Governing in Permanent Uncertainty

David: Boards and senior executives are navigating a world where strategy ages quickly, talent is stretched thin, and technology is reshaping leadership itself. In this season of Pearl Meyer Unscripted, we're exploring the real conversations happening today in boardrooms and the C-suite, and the new rules and adaptions required for executive leaders to be effective. 

Today's episode is governing in permanent uncertainty. Volatility is no longer episodic, it's persistent. Economic shifts, geopolitical tension, technological disruption, and regulatory change have made uncertainty the operating environment, not the exception. 

Yet many governance models were designed for a more predictable world. In this episode, we'll explore what good governance looks like when leaders are forced to make consequential decisions with incomplete information. We'll discuss how boards are adjusting their decision-making approach, how scenario thinking is replacing prediction, and how governance cadence itself is evolving to keep pace with constant change.

Our guest today is Susan Sandlund, someone who has vast experience in board governance. Susan has served as a board member on private and not-for-profit boards, and notably as a committee chair on several public company boards. She currently supports boards and CEOs on important leadership and governance challenges as a managing director at Pearl Meyer. Welcome Susan.

Susan: Hi David, good talking with you today, excited to get into this topic.

David: Great! Well, let’s start high-level Susan. Given the introduction and everything going on with boards and management teams today, I'm curious, in your opinion, what does good governance look like with all of this volatility? Perhaps more specifically, how can boards be most effective in the face of so much uncertainty today?

Susan: Okay, David, great question. I think many boards are looking at the current environment as something they have never seen before. It's a bit daunting. And so when you answer the question of, "then what is good governance?" First and foremost, it's acknowledging that we're not in the same situation we were in, say, five years ago, and reflecting on how does that change how we do our work as a board?

I would say some of the more thoughtful boards have been looking at, do we need to be changing our cadence of meetings? Do we need to be looking at different kinds of conversations that we should be having with our CEO that maybe we never had before? Are we concerned about some of the geopolitical risks, some of the other regulatory environment issues that could impact our business and therefore we see a higher level of risk? So, discussions around risk, of strategic choices for the future, knowing how to keep up, frankly, with the change as a board.

The one thing I've heard some CEOs say is, my board is a step behind me and therefore they're not that helpful to me right now because I'm in this constant world of change and they're not keeping pace. So, a board needs to keep pace right now with the CEO and really be a partner, team member, with the CEO to help address some of these issues.

David: Susan, are you finding boards need to look at themselves as a unit in a different way and the board chair needing to take more responsibility?

Susan: Yes, I would say that more boards are looking at themselves as teams. The best boards are thinking of themselves as collaborative teams and realizing they need development like any other team. So, looking at the role of the chair, do they have a great relationship with the CEO? Is there an openness between the CEO and the broader board? Do we have a balance in how we interact across the organization? There are so many ways we can get at this, but one of the best is the yearly board evaluation. That used to be kind of a ‘check the box’ exercise and more and more, I would say the best boards are taking it a little more seriously and using it as an opportunity to answer the question of, how do we really up our game as a board in this environment? What do we need to learn? What do we need to be focused on? What are the most important priorities to be able to effectively govern this organization?

That is something we're helping many boards with these days in a more intense way. Individual member feedback is a big topic. Individuals thinking about how can I become more effective on this board. And typical things that make boards more effective now. Are all of the directors contributing at a level where they each have unique impact? You don't want them to be all contributing, doing the same thing. The idea of having a diverse board is important, in that you want to be addressing all the different areas of capability that are required to help drive an effective organization. So, there's a lot going on there, but I think there's a little more introspection on the part of the boards asking the questions of, "how do we remain helpful and relevant in this environment?"

David: And yet aligned on the business milestones, I assume.

Susan: Yes, absolutely. I mean, strategy should be driving all of this. And that's the true North. We're looking at, as things change in organizations, as companies are acquired, as major change in the economic environment, you have to adjust and you have to be helpful to the management team.

These days, the board isn't just a sit back organization that says ‘yes’ or ‘no’ to PowerPoint slides. They should be much more consultative, frankly, with the CEO and in the game with them, to some degree. Again, but not crossing into that line of playing operating manager.

David: Right, right. Does this have a potential to slow an organization down? I wonder with what you've just said, that the concern would be if I’m part of an effective board, how do I focus my effort?

Susan: Yes, and I've seen boards that have the best of intentions and they do just that. They slow everything down because they're trying so hard to help the company answer every question. They’re asking for a gazillion reports from management and they're weighing in and, in many different ways, and maybe in having different opinions. And that can confuse a management team.

This is where the chair comes in. The chair of a board has to be watching this and being a real orchestrator of the time and energy of the board, right? So, you can't just let it rip. If you let it rip, you're going to have mayhem. You're going to have everybody talking at once and trying to be helpful, but it's messy. So, picking and choosing big issues to take on as a board is important. Some things you just say management is going to handle that, duly noted. 

The role that the chair can play to kind of watch the cadence of the board, how they are helping the organization, because you have to think, ultimately a board should have positive impact on an organization from a governance perspective. They should not be getting in the way; they should not be a drag. And so, the idea of do you have the right people on that board to be adding value? Do they understand their roles? And can they come in and out in a sort of agile, seamless, way to be helpful.

David: Yeah, I was going to ask you, Susan, about that. The board makeup and roles on the board to help keep management in the company moving forward, given all of the uncertainty in the market. Any observations there?

Susan: Well, the orchestration between the chair and the CEO is super important right now, like that that relationship is solid and that there's a lot of communication back and forth, but also that they are involving the rest of the board is important. So often we'll hear about boards where the chair has a tight relationship with the CEO, but nobody else seems privy to what's going on. And so, this idea of carefully disseminating information and making sure the full board is involved on the right things. That doesn't mean that the chair doesn't have confidential discussions with the CEO, but finding ways to make sure that that is balanced, if you will.

