Ann Skeet and Joan Harrington
Jun 16, 2020
Decisions about opening businesses and keeping them open have created a critical moment for boards of both for-profit and nonprofit organizations. Although management is generally responsible for the activities and safety of employees, as well as other constituents, the organizational risks and complexity of decision making created by this pandemic require attention and intervention from the board.
With no definitive guidance on how organizations should move forward, what safety measures should be in place and for whom; what health care, leave, childcare, and other provisions are appropriate, organizations are left to make decisions based on their own identities and values. Boards must step in to work with management to weigh the competing options, many with moral implications.
Much is at stake at this time for both nonprofit and for-profit organizations. Nonprofit organizations, through their tax exemption and missions are dedicated to benefit public interests. Nonprofit constituents are at high risk in this pandemic with the majority of their employees working for relatively low pay and many of their clients members of vulnerable populations. For-profit companies also face significant challenges, as many people don’t believe companies are doing enough to protect their employees, and even fewer believe that business leaders are doing a good job. The pandemic’s arrival so closely on the heels of the Business Roundtable’s adjustment to its statement of business purpose raises the stakes for companies who want to demonstrate that their commitment to environment, social, and governance (ESG) factors is authentic.
In making decisions about how to move forward in their businesses, boards would benefit from structuring a decision-making process to accomplish the following:
- Center the board by consulting the organization’s mission and values
- Obtain the best information available on an ongoing basis
- Consider stakeholder, interested-party perspectives
- Identify all of the options available; include a self-assessment of strengths
- Use the organization’s mission and values to consider the options and make decisions
- Communicate frequently and openly
- Pause, reflect, and change direction if needed
Center the board by consulting the organization’s mission and values
Organizations with “high utility” mission statements and values, documents that leaders actually use in everyday decision making, can put them to good use in a crisis. Before gathering information and reviewing options, boards should center themselves by consulting the organization’s mission and values.
Using mission and values in decision making
The global company 3M provides an example of using mission and values through a decision made early in the pandemic. 3M shifted production of its N95 masks from industrial use to health care for global distribution. When attacked for not reserving all US-produced respirators for American healthcare workers, the company’s CEO pointed out its humanitarian responsibilities to Canada and Latin America, where 3M is their sole provider of such equipment. Their commitment to improving “every life through scientific innovation” was used to make these decisions, putting lives in other countries on par with American lives.1
Sports Basement, a Bay Area-based retail chain, closed its stores for a period of time when it could have kept them open, citing concern for the well-being of its employees. Sports Basement positions itself as a “community hub”2 and central to its branding and values is the idea that their employees live the company’s values as “staffletes” and “basmenteers” who support philanthropic causes. Though the bike sales, rental, and the general nutrition parts of the stores could have remained opened through the initial shelter-in-place orders, Sports Basement chose to close until it could implement precautions to safeguard employees adequately.
Obtain the best information available on an ongoing basis
The board and management should partner in ensuring the organization has the best information possible as the pandemic and its aftermath unfold. Guidance on how businesses should move forward is often confusing, conflicting, and changing at a rapid pace. Boards can work with management to make sure the best, most accurate information is being used for decision making.
Meeting the duty of care
The board’s duty of care requires them to consider and weigh all of the risks surrounding coronavirus before making decisions about their business. Their responsibility of inquiry, as part of their duty of care, involves board members asking the right questions and acquiring the relevant information and guidance available to them.
Under normal circumstances management would work with the board to obtain the necessary information. But management may be overwhelmed at this time and the board can play a role in getting the necessary information.
Boards need to determine the actions that are legally required, and that will be the floor for their decision making. What level of care for employees, customers, clients and others is mandated or issued as guidance by various authorities?
Finding all available guidance
Guidance on how businesses should move forward is often confusing, conflicting, and changing at a rapid pace. The White House issued broad guidelines in Opening Up America Again. OSHA has a general requirement that employers “shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees,” and the Department of Labor provided some workplace guidance through OSHA. The CDC has released guidance for schools, summer camps, youth sports, restaurants and bars, as well as detailed guidance for office buildings. Individual states are providing sector specific requirements and best practices, as are local public health officials.
