crisis.
The supervisory board has to contribute to creating the necessary equilibrium between the need to cut costs and safeguard solvency on the one hand and making the best of growth opportunities on the other hand, Werner Hoffmann explains. In all of this, team work and “clicking” with the management is key.
No crisis is like another, and unforeseen developments can destroy the best of plans – the coronavirus pandemic has proven as much. In the future, we will need to envision different scenarios. What, for example, could be done if revenues are slim to none? Are business units prepared to act self-sufficiently; is everything set for crisis communication?
The crisis made virtual meetings necessary, and that was true also for the work of supervisory boards. “The potential for increasing efficiency this brings about will probably be appreciated also in the future,” Werner Hoffmann says. At the same time, it has become apparent that building trust and finding creative solutions for complex problems is often easier done in physical meetings. In any way, supervisory board members are expected not to fight digitization, especially because it is a crucial issue for companies across the board. When it comes to the everyday work of the supervisory board members and their dealings with the management as well as with other company stakeholders, the online and the offline world need to converge in a consistent manner, as Susanne Kalss emphasizes: “Depending on what is needed as well as the time, topic, and location, the right choice needs to be made.”
Much like an experienced coxswain finds the right route through stormy waters, supervisory board members need to act as navigators. “This job is all about maintaining and regaining tried-and-tested business fields as well as finding new opportunities,” Susanne Kalss says. Maybe it has become clear now that a business model used in the past has been miscalculated and needs to be refashioned. This way, the crisis also offers a chance to change tack – and the supervisory board will need to play an active part in that.
For more information about the Governance Excellence program, please click here.