For more than a year, the COVID-19 pandemic has disrupted and challenged organizations, lives, and livelihoods across the globe. The results from a recent McKinsey Global Survey of more than 800 board directors and executives confirm that while overall corporate performance has suffered during this time, boards were quick to rise to the challenge of navigating a global public-health and economic crisis.1 That is especially true with regard to how boards operate; after many years of reports of only minimal improvements in how they work and their overall effectiveness,2 the latest results suggest that the pandemic has triggered new and improved ways of working that may outlast the pandemic.
One such improvement is the collaboration between the board and management, which in many organizations has increased significantly during the crisis. Boards have also implemented new structures and processes, become more flexible in their agenda setting, doubled down on strategy, focused on corporate resilience, and, at the director level, committed more time to board-related work. Whether these changes—in particular, a more seamless relationship between the board and the management team—will remain after the pandemic is not fully clear. But when we look at the responses from boards that were most adaptable and effective in helping their organizations navigate the crisis, a few lessons emerge for what boards should do to maintain the positive momentum.
Boards before the pandemic
Our survey results from just before the COVID-19 crisis suggest the extent to which the pandemic caught organizations—and their boards—off guard. A few months before the initial outbreak in China, less than half of all respondents in our 2019 survey said that corporate resilience (for example, the ability to manage a downturn) was on their current board agenda.3
And in 2019, only one-fifth believed that a lack of corporate resilience was a significant challenge for their organizations. Among respondents who said resilience was a challenge, nearly half said their boards were unprepared to manage it (Exhibit 1).
Our latest survey asked about the most significant operational challenges facing boards when the crisis began, and directors tend to say that their own boards had few established processes in place to guide them during the pandemic’s early days (Exhibit 2). After the lack of in-person interactions and difficulty with remote-working tools, the most common challenges—a lack of crisis-management processes, the blurring of roles between the board and management team, and a lack of relevant capabilities within the board—suggest there were some early challenges to adapting the board’s operations in a crisis environment.
At the same time, this environment created a unique opportunity for board directors to step up their game and provide critically needed guidance to their organizations by adapting decision-making processes and lending their crisis-management experience while in some cases also battling for the company’s survival. And the survey results suggest they have done just that.
Boards responded to the crisis—and quickly
According to the survey, boards have largely answered the call to help their organizations govern through crisis. To start, directors increased their overall time commitment. Between 2019 to 2020, respondents report a nearly 20 percent increase in the average number of days spent on board work, and they expect to increase their time spent even further between 2020 and 2021. Among directors who say their boards have been very effective at helping the organization respond to the crisis, they already spent significantly more time than others precrisis—and now report much greater increases in their time spent on board work (Exhibit 3).
Implementing new structures and processes
Besides the increased time investment, the results suggest that nearly all boards made at least one change to their operating models to better manage the crisis (Exhibit 4). The most common change has been structural: investing in technology and tools to enable more digital collaboration and establishing ad hoc crisis committees. After that, directors most often cite changes to the ways that boards and management teams work together and the flexibility of their agendas. Among the least common changes so far have been to board composition—though perhaps not surprisingly, since adjusting the diversity of skills, demographics, or geographies represented on a board is a more complex change to make than others and also requires shareholder approval (see sidebar, “How to diversify your board of directors”).
Strengthening collaboration with management
According to the results, the pandemic appears to have triggered changes that, in past surveys, board directors cited as the best ways to improve their collaboration with senior management as well as the effectiveness of board meetings. In our 2019 survey, more than half of all respondents said that more constructive boardroom discussions between the board and senior-management team would most effectively improve their collaboration.
Indeed, better discussions and collaboration between the board and management team are among the most common changes made during the crisis. What’s more, 79 percent of respondents—including directors and C-level executives—say the collaboration between these groups has been effective or very effective during the pandemic, up from two-thirds who said so in 2019. And better collaboration correlates with a more effective COVID-19 response, according to the results: more than 90 percent of respondents reporting an effective collaboration between the board and management also say their board’s response to the crisis was effective—compared with only 60 percent of all other respondents (Exhibit 5).
Creating a more flexible agenda
Over the past ten years, our research suggests that at a high level, boards have consistently focused on strategy over other items on their agendas, even throughout the crisis. Yet in a situation as extraordinary as the COVID-19 pandemic, respondents do report changes to more detailed topics on their agendas, and that an annual process for setting strategy—which was a long-standing norm for many boards in the past—is no longer sufficient. In the survey prior to the pandemic, only half of all board respondents said their boards were effective at either assessing whether their strategy accounts for new or emerging risks or adjusting the strategy continuously, based on changing conditions.
