The New Director's chair| Leading Through a Crisis
“For Directors, It’s About Having a View of the War and Not Just of the Battle.”
April 21, 2020
Patricia A. Tracey, a director at US Steel and a former vice admiral of the United States Navy, shared smart insights about the director’s role, as well as leading in times of crisis, with me and David Reimer, the CEO of The ExCo Group.
Reimer: What lessons from your experience in the military are relevant for leading through the Covid crisis?
Tracey: Communication is probably the biggest priority. People need to know the facts, the risks, the mitigation plans and also what you don’t know. A big part of crisis management is not leaving people to make up their own stories or hear things through the rumor mill. In my experience, people appreciate honesty about what you don’t know, though they also want to know what you’re doing to get the answers.
Planning and practicing planned responses to potential crises is also important. The situation’s never going to be what you expected it to be, so that will require you to change direction, and maybe do things differently or de-prioritize things that you thought were going to be top of mind. People need to be kept up to date on how things are changing and what you want them to do in response to that.
The leader does need to help build a sense of urgency and a sense of calm, and those are difficult things to do in combination. One of the reasons that the military drills on things is so that you become convinced that, even in the face of live fire, for example, you can take control of the situation, and you know the next steps, the right sequence, and your role is in executing that sequence.
“The situation’s never going to be what you expected it to be.”
One of the lessons from that is that we’re quite good at learning how to deal with complex and dangerous situations by breaking them down into smaller steps and figuring out how to execute each of those little steps to achieve a common outcome. There’s a growing need, particularly at moments like this, for CEOs and boards to provide clarity around the company’s mission. What is our purpose? What’s the role that we play and how do the company’s leaders contribute to that role? Clarity on those answers help to sort out priorities.
Reimer: How has the director’s role evolved over time?
Tracey: I first became a director in 2007. Early on, it was more about receiving information, providing comments and generally supporting the CEO. But the world is so much more complex now, and the board has a bigger responsibility to help management game-plan scenarios and pressure-test strategies.
Legacy companies often bring historic practices that served them well, but they need to evolve to compete in today’s circumstances. Directors can help provide some of that outside perspective from industries that were formed later in the century or in this century.
Bryant: That can be a tricky balance.
Tracey: It is a healthy push and pull. Management knows a lot more than the board about the ability to pull the trigger on some things at a particular time. But the board needs to keep the pressure on, because timing is everything. Getting to the fifth decimal place of precision on the forecasted outcome isn’t necessarily helpful, because the outcome’s never going to be exactly what you thought it was going to be.
That push-pull really has emphasized the need for well-established trust between the management and the board. We will have different points of view as to how quickly to move or exactly which vector to take. We’ve chosen the person who’s running the company, and as long as we have confidence that they share with us the same view of what is good for the company, they’re really better positioned to judge timing, as long as they keep us in the loop on why they’re making the choices they’re making. The board has to have an opportunity to pressure-test management’s thinking and help them adjust.
We’re going to have to understand how to be nimble — conceptually, technically and financially, in order to shift as our plan meets reality. This is about being able to stay at the 100,000-foot level and see some things that maybe escape management because they’re in the throes of the combat every day. For directors, it’s about having a view of the war and not just of the battle.
Bryant: What are the X-factors that separate great directors from good directors?
Tracey: It’s about asking the next-level, what-if questions that are forward-looking, and that don’t re-do all of management’s analysis. It’s about asking how, for example, some external factor would impact the strategic plan if it didn’t play out the way we are assuming it will.
The best directors are people who bring some parallel experience and lessons learned to the table, not as a means of confounding management but as a way of being sure that management takes advantage of the lessons that have been learned. They bring that to a table in a helpful way.
Some people also have a gift for how to present information in a way that is easy for an audience to consume it. Some directors can help management turn 100 pages of explanation that nobody understands into 50 pages of really comprehensible, indicative data. They help management make meetings more focused.
Reimer: What are the issues that boards are really going to have to grapple with over the next few years that are substantively different or more challenging than today?
Tracey: The notion that stakeholders are more than only shareholders who want quarterly returns is real, and the board has a unique role in helping management strike the right balances across the immediate responsibilities to investors and the ability to make sustained investments to make the company relevant for the long term, where the payoff is likely not immediate.
That’s a unique board responsibility to help management keep both of those targets in mind. Companies that only worry about short-term returns to shareholders often fail at some point by tripping over themselves and not making the changes that need to be made to stay relevant for the future.
“The board plays a role in trying to anticipate the opportunities and risks.”
I do think that competition and trade issues are going to be different coming out the other side of this coronavirus. The board plays a role in trying to anticipate the opportunities and risks that are involved in getting through this and how the company can capitalize on the opportunities and navigate the risks.
Reimer: Shifting gears to you more personally, what was a key leadership lesson for you early on?
Tracey: On my first day on the job in the Navy, I was assigned to the Naval Space Surveillance System. Our job was to track known satellites crossing over the United States so that we would be able to detect a missile coming across the United States. On the day I reported for work, the computer that did those computations had been struck by lightning, so it was not functioning.
The Chinese had launched their second satellite the day before, and a US satellite had broken up on entering the earth’s atmosphere. There were a large number of objects whose orbits needed to be computed. I walked in to find dozens of people on their hands and knees working on a piece of thermographic paper that had been used as the backup to the computer.
They were using calculators to do celestial mechanics computations that were typically done by an IBM mainframe computer. They had 98 minutes to do the calculations because of how fast things circle the globe when they’re close to the earth’s atmosphere.
The lesson was that when there is such an important mission, you don’t allow things you don’t control to stop you from figuring out how to execute the mission. It happened on my first day at work, and these were civilians. These were not military people. Many of them had taught themselves celestial mechanics, and they were so committed to this responsibility. That set the stage for me that it was important to be committed to things that are bigger than yourself.
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