Board decision-making under pressure

[00:00:00] Intro: Welcome to Minutes by Boardcycle, where in each episode we pack the insights from one of Australia's boardroom leaders into just a few minutes.

[00:00:08] In today's podcast, host Richard Conway interviews Penny Winn, director of Ampol, CSR, Super Retail Group, and the ANU Foundation on board decision making under pressure.

[00:00:25] Richard Conway: Hello and welcome to the Minutes podcast. I'm your host, Richard Conway. In today's podcast, we're going to be talking about board decision making under pressure.

[00:00:33] Richard Conway: Joining me to discuss this topic is Penny Winn. Penny's the director of listed companies at Ampol, CSR and Super Retail Group, and is also a director of the ANU Foundation. Welcome to the podcast, Penny.

[00:00:47] Penny Winn: Thanks, Richard. It's great to be with you today.

[00:00:49] Richard Conway: So Penny, to jump right in, normally board decision making is very structured. So the meetings are planned, papers and briefings are given. The board has [00:01:00] time to discuss and consider before it makes its decision. But as a Director, you've been on a few boards that have had to work in a much more dynamic decision-making environment than that.

[00:01:10] Richard Conway: So I wanted to start off by asking you if you could tell us a little bit about those experiences that you've had.

[00:01:17] Penny Winn: Thanks, Richard. I think one of the most dynamic and I guess, less planned eras in my board career is obviously the year of COVID. So, 2020 was a really interesting year for all of our boards. I was on about four listed boards at the time.

[00:01:31] Penny Winn: And you know, we started the year with a takeover offer on one of them, which actually went away at the beginning because COVID came. Then COVID hit and then we had obviously the whole, you know, the whole challenge of the COVID era. And then, at the end of the year, we had another takeover offer. So it was a very busy year.

[00:01:50] Penny Winn: I think, normally, in a normal year, you would probably go, you know, maximum 15 board meetings, if you're, you know, even if that would be a very busy year.

[00:01:58] Penny Winn: And for many of [00:02:00] my boards, it was more like 50 board meetings in that year. And I think that was, I think for all of the companies I was working with, it was kind of like initially when COVID struck, no one knew where the world was going. Demand suddenly fell into a hole. There was a crisis on top of crisis.

[00:02:14] Penny Winn: So we had a health crisis that led to an economic crisis that led to all of these other crises. So, you know, it was a matter of that, you know, the planning went out the window. The focus needed to be on day-to-day focus. Firstly on safety, safety of individuals who worked for you and making sure that they were healthy, safety of customers, you had to make decisions about, well, if the board gets, you know, one of the board people, board directors gets knocked over by the virus?

[00:02:40] Penny Winn: What do we do if, you know, it takes out the board? What do we do if it takes out the management team? And I guess, it was very much a focus on survival. So our meeting intensity went from, you know, as I said, it was typically almost, in those early days, once a week, and it was very much unstructured.

[00:02:56] Penny Winn: But we were focused very much upon liquidity, safety and making [00:03:00] sure that the businesses were able to continue to operate, because we weren't sure what was ahead of us. And I think that was probably, and you know, as, as the crisis continue to operate.

[00:03:09] Penny Winn: Further into it, I think, we all got a better understanding as to how to organise and how to operate the business. But it was a good 18 months, I think, before we really were out of that, more chaotic approach to running our board meetings. And I think that, there are other years and other crises.

[00:03:25] Penny Winn: The fact that we had so many crises on top of crises and tested the risk management and crisis management for all of these businesses.

[00:03:33] Richard Conway: Yeah, and I think, I wanted to follow up on the COVID example because I think it's very rare that you get the chance where you can see across different companies responding to the same event. Often, you know, there are crisis events, but they happen to an individual company and they're hard to compare.

[00:03:50] Richard Conway: Were there companies that dealt with that better, or were there strong similarities between the ways that the companies dealt with that [00:04:00] crisis?

[00:04:00] Penny Winn: I think they were different, it depended on the business. So yes, the business, one of our businesses was in property and real estate. And so it was actually able to carry on. Because these things didn't have a massively large workforce.