If organizations can afford a lawyer to help them work through the federal, state, and local guidance, this is advisable. Many smaller organizations and nonprofits do not have the ability to pay for legal advice and this leaves decision making at the organizational level and primarily with boards and management. Because there is no clear legal standard for care at this point, even with legal advice, boards will have decisions to make.
Thinking about the impact of lawsuits
Congress and some state legislatures are considering giving businesses immunity from lawsuits for coronavirus infection through safe harbor provisions. Under these provisions, someone injured would be required to prove more than negligence on the part of the organization or, under some proposed legislation, an injured person would have no right to bring a lawsuit. Boards should keep track of these legislative efforts, though even if such legislation is passed, ethical organizations will continue to get the best information they can and determine what they can do to act with appropriate attention and care to all of their stakeholders.
Consider stakeholder and interested party perspectives
In the decisions about moving forward there may be competing goals: organizational survival, employee paychecks, the broader economy, health and safety of clients and other constituents, relationships with suppliers, and sustainable business practices, to name a few. Boards need to hear those voices, assess their interests, and weigh their significance.
Communicating with employees
Talking to the people doing the work is a worthwhile practice in any organization. In this instance, boards should engage directly with frontline employees given the risks they will bear working during a health crisis. This might not be a traditional company practice, but it’s an important signal about the extraordinary nature of current risks. Bioethicists and healthcare providers can be consulted, for example, to provide recommendations regarding best health and safety practices and also how to consider the needs of employees with special vulnerabilities. Boards that are able to handle sensitive issues ranging from vulnerability of some employees to privacy, and do their best to balance the rights of individual employees with the needs of the entire community that the company and its key stakeholders represent, will serve those stakeholders, including investors in for profit organizations, most effectively over the long run.
Hearing from other stakeholders
Engaging both traditional stakeholders and some outside the realm of the usual suspects will serve boards well. For nonprofits, decision makers should hear the voices of the clients: people with disabilities who participated in summer camps and other social engagement, the museum attendees and the artists who shared their art, the veterans with disabilities working to reengage in communities. What will work for them going forward in this pandemic? Stakeholders in for-profit companies will include customers and potential customers, local communities, and larger, virtual communities.
One of the unique aspects of operating in times of coronavirus is the obligation all organizations must now accept broadly to public health, meaning the health and safety of people not directly in their traditional set of stakeholders. Within these people, there is a subset, people considered vulnerable, for whom special consideration and care must be afforded.
Identify all of the options available; include a self-assessment of strengths
Organizations should use scenario planning to approach resource allocation and planning prudently yet flexibly. As part of this planning, organizations need to understand themselves well in this moment. It is a time for self-assessment. What are we best at? How do we leverage those strengths? How do we ensure that we are looking out for the right interests?
Organizations with a regular practice of using mission and values to make decisions are going to fare better in the eyes of the law and humanity coming out of this pandemic. They will be able to respond more quickly, as even the more complex decisions can be tackled in pieces by asking a series of questions aimed at understanding which scenarios under consideration mesh well with the way the organization sees itself.
Most companies, organizations, and institutions are turning to scenario planning at this time. Within these scenarios, a series of questions should be considered that fall into several categories. It is an effective approach to considering the future workplace, and all the pieces of it from transit to populations who cannot work for one reason or another.
Refocusing on care
The primary concern in a health crisis centers on questions of care. Organizations must consider not only the care of employees and customers, in this situation, but to an undeniable degree, they must also consider the care responsibilities those people have in their own lives. Corporations do not typically consider the school calendar, affordable daycare for children, and elders in their domain. Now, perhaps they are seeing this differently. In addition to testing, tracing, treating, and isolating those people who organizations come in immediate contact with, organizations have to consider the impact their choices make far beyond that first circle of contact. This will require the kind of organizational mindsight boards should provide and a commitment to workforce well-being.
Siegel, M.D., Daniel J (2011). Mindsight, The New Science of Personal Transformation, New York: Bantam Books. and Skeet, Ann (2019). Defining Healthy Organizations. Santa Clara: The Markkula Center for Applied Ethics. Found at https://www.scu.edu/ethics/culture-assessment-practice/defining-healthy-organizational-culture/
Nestled within those care questions, it will matter not just what is decided but how those decisions are reached. Whenever possible, consulting people representing public health standards or vulnerable populations is prudent.
Organizations need to understand themselves well in this moment. It is a time for self-assessment. What are we best at? How do we leverage those strengths? How do we ensure that we are looking out for the right interests?
