You don’t hear much about CEOs and their Boards until there are problems, and then you hear a ton. When things finally hit the newspapers, it makes you wonder what has been going on – or not going on – in the regular meetings between management and those charged by shareowners with overseeing their actions.
The Uber Board has been in the spotlight in recent weeks, as the ‘bro’ culture propagated at the high flying personal transportation company during its growth from startup to $6.5 billion led the Board to – ‘finally!’ in the views of many – oust its flamboyant CEO Travis Kalanick. The Wells Fargo Board entered the spotlight earlier this year in the wake of revelations about longstanding improprieties in the bank’s retail unit. Despite their instituting sanctions against the executives responsible, accusations of dereliction of duty by the Board and calls for resignations continue to this day.
These are just two of many examples of large company boards coming in for criticism due to lax behavior. Boards can misbehave equally through over-involvement, more frequently noted in smaller companies where board members represent or are themselves investors in the business. Two of the most common instances are these:
- The board member brought in for industry / technical knowledge, also a former CEO so empathetic with the need for balance, who still operates like a CEO: makes ‘suggestions’ and is critical if they are not followed
- Board members who ‘get to know’ management below the CEO and make recommendations that cause extra and distracting work; in even worse instances, their confidential chats elicit back-channel criticism of the CEO and destabilize top management teamwork
Check out this blog post and reader comments for further discussion of ‘the bad board member.’ And check out this trenchant article by my Launchpad Venture Group colleagues Ham Lord and Christopher Mirabile on the good board member: Noses In, Fingers Out.
Thoughtful attention has been paid in the business academic press to board duties and the challenges of making an effective board. Among the most noteworthy are these three. The dual role of a board of directors to both advise and oversee is ably summarized in this 2014 Stanford Business School publication. The three areas where boards typically fall short in executing on their role were revealed in this 2015 research published in Harvard Business Review: selecting the right people, spending quality time on strategy, and engaging long-term investors. The most important accountability of a board, in my view, is their obligation to evaluate their own performance and hold themselves accountable for rectifying shortcomings. The legal requirements for doing so leave considerable room in execution for applications of whitewash. An efficient but rigorous process for fulfilling this responsibility was succinctly outlined in this HBR article earlier this year.
These articles appropriately focus attention on the part boards must play in getting that ‘Goldilocks’ / ‘just right’ balance in relationships with the organization’s leaders, but thoughtful CEOs won’t be satisfied to leave things entirely up to their boards. Here are three useful guidelines to help CEOs take the lead in making an effective board.
- Shape the conversation. Your primary job as CEO is to develop and execute an effective strategy for the business. Task your board with supplying useful perspective on the challenges that your strategy must address. What economic or technology trends are material? What customer needs or competitive developments deserve attention? Board members live in the world outside the company. Make sure when they’re not with you that they’re keeping their knowledge of that world fresh and relevant to your company. When your strategy effectively addresses the challenges they’ve identified, it will tighten their allegiance to you
- Manage the situation. Your personal effectiveness is heavily dependent on the quality and performance of your top management team, and you want your board to both appreciate and suggest guidance for their work. The best way to do that is to provide them exposure to your team in board meetings and access to them outside of meetings, but these interactions can be tricky. Organize these outside-meeting conversations loosely – know the topics of interest and help your team members prepare in advance. Afterwards, consult independently with both around what was covered, what was suggested, and most importantly, what judgments were formed by both parties. Be sure to correct any misimpressions on either side, but take these judgments in hand for both improving team performance and shaping board behavior
- Manage the relationship. Board members provide disparate perspectives, but must function in a coordinated way. They’re not strictly speaking a team, and many have the distraction of either leading or serving as members of other top management teams besides yours. Nonetheless, a little team play goes a long way in helping you get the benefit of your board’s perspective and expertise, and you can’t do this by yourself, so pick an able partner for your board to serve as lead director. Putting someone in this role, and tasking that person with managing and evaluating the board’s performance is an underutilized means of getting the most out of your board. You will feel the need to be polite and accommodating when a board member forgets an important topic covered in the last board meeting, or drills down more deeply than your meeting agenda allows. Your lead director can intervene and reinforce the proper discipline for the board in discharging its duty
Put these three guidelines in place and you will have a much better chance of getting what you need from your board – and of keeping the balance of your attention focused where it should be: running a successful business.
Comments? I’d like to hear your thoughts. Email me at firstname.lastname@example.org