Here, too, boards have adapted in response to the crisis. Two of the top five changes respondents say their boards have made relate to the flexibility of their agendas: to discuss topics as they arise and to include strategy on the agenda of every board meeting—of which there were nine on average during 2020.
Increasing the focus on resilience
Compared with the results from the previous survey, respondents report a clear shift in the specific topics on their agendas (Exhibit 6). In 2019, boards were most focused on innovation and growth as well as technological trends. Innovation and growth remains the most common agenda item in the latest survey—though corporate resilience has risen in the ranks and become an almost equally important topic. And while boards seem to have shifted away from several people- and organization-focused topics (for example, the organization’s culture, purpose, societal trends and changes, and workforce capabilities) in the past year to focus on their crisis responses, slightly larger shares of directors say such topics will be on the 2021 agenda.
Learning from the most adaptable boards
To get an even better understanding of the changes under way, and which of them might outlast the crisis, we took a closer look at responses from the most adaptable boards and the changes they made across structural, process-related, and interpersonal dimensions (Exhibit 7).4
On average, respondents on the most adaptable boards are twice as likely as others to report any of the operational changes we asked about once the crisis had started. The biggest differences between the most adaptable boards and all others relate to collaboration between the board and senior management, as well as collaboration within the board. And compared with all other respondents, a significantly larger share of directors at the most adaptable boards say their boards’ decisions and activities have a high or very high impact on the organization’s value creation during the crisis.
When looking closely at this group’s responses, we see that they report significantly better performance on a number of other dimensions:
- Time commitment. At the most adaptable boards, directors reported the same average number of meetings in 2020 as did their peers on other boards. Yet their overall time spent on board work is much greater: these directors report a 50 percent higher number of days spent on board work in 2020, compared with all others. And while this group expects to spend one less day in 2021 than they did last year, that number (37 days) is still much higher than the days expected by all others (27 days).
- The board’s agenda. According to respondents, their boards allocate a similar amount of their meeting time to specific topics (such as strategy, risk management, and finance5) as they did in 2019; but risk management has moved up in the overall ranking of topics, and boards now spend as much of their time on it as they do on organizational issues, such as talent management, organizational structure, and culture. Yet respondents at the most adaptable boards report slightly different priorities: for example, they spent significantly less of their time on performance management than others.
When looking at specific topics, the most adaptable boards appear to be faster at changing their agendas to meet the moment. According to directors on adaptable boards, they are much more focused on corporate resilience than their peers (69 percent say it’s on the agenda, versus 54 percent), and they are almost twice as likely as others to cite disruptive business models. Fast forward one year, and the most adaptable boards expect the biggest increases in their focus on the organization’s purpose; political, geopolitical, and macroeconomic risks; and the effects of climate change. - A new way forward. Finally, the more adaptable boards are more likely to stick with the newer ways of working in the long term (Exhibit 8). Of 15 changes to the ways boards work, much larger shares of the adaptable directors say their boards will continue with eight of them; most notably, they will continue with changes that signal increased value-enhancing board involvement, rather than merely rubber-stamping decisions—for example, including strategy as a topic on every meeting agenda, strengthening collaboration, and increasing interactions between boards and management teams in between meetings. Indeed, almost 90 percent of respondents at the most adaptable boards say their collaboration with senior management was effective or very effective during the crisis.
In other ways, the adaptable boards and others are aligned on how boards will continue to evolve. Both groups of respondents agree on the most likely changes: their boards will continue running at least some meetings remotely (62 percent of all respondents say so), and their use of technology and digital tools to collaborate will increase (50 percent).
Board governance
While it’s not clear yet which of the substantial changes that boards made during the COVID-19 crisis will continue to gain momentum, there is a general consensus that the ways boards work in the future will look quite different. Based on our experience, boards can keep the momentum going and serve as catalysts for change by doing the following: taking a more flexible and agile approach to agenda setting, which will help boards account for timely or emerging topics (for example, corporate purpose and environmental, social, and governance issues), new risks to the business, or strategic alternatives as the need arises; dedicating their additional time spent on board work to value-enhancing activities outside of formal meetings (for instance, prereading of materials; attending training and development sessions; or participating in one-on-one meetings with other board directors, key executives, or other company stakeholders); and interacting more often with the executive team through formal and informal one-on-one interactions. For instance, having the chair of the audit committee coach the company’s CFO.