[00:04:13] Penny Winn: So they, it typically, the way you had the grouping of companies, that had similar approaches, well, where you had a lot of employees. So you're, you know, you're dealing with health and safety of thousands of people. You also had lots of, you're a direct to consumer, so I think there was a direct to consumer focus on it.

[00:04:30] Penny Winn: And I think all of my businesses actually had pretty good balance sheets, but where you had a less strong balance sheet, it became even more challenging.

[00:04:37] Penny Winn: So I think we all had varying degrees of it, but I think the focus was mainly on those organisations that had a customer, consumer facing, a large workforce, and actually, maybe a highly leveraged balance sheet.

[00:04:50] Richard Conway: Absolutely, and so, Penny, thinking about those kind of experiences and general principles, what do you think the key things are that boards [00:05:00] need to do to ensure that they're continuing to make the best possible decisions in those kinds of scenarios where that planned, well-briefed kind of approach has gone out the window?

[00:05:11] Penny Winn: Think about 2020, we started out with the fires and then we had the, well, then we had the COVID crisis, which is the health on top of economic. You know, all of these different things.

[00:05:19] Penny Winn: And you typically, with your risk management, you actually look at individual pieces of that. But you don't lay a risk upon risk upon risk. And I think what's really critical and what we've all learned from that is making sure that you, well, you can't predict the exact issue or incident that's going to happen, you need to actually have exercised very strongly your responses to crises and to make sure that your risk management framework actually has been really rigorously tested.

[00:05:46] Penny Winn: So I think that's really, you know, getting that muscle memory going ahead of the crisis is a learning I think we've all taken out of it. And I think all boards are probably doing a lot more of that now than they ever did before.

[00:05:57] Penny Winn: I think one of the things that, you know, [00:06:00] as you go through these crises, you need to make sure you, you need to be a match fit. So it's very hard if you're bringing out directors with training wheels or asking, you know, this is a time where everything needs to be working.

[00:06:11] Penny Winn: You know, your communication networks need to be working. You don't actually need to be bringing people along for the ride. So it's almost like you almost have to potentially sideline some of these directors or, maybe form a subcommittee of the board to work with the management to make sure that the business keeps going.

[00:06:27] Penny Winn: Because execution and the speed of change and the speed of response is critical during that time. I think it's important during that time is also, while management's in the weeds of managing these types of incidents, it's important for the board to have the outside in view, to have the horizon view to be able to share with the management team what's happening and what are they thinking, you know. And actually help the coach, you know, have that outside in view to help coach management on how to,to understand other things that are coming at management that they may not be aware of because they're so focused on dealing [00:07:00] with the day to day response.

[00:07:01] Penny Winn: So I think there are different roles for the board to play, but I think most importantly is making sure that your response management, risk management is working really well, that you are helping to guide management, and that you are taking that outside in view.

[00:07:15] Richard Conway: Yeah. And I guess, Penny, would it be fair to say that, in a crisis situation like COVID, there is a really strong role for directors to play bringing practices from other companies and surfacing those in different places?

[00:07:30] Penny Winn: Indeed. It is great because if you've got a number of companies who have got these similar things, there is that sharing of information across various businesses. Not specifically go to this bank and do this, but it was, you know, have you thought about this?

[00:07:42] Penny Winn: And, you know, with different perspectives, it actually helped to bring that in and get ahead of some of the secondary crises that often happen because you have seen it happen in other organisations and help management to manage that.

[00:07:56] Richard Conway: And Penny, you talked about, during a crisis, not necessarily being [00:08:00] the right time to bring people up to speed or bring them along the journey. Are there other things that boards need to be careful to avoid doing during those crisis scenarios?

[00:08:11] Penny Winn: I think, not bogging management down with extra requests. So, you know, additional requests. If you need to make sure that you are letting the management team do their job, so also not reaching in too far. I think, often, we all want to help, we all want to get involved. But actually we have to, you can get too many people involved in solving the crisis.

[00:08:30] Penny Winn: In a crisis, it's really important for boards to understand their role of management to understand theirs and to not cross over because once you start doing that, you actually get a much more chaotic response and because you've got directors directing, which is actually what directors do.