And the CEOs are having bigger roles here. I mean, the best CEOs are looking at their boards right now as an asset to help them. Verus, I want to hide from my board. How do I leverage my board in a way that can be very helpful? Do I want them to talk to a couple of my management team members because they happen to have experience in an area that we need help with, and boy, that's like free help coming from my board, frankly. The CEO has to be very, sort of, transparent, and no ego right now with this environment, and it’s sort of all hands on deck.

David: Yeah, yeah. I mean, and look, you've served on boards and continue to serve on boards and in terms of some real specific pointers or advice, how can boards be most effective in today's environment?

Susan: Well, the worst thing you can do, let's just say, and I've seen some of it, is to run away from reality. Sometimes the board is dealing with everything but the biggest issue on the table. So, a couple of times I've seen CEO succession ignored, you know, because guess what? The CEO doesn't want to deal with it. And so, everybody, even though they know it's important, they've kind of begged off of it.

And I've seen disaster occur as a result in some cases where it was just let go too long. And that doesn't happen that often, but it still happens. So, this idea of, are we focused on the right issues? And board members who are willing to stand up and say things. Unfortunately, you know, especially on big public companies, a lot of our board members, you know, yes, they're past CEOs and they're on these boards because they have amazing backgrounds and capabilities and accolades. That doesn't mean that they don't sometimes do things to preserve their board seat. It's in the spirit of, "am I going to stick my neck out on this? Oh no, I'm going to lose chips with the CEO if I do that and I don't want to get on the wrong side." That's not a good board member, you know? So that kind of behavior has to stop but it's pretty prevalent.

Political boards, you know they're very politically oriented. I mean, that's not something you want. So, what do you want? I mean, obviously you want a board that has the right capabilities that is aligned with the business strategy is important. So, to take a hard look at your board and say, do we have the right people on this board that can truly add value to help this company grow to the next level? Big, important question to answer. And then, to think about what does it look like in the future and how do we evolve to be the right board if you don't have the right board. So that's one thing, getting those right people.

And then the second thing is how you play. And this is slightly controversial, but I truly believe it. I think the best boards are like well-oiled senior teams, in that they're not a typical senior team, but they know how to work together. And they're very collaborative and they know how to raise issues that are tough because they trust each other and they respect each other. And so, when somebody challenges something, it's taken seriously and you don't lose points for it. In fact, you gain points for raising the tough issues.

So those are the environments that usually are really positive and add a lot of value back to the company because they're asking the right questions, they have the right capabilities, and they're really helping the CEO and the company move forward.

David: And I wonder, Susan, from a cadence perspective, there was a time when boards met quarterly. And yes, there were some updates along the way in written form. But I see and hear about boards more frequently needing more special sessions. You know, frankly, more committee meetings offline. Are these things that you're seeing as well from a cadence perspective, and do think that's directly attributable to the velocity with which change is impacting companies and boards? Or is this just something that, you know, boards sticking their nose in things a little bit more than they used to?

Susan: Well, the answer is, it depends. I mean, it depends on the board, but if you have a very good reason to need to have a meeting in between meetings, then you have it. But you should be careful with that because you can get scope creep with boards where all of a sudden you have way too many meetings and you're getting maybe too into the details. Sometimes it's important to get into the details, but you've got to ask the question of why and are we overstepping? So, there's always that tension between are we crossing the line with management in that we're starting to get into their territory and we should back off. So that's important. But there are some areas right now where it might require a special committee or a special focus.

I think the question to always ask yourself if you're on a board is, "are we being strategic? Are we addressing some of the bigger issues like risk? Talent?" Those are kind of the most important things right now where boards can add value. If you're holding these extra meetings because you're delving into some esoteric part of how an accounting procedure works or it's getting into the ticking and tying of every little thing, it's probably something that either management can do or a committee. But overzealousness, if you will, on committee work can be non-value added after a point. You know, it's like, okay, we're really great at our committee work. We've done everything we're supposed to do, but are we actually doing the more important work? Which is the strategic thinking, really looking at risk, the really intense looking at talent and bench strength, that is where the gold is more in that territory than the traditional board work right now.

David: Right, that balance I'm hearing, that balance between pushing and challenging the management team, while at the same time being supportive in the best way possible with the experience that the board brings. That makes a lot of sense to me.

Susan: And it’s just a different area of attention, you know. It's like, as much as we have to take care of our sort of day-to-day details in the committee work, there are these bigger topics that we can inadvertently avoid because they're just too big and important, that would be a mistake. So, making sure we're hitting on, as I said, the talent, the risk management, the more strategic areas for the company.

David: Right. Well, Susan, in conclusion, I always like asking this question: What is one assumption boards, or board chairs, should let go of right now?

Susan: I think an assumption that you need to let go of is that you can be on a board and be anonymous. There are those who just don't talk on boards and everybody notices it and it's often been okay, ‘oh so-and-so they're just quiet.’ It's probably not okay anymore to be on a board and be just quiet. You have to share your point of view. You should be adding value and that would be what I'd say is something you can't do anymore.

David: It makes a lot of sense with all we've talked about today. Okay, well, thank you, Susan, for joining me, and I appreciate it.

Susan: All right, thanks a lot, David. Great talking to, bye-bye!

David: My thanks again to Susan for a terrific and illuminating conversation. Next week, I'll be joined by Jeff Lagomarsino, a decorated expert in helping companies traverse the tricky waters of large scale transformation. Although transformation is often described in strategic terms, the reality is that when large scale performance improvements fail, the breakdown is usually at the human level as organizations struggle to adsorb significant change. I'm excited to dig into this with Jeff, I hope you'll join us.