The Companies That Survived, Prepared

Q: What are the characteristics of a Russell Reynolds’ Gold Medal Board?

A: Gold medal boards do three things that appear to be quite different from “average” boards, leading to greater value creation within their companies. First, too many boards focus on backward-looking compliance and review activities at the expense of forward-focused value-creation efforts. While reviews are fundamental to a board of directors, a Gold Medal Board spends most of its time looking forward to curating a forward-looking strategy that strives for operational excellence and considers possible mergers or acquisitions. Second, Gold Medal Boards are more likely to be composed of professional, specialized talent that coincides with the needs and objectives of the organization. These professionals have the ability to infuse the board with their relevant wisdom or experience. Third, Gold Medal Boards are actively reviewing their succession planning strategy for board members and CEOs alike, as opposed to waiting for vacancies. They usually have a list of potential internal and external candidates for consideration.

Q: Given a potential recession, rising interest rates and geopolitical instability, what priorities should be on the board of directors’ agenda?

A: The restrictions throughout the COVID-19 pandemic forced people and companies alike to constantly adapt to shifting circumstances, most recently the rise of interest rates, energy supply concerns, the Russia-Ukraine war, continued supply chain disruptions and a global rise in domestic populist movements. Companies will need to learn – if they have not done so already – that uncertainty will remain a constant in the immediate future, necessitating a fundamental clarity on the state of a business and its purpose. Drawing insight from a core strategy facilitates organizational mobility and adaptability as external circumstances shift for better or worse.

The best companies are formed during economic downturns. While it is easy to do well when market conditions are favorable, economic downturns create opportunities for future winners, such as the acquisition of weaker competitors or complementary firms. Those with stronger balance sheets will be at an advantage but their success is not guaranteed. Overall, during this upcoming period of market correction, winners will be created at the expense of those companies that have not done their homework.

Q: What is your advice to acting CEOs in the face of these same threats?

A: It is essential for CEOs to be completely aligned with their board of directors so the organization can move in lockstep, following the same immediate short-term goals. A great example of this in practice is the fit assessment of a possible merger or acquisition. While a CEO may consider the purchase of an organization opportune, this decision must be based on a clear understanding and alignment with the board’s long-term view and priorities.

CEOs should also review the capabilities of immediate executives and compare them with the organization’s long-term objectives. This is especially important as companies exit a survivalist state of mind, which makes changes seem risky. Companies have a tendency to wait until a period of stability to make talent readjustments, a mindset that appears to be becoming obsolete in the face of multiple crises.

Q: How should companies prioritize tackling business challenges in the landscape ahead?

A: The sad truth is that in many companies, the prioritization of business opportunities and challenges is hardly a common practice. Clear market winners are almost exclusively companies whose board and management teams have sat down together to assess everything on the table, setting priorities in function to their lockdown strategy. This practice will prevent the horizontal pursuit of half-baked ideas that lead to disappointing results. There is no general answer given that it will depend on the company and the sector in which it operates. Companies can engender greater impact from the prioritization of selected initiatives, which demands the efficient allocation of often limited resources.

Q: What objectives does Russell have for the Mexican and Latin American markets?

A: Family-owned and backed businesses in emerging economies like Mexico and Brazil are evolving in response to a shifting global landscape. Russell Reynolds is playing a supporting role in these economies by providing access to a diverse talent pool and guidance as they attempt to scale up, internationalize and professionalize. While these companies have demonstrated considerable resilience, they are beginning to ask themselves key questions related to their long-term competitiveness, including succession management, governance, family versus business interests and long-term transition management. These are all important questions and the answers will help companies mature and survive in the long term.

Russell Reynolds Associates is a global leadership advisory firm with over 470 consultants in 46 offices working with public, private and nonprofit organizations across all industries and regions.