There are few directors—at least that we know—as well equipped to think through the impacts of disruption and change being brought about right now than Claudia Fan Munce. A venture advisor at New Enterprise Associates, one of Silicon Valley’s largest and most active venture funds, Munce is also on the boards of Bank of the West/BNP Paribas and Best Buy.
She joined NEA in 2016 after 30 years at IBM where she founded the company’s Venture Capital Group and helped the company devise strategy. CBM reached out to her for her thoughts on the current crisis. What follows is edited for length and clarity:
‘This Is a Humanitarian Crisis Above All’
This is a time to stay calm on behalf of everybody, even with all this horrible analysis that we’re getting almost on an hourly basis. It is the time for the director, on behalf of the company and in support of the company, to be rational, to be analytical, and of course, to be caring, right? Because, even with all the horrible economic impact, this is a humanitarian crisis above all.
Prior to this crisis we were all very focused on the social, the governance and the environmental, all the ESG conversation that took place. And then when the crisis hit everybody is like, “Oh, my God. The financial, the stress test, the liquidity, the shares, of course, plunging.”
I just remind directors to stay on the position that the company is composed of people. That is, in my opinion, a very important focus. People need the director more than anyone because we have the foresight and the oversight responsibility. We can choose not to be engaged in the moment, in the almost-fanatic executions that the company has to go through right now. I think the directors’ best practice—in terms of employees, in terms of supply chain, in terms of the shareholder—is to keep themselves in a much more analytic mindset to help the company navigate through this crisis. There’s enough panicking going around for the rest of us, right?
Surely the oversight component is very clear, to make sure the company is prepared for what they need to do in the short term for the potential impact on the business. All companies have, at least the ones where I sit on the board, very, very comprehensive crisis management plans. Many of these corporations have a pandemic crisis management plan—and even some that do not have one, some, like, California corporations have a wildfire crisis management plan that can be very easily adapted as a framework to generate a new epidemic crisis management plan.
So the board really needs to be exercising the oversight when we have a good plan in place to respond to, and that plan needs to be very dynamic. Because things are so fluid, they’re changing so much. Who knows what is going to be the next thing? So the fluid, dynamic sort of a plan that the company needs to have, and be available to engage with the management team as they redefine this responsive plan is a very critical role that the director can play. Because in many ways, the directors’ oversight is their sight across these kinds of sustainability and continuity plans. That is a role that the can director play.
At the same time, directors can bring foresight. I know it’s unpredictable, but there are clearly scenarios that are playing out that we need to somehow evaluate, right? Is this going to be a short-term impact? Are we going to see this bell-shaped curve flatten or not flatten? Is this going to be an epidemic that will be here for good? Is this going to be a global financial recession or a recession in general? There are a lot of crisis scenarios that directors can help the company play out and establish a different framework of thinking in terms of responding to more long-term needs that a company will have in this pandemic crisis.
Analyzing Risk
The framework itself is not very different than the normal framework that we have always used. You look at the key business risk management frameworks: What is the operational risk? What is the technology risk? What is the financial risk? What is different now in the planning are the trade-offs that need to be looked at. We were all so focused—and it was such a great topic—on ESG as a high priority. And of course, cyber, right? Everybody is so focused on cyber and all the component of that particular risk. The risks obviously are different now, right? The operational risk, the health of our employees, our customers. So I do not think the framework changes, but priority and the trade-offs do change, and need to be absorbed, on a regular basis.
The best practice that I’ve actually seen from companies is to form a very dedicated group within the board to avoid this “too many cooks in the kitchen” syndrome that happens when you have a very fluid situation. Establish a particularly focused group of directors who are able to dynamically manage the crisis with the senior management team, without the burden of a full board being engaged in an ongoing dynamic trade-off of risk and investment on the operational side. This risk committee becomes the firm first line, not necessarily engaging the full board.
Thinking About Strategy
I think there are opportunities presented so this can really be time to shift the strategy. If you are rolling out your digital channel for example, well, guess what? This is a time to accelerate that, right? If you’re thinking that you are following a certain kind of adoption curve on your digital strategy, guess what? That adoption curve just changed its slope. Right?
Just like everything else, if you are absorbing all the sorts of impacts and the changes for risk management, those same inputs also allow you to look at your strategy and say, “There are opportunities.” Remember everybody was talking about how difficult it was for banks is to get the customer segment that is older on a digital platform for financial services? Now more than ever they have to be. So can you do something here? Can you encourage them? Can you make it easier out of necessity? People always say necessity is the mother of invention.
This is really a great time for so many of us that care about the human side of it to look at it as also a strategic change that a company can address to better serve their customers. At the end of it, the strategy is really not, “Can I profit from it?” It’s really: “Can I better serve?” Strategy in general should be in that tone: “How do I best serve my customer? And is it time to accelerate? Is it time to slow down?”
You’re not likely to have a lot of face-to-face, you’re not likely, going forward, to encourage a lot of the things that we’ve been doing, right? Some of our companies are saying, “Well, our major channel for lead generation is showing up at the trade shows.” Well, guess what? There aren’t going to be any for a long time. What are you going to do for lead generation? That is a very, very significant strategy change for any company.
Working With Management
The board is really an advisor. We talk about diversity, but I really think the value of the board—even when it comes to diversity—is cognitive diversity. The fact that you bring a different point of view, you bring a different perspective based on your experience or your expertise area. That is the kind of role the board can exercise at this point because things are clearly very fluid, things are clearly changing very rapidly. So up your engagement and make sure that you are synthesizing all this input, which is already a challenge for the board because the data is poor. I probably read about five reports yesterday alone on what you should or should not do right now.
The director should be engaging directly by bringing their insight, their perspective in helping the company, and upping their engagement. But at the same time, being very cautious in synthesizing this abundance of information that they’re getting. How do you synthesize that into truly valuable insights that the company can leverage in defining the response plan, in defining the strategy or change of the strategy, in making trade-offs, all the things that we’ve talked about?
But burdening them with massive reports or just another 10-page analysis? I don’t think that is helpful at all. I think the director, to the extent that we understand the company, understands the business strategy and we are in a unique position to in the time of this uncertainty and abundance of information and analysis to help synthesize all that and provide our unique insights that are helpful to the company and the management team to act on.
Lessons from Sand Hill Road
For me, the VC community’s reaction, versus a public company, is probably even more transparency and even more frequent communication. This frequent communication is something that a public company can learn to do even more of—and have the leadership show their very-direct engagement in the crisis. Like I said, this is a humanitarian crisis and people need to feel the management really cares about the people, about their health, about their well-being.
I think the VCs are doing really good job communicating to their employees, to the CEOs within their portfolio, giving them a new dimension that we’re not just your investor and here for the financial return, but we care about you as people, as teams within the portfolio. That for me is the difference that I see—the ability to feel free to be very transparent from the top down, to have very frequent communication rather than this very formalized process of employee communication within a public company.
CEOs: just have a conversation with your employees. This really is the time that you need to be active to help them feel a little more calm in the chaotic environment in which they find themselves. I think that voice from the top is something that we see more within the VC community that I think we can do even better in the public companies going forward.
