Are you a great director? (I'm really asking. But before you answer, answer this: How would you know?)
If we're being completely honest here, there's still so much in flux that's making the provision of good governance—for a wide variety of organizations—more challenging. Businesses are increasingly looking for expertise to help them identify trends and find the right direction forward. But, post-pandemic, it's incredibly difficult to identify one particular industry or trend that's going to pack a lot of resilience along with it. So, how does a director—any director, anywhere—know the best way forward during this long, slow time of upheaval?
Tech unicorns are a ready example of those that made the most of what appeared to be a frothy pandemic market for their industry. Another is food and grocery delivery. But, even so, they didn't all make it through to the other side. Many believed their own headlines. Others went public too soon, and their valuations plummeted. Many who didn't realize that people's habits had changed and didn't adapt are surprised to now be facing serious challenges.
It's easy to offer "thoughts and prayers" to the organizations that just didn't make it through COVID. It's not as easy to recognize pre-emptively that your own company may be headed in the same direction.
Let's assume your company has proper governance in place, with a diverse set of directors who take their fiduciary duty seriously. Maybe you're one of them. You come for the fresh doughnuts, the regular board package to review, the financials, the operations reporting—heck, you might even be tracking how your company's activity is hewing to your strategic plan. Does that mean you're worth your jam as a director?
Let me give you three ways to help you determine the answer:
- First, look at the financials. In the projections for the next quarter, do you see things getting tight in terms of liquidity? Or working capital? Or cash? In other words, are your plans for liquidity and cashflows fully baked? Can you stress-test your projections? Do you have a contingency plan that allows you to pivot? (If the answer is No, reach for an extra doughnut).
- Second, consider operations. How is growth? Are you flatlining? What about any supplier issues that are raising their Medusa heads—are they getting paid? Are they suddenly asking for cash on delivery? What about your people? Are your employees quitting in droves or is retention healthy? Your summary question here is: What are the signals that tell you the temperature might be rising? (Definitely worth two doughnuts).
- Third area to examine: your options. Is management really just painting you a rosy picture? Do you have a turnaround plan, and has it been independently reviewed? Specifically, have the assumptions behind that plan been objectively challenged? (If this one is making you break into a sweat, go ahead and eat the rest of the doughnuts.)
By asking these questions and giving serious, honest answers to them, you will demonstrate real value to the organization you're representing. But understand that the obstacles your company is facing are not a reflection of your personal circumstance or abilities. They are, however, a reflection of how well your board as a whole is covering their duty to maximize shareholder value, and also how diligently they are minimizing creditor exposure.
Adding to the current complexity is the "COVID bump" that many businesses got from federal subsidies that have now come to an end. I've seen so many organizations that simply waited too long to reach out for help and were likely afraid of digging into those key areas of financials, operations, and options. But once the balance is tipped in those three areas, you begin to lose control—and even power—over your own business. Your lenders and suppliers could end up with a bigger stick.
At this stage, you definitely need to call on trusted relationships not only to smooth things over but also to bring in real, long-term solutions. I've seen it happen time and again that professional help, as soon as it's called in, provides exactly the right signal to jittery creditors that organizations are taking their predicament seriously.
Picking up the phone and having a preliminary discussion with independent advisors is easy, and unlike post-pandemic denial, there's no risk involved. Your stakeholders will see that you are taking things seriously, and that you have called in the right people to help. An outside perspective will help you discover options that seem unattainable when you're looking at the problem from the hole in the doughnut.
Getting an independent view of your situation brings you, and the business you steward, immediate credibility. And that's how you know you're worth your jam.