[00:08:45] Penny Winn: Directors actually shouldn't be doing, they actually need to be supporting and coaching. And, and as I said, bringing that outside in perspective to help, you know, have you thought about this, have you thought about that. But not necessarily to be doing the doing of managing the day to day, which, I think [00:09:00] that was a big learning for all of us in, as we went through the COVID crisis.

[00:09:03] Richard Conway: We often hear about boards participating in these crisis style simulations. So cyber simulations are really common example of that. And I wanted to ask you what value they provide for the board. If they're often quite, burdensome to organise and take up quite a lot of time. So how likely do you think a crisis needs to be, to justify a board spending on time on that? Or are they valuable just in the exercise itself?

[00:09:29] Penny Winn: I think what type of crisis you exercise for is not actually relevant. It's actually more about understanding the roles and responsibility of the board, as I said, and actually how, how the board interacts with other things. So when, when you've got a crisis, you know, you've seen it in many of the, you know, recent corporate crises that, you know, communication, you know, who communicates with the, with the outside world, how do we interact?

[00:09:55] Penny Winn: You know, what do we, when do we bring the lawyers in? When do we talk to lawyers? When do we, [00:10:00] talk to the government, you know, and to making sure that we know who's got what responsibility to talk to these external stakeholders so that you're not left standing there like a fish with its mouth open, gasping for air.

[00:10:11] Penny Winn: You, you've got a practised solution. So I think the benefit of this crisis management is actually not in the, well, we had this crisis and we knew we were going to, we were, we weren't going to pay ransom. That's not what it's about. It's actually about, we had this crisis and we know that if we have another one, we're going to talk to this, but get this communications person in, we're going to get this legal one.

[00:10:32] Penny Winn: And this is the timeframe we're going to do that. We're going to set up that subcommittee. We've got a subcommittee of the board that we, you know, and these are the community, you know, the key, and this is the protocol on which we're going to communicate with the board on, on this basis. So these are the things that you can actually plan for and practice ahead of time.

[00:10:47] Penny Winn: And I think that's why they're valuable. I think probably if we were to say, how do we exercise these crises in the future? If you think about some of these cyber crises, they are bigger than Ben Hur. It's actually not, [00:11:00] we potentially don't need to bring all of those external experts into simulation.

[00:11:03] Penny Winn: It's actually in the testing of the processes that the board and how the board management would respond to that. That's really important in these crisis management, a crisis exercise.

[00:11:13] Richard Conway: Yeah, great. And Penny, just to wrap up, I think, to summarise some of that, what would you recommend for boards if they're faced with something that's really an unforeseen black swan event, what are the key things you think they should have done beforehand and that they should do when they're faced with that?

[00:11:32] Penny Winn: I mean, a black swan by it's nature, we can't predict what it is. So I think it's how the board prepares to respond so you know, making sure you've done the crisis management practice so that you can manage to grasp as you go through it. But I think it's how, it's not just about the response to the crisis, but how you respond, how you recover from that.

[00:11:53] Penny Winn: So, a lot of boards previously said, "Oh, I'll tick the box and we've got the business continuity plans in place." You know, "how do [00:12:00] we operate if we lose our systems these days?" People would say, yes, yes, we've got that. But it would often exist in it. And when you drill down on this, it often exists in key people's heads, as opposed to on paper that is something that is a go to thing.

[00:12:14] Penny Winn: And to see, you know, and we don't know, how, you know, the real evaluation as to how long you can do without a business, part of your business or how long you can do without a system hasn't really been thought through. So business continuity plans are really, something that I think a lot of boards have spent a lot of time on post COVID, post crisis to make sure that, If we do lose key people, if we do lose key systems, if we do lose that, we understand what are the most important things to bring back up. What are the most important people we need to have backups for?

[00:12:44] Penny Winn: So to think about business continuity, not just managing the crisis, but bringing the business back online, is something that you really need to think of ahead of the game. So they're the key, you know, making sure you've got crisis management and business continuity really well planned and not [00:13:00] just in people's heads.