Watch for these warning signs that there are problems with a company's executive team

Photo: Caroline McCredie/Getty Images

Directors can read a lot into a company’s behaviour by management’s response to questions, says Melinda Conrad, a former director of David Jones and currently on the board of OzForex and The Reject Shop.

Start to worry if the chief executive brushes off the question: “How would the company handle a significant cyber-security attack?”

It’s a clear warning when a management team is wedded to the past or thinks a disaster can’t happen.

“You are continually testing whether the executive team is being sufficiently proactive on issues, or reactive, and has the right people to deal with an event,” Conrad says in an interview with Company Director, the magazine of the Australian Institute of Company Directors.

So many threats to a business can’t be predicted and she recommends directors establish their own information flows.

“It’s the capacity to react to the unexpected, in real time, that matters,” she says.

“At an individual level, directors must be across a broad source of information and views. In addition to following mainstream local and international business media, I also actively follow what key business and governance thinkers are saying on social media, particularly Twitter. It’s a great source of links to thought provoking articles you may not otherwise come across.”

Conrad, who founded Conrad’s Warehouse retail chain in the 1990s, says the best test of an organisation’s health is the customer.

“By finding out what is and isn’t going right for the customer, you can then start to work back to where, from a governance perspective, you need to start asking questions,” she says.

Conrad was on the the board of David Jones when there was an unexpected CEO resignation and a takeover by South African retailer Woolworths.

She says you need to think several steps ahead in a crisis and she also learned: “To be more assertive when something does not feel right. When you’re in that fast-moving situation, various technical experts are advising the board what to do. You have to create that space to listen to their advice, weigh it up, and test it against your commercial judgement and instincts.”

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