The COVID-19 pandemic and its fallout are testing companies like never before. According to our survey of directors, most board members say executives have done a great job of navigating the challenges thrown at them in the early days of the crisis. And it’s not just management. Directors are pleased with their own performance as well. Even as the boardroom goes virtual, directors say they are staying engaged and have no trouble asking hard questions of management.
Directors may be confident today, but are they ready for what comes next? The crisis is far from over. In fact, some of the biggest challenges—such as bringing employees back into the workplace—remain ahead. And boards need to ensure that the company's strategy can carry it through, no matter how long the pandemic and economic slowdown lasts.
Confidence can be a good thing. But overconfidence can lead to complacency. By remaining focused and building on their early successes, boards can help their companies succeed—no matter how the pandemic unfolds.
Most directors have nothing but praise for the way their management teams have handled the pandemic. When it comes to some of the toughest problems businesses are facing, board members give them top grades. More than 95% of directors surveyed say their companies did a good or excellent job of dealing with issues such as interruptions in internal operations, supply chain disruptions and the shift to remote working.
But this positive outlook may be masking potential blind spots. Directors see their companies as doing a good job handling the impact on operations through the initial phase of the pandemic, but the real success stories will be the companies that have developed agile plans to address what is to come. Planning for different scenarios is key, and boards should be working with management to look around the corner—even if the future is far from clear.
Companies have started to imagine what a post-COVID world will look like for their employees. Most directors (71%) say that increased flexibility to work remotely is expected to have a significant long-term business impact. Fewer—just 22%—say the same about reductions in office space. So while they see change coming, management and their boards may not have started thinking about all of the opportunities presented by the post-pandemic environment.
About 98% of directors say their companies did a good or excellent job managing the transition to remote work, and 97% said the same when it comes to handling employee relations overall. It remains to be seen whether that effort is sustainable. As employees return to the workplace, new challenges are sure to arise (such as increasing risks related to employee safety, ethics and compliance matters and any potential related litigation). To help their companies navigate these risks, directors will need to be ready to ask tough questions of management, so they can anticipate and prepare for the bumpy road ahead.
The companies that come out in front will be the ones that fine-tune their strategies for the future, and embrace new opportunities. Returning to the workplace is the near-term issue that companies need to address, but reimagining the way people work should also be on the table. Many companies have determined that not all of their employees need to return to the office, as many knowledge workers can work from home effectively. Leveraging technology to digitally transform how things get done, addressing the effects on company culture and ensuring a robust cybersecurity posture should all be in focus as companies plan for what comes next.
The pandemic has changed what work looks like for everyone. Directors are no exception. The time demands of board service have increased, with more than three-quarters (76%) saying they’re spending more time on board responsibilities. About 30% even say they’re spending twice as much time, or more.
On top of the time demands, board meetings have been forced to go virtual. But directors say their boards are thriving. Ninety-three percent say both that the level of director engagement overall, and their own personal engagement, is good or excellent. And 88% say the same of their ability to question or challenge management.
In a situation without precedent, directors may feel more empowered to speak up. To stay sharp, the challenge will be to maintain stamina and focus even as the novelty of virtual meetings wears off and boards go long periods without face-to-face contact.
Just because a company navigates one challenge doesn’t mean it will successfully navigate the next. While directors have given themselves and their management teams high grades so far, they risk taking their early successes for granted.
Stabilizing the business was and is the first priority. But the companies that come out of the crisis on top likely will be those that recognize and seize opportunities as they arise. But few are in that mindset yet, according to our survey. For instance, just 10% of directors say their board is looking at increasing M&A—even as distressed potential targets proliferate. Making supply chains more agile, adapting to changing consumer preferences, establishing more efficient working arrangements—these are the areas in which companies can differentiate themselves from the pack.
The good news is that boards are actively engaged right now. Whether directors remain as satisfied with their companies’ performance in the months to come is yet to be seen. Directors need to keep their eyes on the ball to make sure their companies come out ahead as the world moves from crisis to recovery.
PwC’s 2020 Annual Corporate Directors Survey asked directors about how their boards and their companies have responded to the COVID-19 pandemic. More than 250 public company directors offered their views on their own performance and that of their management teams, as well as potential future impacts of the pandemic. The full results of the Annual Corporate Directors Survey will be released in fall 2020.