Consider attending the training referenced at the bottom

Do you know what your company will be like after the recession?

By Professor Paul Strebel - February 2009

A key theme in the IMD High Performance Boards program sessions this year will be how board directors can assist the CEO in positioning the company to come out ahead after the recession. To do so, the board has to engage the CEO and the management team in coming up with robust answers and action plans to address four critical questions:

1. Does the company have the necessary liquidity?
In the depths of the recession when confidence is at its lowest, liquidity is king. The board must ensure that the company has access to sufficient liquidity to survive a worst case scenario. The whole board has to participate with the Auditing Committee, using plain language, to identify and evaluate the key liquidity risks facing the company. Board members cannot delegate this task. As a board member, you have to be confident that the Auditing Committee has identified all the hidden liabilities and that there are no liquidity time bombs waiting to explode when a large creditor suddenly insists on repayment.

2. Is a big move needed to ensure adequate financial resources?
If there is a significant risk that the company may not be able to survive the worst case scenario, or will not have enough financial resources to benefit from the next upswing, then one of two big moves may be called for:

Restoring profitability. If the cash flow isn’t there, the board has to insist on bold restructuring, sooner rather than later. Re-focusing the business model on the core money-making parts of the business is essential. Waiting for the upturn to re-float weak business units can be disastrous and sink the whole company, especially if the downturn persists. Re-focusing has the added advantage of putting the spotlight on what is special about the company, why it should exist and flourish after the recession.

Getting into shape. Even if radical restructuring isn’t appropriate, lower or declining growth means that costs have to be cut. The board has to make sure that management doesn’t take the easy way out by putting in an unfocused improvement program, or cutting across the board. What is needed is lower fixed costs and increased flexibility, the ability to rapidly scale back if the recession deepens, and then scale up on the rebound. Making sure that the value chain is properly aligned with the market is essential to picking up and rapidly reacting to the shifts in demand.

3. What are the opportunities for changing the competitive game?

For those with financial resources, recessions throw up opportunities of a lifetime to reshape the competitive landscape:

Relaunching growth. Getting ahead during the upswing will come from not trying to imitate the competition and beat them at their own game, but doing something that’s distinctive. The board has to insist on distinctiveness. This might mean re-designing the value proposition and/or adding new lines of business to serve well-defined markets with growth potential. The acquisition of access to markets, talent, assets, or whole businesses at distressed prices, can completely change the balance of power in an industry. However, if it’s an acquisition, it still has to be integrated (as Bank of America has re-discovered with its acquisition of Merrill Lynch).

Finding a new game. The recession may change the fundamental economics of the industry (again, the immediate example is investment banking) and open up new types of business. If so, getting ahead will be about creating a new business model, which will mean real change in the "what" (value proposition), the "who" (valuable customers) and the "how" (value chain of activities). The strategic key will not be opportunism, but experience-based entrepreneurship. The board will have to make sure that management leverages existing capabilities and doesn’t deceive itself into thinking it can run any business.

4. Do we have the right talent and value chain partners?

The board will have to ask this question: Do we have the right CEO to get us through the recession, as well as lead the company into the upswing? And the board will have to get answers to these questions: What is the critical management talent needed for the long run and how can we keep managers on board and attract new recruits? How can we maintain the morale of the organization during the recession so that people bounce back with full energy when demand picks up? How will we develop the new capabilities to support the big moves we make? And how will we keep smaller partners, like critical suppliers, distributors and customers afloat and prepare them for life after the recession?

During recession, the critical role of the Board of Directors is positioning the company to come out ahead after.

Paul Strebel is the Sandoz Family Foundation Professor at IMD. He is Director of the High Performance Boards program and teaches on the International Seminar for Top Executives, the Program for Executive Development and the Orchestrating Winning Performance program.

http://www.imd.org/research/challenges/TC012-09.cfm

High Performance Boards (HPB)

HPB is an international program for board directors that shares best practice from different governance regimes. You will be exposed to practical frameworks for board work as well as the most recent research on top performing boards, guided by IMD Faculty members who take a global view and are not wedded to a particular governance system.

Who

A select group of executive and non-executive board members, board nominees and chairpersons from diverse international companies and a broad range of industries.

What

You will participate in a complete overview of the board's auditing, strategic, supervisory and coaching roles, with emphasis on:

• Understanding your board's power structure and responsibilities
• Setting priorities and structuring the board
• Creating flexibility to deal with new challenges
• Developing an action plan to improve your board's functioning

Duration

3½ days

When

Dates 2011

May 17 - May 20, 2011

October 18 - October 21, 2011

http://www.imd.org/programs/oep/topmanagement/hpb/index.cfm

High Performance Boards (HPB)

HPB is an international program for board directors that shares best practice from different governance regimes. You will be exposed to practical frameworks for board work as well as the most recent research on top performing boards, guided by IMD Faculty members who take a global view and are not wedded to a particular governance system.

Who

A select group of executive and non-executive board members, board nominees and chairpersons from diverse international companies and a broad range of industries.

What

You will participate in a complete overview of the board's auditing, strategic, supervisory and coaching roles, with emphasis on:

• Understanding your board's power structure and responsibilities
• Setting priorities and structuring the board
• Creating flexibility to deal with new challenges
• Developing an action plan to improve your board's functioning

Duration

3½ days

When

Dates 2011

May 17 - May 20, 2011

October 18 - October 21, 2011

http://www.imd.org/programs/oep/topmanagement/hpb/index.cfm