Boards at their best elevate a company’s performance providing guidance and guardrails to help management succeed. CEOs at their best leverage the board’s expertise and perspective to improve decision making and strengthen execution. Of course, getting the best from either side, given the inevitable personalities, power, and politics at play, is an artform.
Inarguably, the first and most important step is hiring the right CEO. When a board gets that wrong, a lot of other things go wrong. However, even when they get that right, things can still go wrong. Our current business environment is so complex and fast-moving that even the best CEOs have blind spots. One of the biggest mistakes a board can make is taking a hands-off approach to governance because they feel they have a strong CEO at the helm. Today, successful organizational leadership requires all hands on deck from both the board and executive team, each member playing their part as they navigate tricky waters together. Following are four key elements needed to for them to bring out the best in each other
A rock-solid relationship between board chair and CEO
There are places in organizations where mediocre relationships are passable. The board chair and CEO is not one of them. Cracks in communication and trust between these two reverberate everywhere. Spencer Stuart conducted a survey last year identifying key moments that make or break this relationship: compensation negotiations, annual evaluations, transparency regarding executive sessions of the board, board composition, and support during times of adversity. The obvious thread that runs through this list is the importance of addressing uncomfortable topics head on. Rather than viewing conflict negatively or avoiding it, the best board chairs and CEOs use it as an opportunity to strengthen their relationship and the organization.
The right people on the board
All boards run the risk of becoming clubby over time. Some members are more interested in prestige or social benefits than getting real work done. Board chairs need to stay cognizant of this natural tendency and facilitate the process of introducing new blood as needed. The right board members are genuinely interested in the organization and show up well-prepared to energetically engage. Everyone on a board should be there for two reasons: their functional value-add and their ability to think systemically. The first relates to a unique and useful expertise or perspective (finance, operations, technology, talent, or ownership etc). The second is the ability to see how these pieces should come together for the enterprise. The first without the second risks turning the board into a gab session of conceptual ideas that never gain traction.
Well-prepped and well-run board meetings
Meetings are a board’s primary tool for value creation. When they’re well-prepped and well-run they create clarity and momentum. When they’re not, they create confusion and frustration. A well-prepped meeting means effective materials are circulated well in advance; the agenda prioritizes the highest-value use of in-person time; and known risks for derailing the meeting (people or topics) are headed off prior to getting into the room. (This isn’t always possible, but it should be a goal). A well-run meeting means the board chair allows for robust dialogue while keeping the group from meandering down rat holes; all voices are drawn out, not just the loudest few; and concrete decisions are made and communicated clearly to relevant stakeholders after the meeting. A common and legitimate frustration from CEOs is that prepping for board meetings can divert too much time from running the company. The best way to address this is having fewer board meetings. Four to six well-run meetings a year should suffice for most organizations. When circumstances warrant more frequent meetings, the board should stay mindful of the workload this places on the executive team.
A mentality of learning and continuous improvement
The most productive boards and CEOs approach their work together in the spirit of experimentation and continuous improvement. That means objectives, goals, and KPIs are collaboratively set and reviewed. The board holds management accountable for performance, not pulling punches or treating them with kid gloves, but does so supportively with an eye towards growth. Both sides recognize that no one person has all the answers and they need many sharp minds working together to solve the problems they face. The military model of debriefing provides a useful framework for how boards and management can interact with each other. Leaving their “stripes at the door,” boards and management review objectives; develop a clear-eyed assessment of what has and hasn’t worked; identify root causes of each; and clarify implications for the path forward. The more they do this work together, the stronger they get at having real and challenging conversations in the service of organizational success.
A strong board and CEO relationship doesn’t happen overnight. It takes time and energy using every interaction to strengthen trust and increase clarity. But the payoff for the effort is huge: It creates a robust decision making culture at the top that cascades down through the organization and becomes a tough-to-replicate competitive advantage.