Moments That Matter... A Board's Value In A Crisis

 By Darren Rawson

Darren Rawson is the chair of five private companies including AltaML and Chandos Construction. He’s a former CEO of three different private companies and has done business internationally for over 25 years in numerous industry sectors. 

One of the more challenging career moments happened when I was CEO of a mid-sized private company. We were operating internationally with offices in multiple countries across the globe. We were a high-performing business with an aggressive strategy although in the midst of navigating an industry downturn, yet confidence was high and our plans were clear and infallible.

A phone call early one morning disrupted my mood significantly. I learned from our leader in the Eastern hemisphere that in the middle of the prior night all of our equipment and inventory was seized by operatives in one of our mission critical countries. At the same time all of our staff were arrested by local police.

At that moment I’m not sure I had ever felt so helpless. Typically during a crisis, as a CEO, I would hop on a plane and be in person. I realized that attempting that would likely put me in jail and part of the problem. 

I also realized I knew so little. The actions of the operative were not legal and were completely unethical, although they were not specifically illegal. The operative was taking advantage of the situation – in particular their knowledge of local laws, their power in the country, and their local relationships – using misleading arguments to twist the facts and leverage the situation to their advantage.

I phoned our board chair to let them know the situation. As the shock passed, the chair quietly asked if our staff were going to be ok. I replied I was not sure. The chair more emphatically asked if they would be tortured. I replied I was not sure.

This was one of the moments when I realized how powerful a great board can be. 

We called an emergency board meeting. We updated the board on the situation along with our strategy, at least as much as we had worked out so far. The board could have reacted with anger and frustration, venting at the executive and demanding when we would have this rectified. It could have shown up on our year-end performance evaluations. Neither occurred.

While the board was appropriately angry and incredibly concerned, they were also supportive and a thinking partner. They were not focused on blame, their priority was looking forward. We agreed on our key priority – our staff. We agreed on what was critical – sustainability of our overall business along with our reputation. While we had no firm plan yet, we agreed on our next steps. And we agreed on our communication plan together. 

Fortunately our amazing staff were freed quickly, were not harmed, and were secluded to protect from further harm. Our operations in the country took years to sort out, including claims and lawsuits over our stolen equipment, but that remained quite secondary. 

Interestingly, we did not stop with resolving this crisis. We quickly pivoted to understanding how we got to this point and what we would do differently. Two decisions emerged.

First, in debriefing this experience, we realized it would be beneficial to change the structure for how we entered new countries. This was designed to further protect both our people and our assets. This was a positive improvement to our business.

Second, we learned a lot about our risk threshold. Our shareholders’ risk appetite was extremely high. The returns we were getting from these countries over an extended period was tremendous. We collectively agreed that losing our equipment and inventory would be an acceptable risk for the potential returns, so we changed our investment policy to expect the loss of all equipment and assets within 4 years as part of our investment analysis. The board agreed with our recommendation to pre-condition ourselves to expect a major loss when entering a country. If it did not happen, that would be a bonus. If it did happen, we would re-mobilize and move on quickly.

The only non-negotiable was our people. We would not accept any material degree of risk or exposure to our people. This was also built into our investment policy as a critical condition in reviewing a project.

The board did not judge. The board actually did not provide advice. The board did not direct management. The board was a critical thinking partner, playing a key role in (1) helping us through the crisis, (2) learning from the current situation and designing pivots, and (3) leaning into go-forward strategies that helped us elevate our business. 

Conclusion

The key learning to me was that a board’s role is not just about oversight. While a great board may add value at every meeting, it is critically important to have your board ready for the moments that matter. Whether it is a crisis like the one described above, a major hire, or a major decision such as an investment or divestiture, having the board invested in your business and your strategy and ready for these moments that matter is critical. They can become those inflection points that make or break companies.

If you are going to have a board, have a great board.