Control over the work environment has never been more important to employees and customers. They are hyper aware of their rights and seeking autonomy to decide to work or shop based on their own unique situation. This requires a level of mass customization across all industries in all countries on a scale we have never seen. As the new workplace gets designed, boards can make sure the designs are smart ones, the workers are part of the equation and their mental health, including basic aspects of financial security, are addressed.
Boards are the keepers of workplace justice. Though they do not implement policy they are uniquely charged with ensuring policies are fair. In this moment, it is not enough to dictate fair procedures and hope for the best. Rather, careful consideration for the outcomes those policies drive toward must be considered. Boards can pay special attention to the organization’s culture, emphasizing norms that encourage the desired, best behavior by the entire corporate community.
Boards are also at an intersection point between the company and the ecosystem it operates in, both by industry, sector, need, client, region, regulatory body, and more. All of these speak to the interconnectedness that exists between companies and society broadly. Boards have an obligation to ensure companies are aware of this ecosystem and meeting their commitments to it. The CEO of 3M was aware of the ecosystem the company operates in, and chose to honor its obligations to it, when it chose to distribute masks beyond the borders of the United States. Boards are also a primary reserve, if you will, that companies have, to increase their capacity to influence these broader ecosystems and drive for justice in matters such as compensation, impact on the environment and other social concerns, now well-captured in ESG tracking measures.
Use the organization’s mission and values to consider the options and make decisions
Decisions about when to re-open a business or nonprofit workplace, how to treat employees with varying needs, and how to enforce safety rules will, in part, be defined by the various legal authorities. But the areas that are not spelled out legally will be decided based on mission and organizational values and it is for the board and management to do the work of integrating those into the decision making.
Communicate frequently and openly
For people in leadership positions right now, it should feel like they are sharing information almost nonstop. Anxieties are calmed by transparency and honesty. It is helpful to be clear about what is known and decided and what is not. People perform better when they are working in environments with supported relationships, which are strengthened by positive communication.
Using stories to communicate
Leaders who do this most effectively will use stories to point to the behavior they want to see and connect to other moments in the organization’s history that employees might be able to identify with or draw comfort from. Special attention should be taken to nurture empathy by connecting people in different parts of the organization or different stakeholders, to help people gain an understanding of the concerns others might have.
Pause, reflect, and change direction if needed
In this time of pandemic and in the aftermath, our knowledge and understanding will be evolving. We will have changes in our understanding of the virus, how it affects people, new ways to manage it, the significance of a vaccine, economic impact, and more. Boards will need to take the time to reflect on what is happening in real time and adjust with creativity.
Learning from what is happening and adjusting
Boards provide critical “mindsight” for organizations in a crisis. Mindsight in individuals is the “kind of focused attention that allows us to see the internal workings of our own minds.”3 In organizations, it is the ability to reflect on what is happening and adjust. Just as the healthy mind in humans is flexible, adaptive, coherent, energized and stable, so too do these qualities mark strong organizations, though in today’s business language, we are more likely to capture the essence of coherence using terms such as “synergy” and “purpose.”
We know adults learn best by doing something and then reflecting on that action. To sustain learning organizations, this needs to be relatively automatic. Business scholars have been talking about this ability for decades, including the recent embrace by Microsoft CEO Satya Nadhella and other business leaders, of the need to foster a growth mindset in companies.4
What has this got to do with coronavirus? In times this uncertain, people in organizations are going to need to iterate constantly. The recent fascination with design thinking and agile methodologies in business and nonprofits sets up organizations to take the information they have now, use it well, and adjust quickly based on feedback from customers. In this case, boards can guide the management team to broaden the definition of customers being served to capture those key stakeholders and respond to changes in the virus itself, and the guidelines and practices protecting us from it.
There is genuine potential for creativity if boards can embrace such a growth mindset and see the constraints imposed by the pandemic as opportunities for innovation (and more rapid adoption of technological and automation shifts already underway). Boards have a moral obligation to guide organizations to make these changes in a way that keeps workforce and other stakeholder well-being front and center, a truism reinforced by the health dangers posed by this illness.
3 ibid, Siegel, introduction.
4Dweck, C. (2006). Mindset: The new psychology of success. New York: Ballantine.