Building board resilience

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Bothwell P. Nyajeka

WHEN discussions about corpo­rate resilience arise, the focus is often placed on manage­ment and executive teams. The assump­tion is that resilient companies are built primarily through strong operational leadership.

While management resilience is im­portant, my experience in the Zimbabwe­an corporate environment has taught me that company resilience begins at board level, providing the foundation upon which management resilience is built. A resilient board, together with manage­ment tenacity, will sustainably protect the organisation from collapse.

The board sits at the centre of balanc­ing competing stakeholder expectations. Shareholders demand short-term profit­ability and long-term value creation. Cus­tomers expect quality products and ser­vices at affordable prices. Employees and suppliers want the company to remain operational so that salaries and revenues continue flowing to them. Governments depend on companies for taxes, employ­ment creation and economic growth. Communities rely on companies for live­lihoods and local economic activity.

Ultimately, all stakeholders share a common interest, being the long term survival of the company.

Zimbabwe has painful examples of what happens when companies collapse. Entire towns and communities have de­teriorated following the closure of major mines and corporates. When a large or­ganisation fails, the damage extends far beyond shareholders. It affects schools, informal traders, transport operators, lo­cal authorities and entire value chains.

In developed economies, boards may focus primarily on growth and innova­tion. In Zimbabwe, however, the first building block of resilience is survival. Only after survival capabilities are estab­lished can growth be built sustainably.

In Zimbabwe, boards have to navi­gate a number of risks including inflation, currency instability, policy uncertainty, power challenges and constrained capital markets. Under such conditions, resil­ience becomes a strategic competency rather than a compliance exercise.

From my experience, most Zimba­bwean boards already possess reasonable corporate governance structures. Many comply with the principles outlined in the Zimbabwe Corporate Governance Code and various international gover­nance frameworks. Board committees are established, policies are documented and statutory requirements are generally observed.

However, board resilience is often determined less by formal structures and more by softer leadership and be­havioural issues.

One of the most important responsi­bilities of a resilient board is appointing the right chief executive officer (CEO). The CEO does not necessarily need to be the best technical expert in the organisa­tion. In my view, the key attributes of a successful CEO are the ability to influ­ence people, strong business acumen, a sound understanding of financial drivers, excellent listening skills and the ability to execute strategy through others.

A resilient CEO builds a high-perfor­mance culture and assembles teams that are incentivised to deliver both short-term and long-term goals.

Boards are increasingly becoming more innovative in how they assess potential CEOs. Traditionally, human resources committees relied heavily on interviews and psychometric testing. However, many boards are now going further by presenting candidates with real business case studies, often based on actual challenges facing the organisation. This allows boards to evaluate not only technical competence, but also strategic thinking, judgement and decision-mak­ing ability.

Another practice that is recommended is for the prospective CEOs to engage in­formally with the board chairperson and, in some cases, major shareholders. These engagements help assess alignment in leadership style, thinking patterns and or­ganisational values before appointment.

Board resilience is also built by hav­ing a board with ethical directors who have diverse skills. A board must have a good combination of technical skills (fi­nance, engineering, law, human resourc­es, information technology etc), industry knowledge, and commercial expertise. The key is to avoid a board where every­one is politically connected with no real experience or skill required to help lead the business.

Board resilience is often destroyed when directors do not question manage­ment decisions. Strong boards cultivate a culture of questioning and holding management to account. They insist on data-driven decision-making process and create an environment where opposing views can be raised without fear.

One of the most effective practices boards can adopt is conducting post-mor­tems on major decisions and projects. This involves comparing actual out­comes against the forecasts and assump­tions presented when the decision was approved. This will help in getting key learnings that can be applied when mak­ing decisions in future.

Another critical resilience tool is stress testing board decisions to under­stand how changes to assumptions made in coming up to a decision would affect returns, cash flows, profitability and, the balance sheet. Boards must ensure that major strategic decisions do not weaken the organisation’s ability to withstand economic headwinds.

Nyajeka is a business consultant and board advisor. He has vast experience as a corporate executive and has sat on various boards in Zimbabwe, Botswa­na, South Africa and Uganda. He is currently chairman of ACR Solutions and is also a seasoned trainer and fa­cilitator for the Institute of Directors Zimbabwe (IoDZ). For busines con­sulting, board advisory and executive coaching Email him on: bnyajeka@ acr4solutions.com

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