Managing The Board – 10 Things Every CEO Should Know

Managing The Board – 10 Things Every CEO Should Know

Managing The Board – 10 Things Every CEO Should Know

By Mike Myatt, Chief Executive Officer, N2growth

I’ve yet to meet a CEO who at some point in time hasn’t been frustrated by their board – it goes with the territory. That said, it should be the exception, and not the rule. Ultimately, chief executives deserve the board relationships they develop. As a CEO, your board can be one of your greatest allies. Conversely, and just as easily, they can be a significant contributor to your undoing resulting in an early and unnecessary demise. In today’s post I’ll share 10 tips to help develop a skill set all successful CEOs excel at—managing board relations.

What’s interesting to me is that of all the constituencies CEOs must deal with, the relationship with a board of directors is among the easiest to manage, and the most valuable. So why do so many CEOs blow it when it comes to managing their board? From my perspective, CEOs who fail in their attempts to coalesce with the board usually do so as a result of being either arrogant or naive. The odd thing is, whether through arrogance or ignorance, the results are often the same. These misguided CEOs often just ignore the board as if they didn’t even exist until they see a board meeting scheduled, or receive an angry phone call or e-mail.

The simple truth of the matter is savvy CEOs see their board as a strategic asset, and not a liability to be avoided. The following 10 tips will help you become skilled at managing board relations by lessening your burdens, extending your shelf-life, and improving your performance:

1. Understand the Landscape: 
Regardless of composition, your board is likely made up of successful and influential people. As such, they make better friends than adversaries. Remember that no one likes to be publicly embarrassed, and that your statements, actions and overall performance are an indirect reflection on the personal brands and professional reputations of your board members.

If you inherit your board, seek to build strong relationships as quickly as possible. If you find yourself in the enviable position of being able to drive the selection process for your board—choose wisely. If you find that you have strong opposition that cannot be managed or improved, do everything possible to have them removed/replaced before they do the same to you.

Board members have egos, and will go to great lengths to help you if they perceive you respect and value their position. Likewise, they will seek to undermine your efforts by creating substantial barriers and obstacles for you if you choose to trivialize them.

2. Board Composition:
First rule of board management—avoid conflicts of interest. All board members should meet director independence standards and not subject themselves, their company or your company to unnecessary risk

While race/gender diversity mandates are drivers in today’s selection process, the diversity drivers you should be paying attention to are thought diversity, industry diversity, skill diversity and experience diversity. Selecting a board that challenges your thinking, and makes you a better chief executive, is more important than having a rubber-stamp board that adds little value.

Length of board term should also be considered when appointing new members, as you don’t want to be wed to a board member for a long-term commitment only to find out early in the relationship the member is not a good fit (see succession below).

Lastly, when developing board committees, I would recommend forming a minimum of the following: audit committee, executive committee, investment committee, nominating and governance committee, and organization and compensation committee.

3. Boards Must Be Led:
As I noted above, CEOs deserve the boards they develop – a failure to lead at any level, especially at the board level, will have significant negative consequences. The concept of “tone from the top” doesn’t just apply to employees. Just as chief executives must align expectations with their employees, they must also do so with the board. Smart CEOs develop a framework and platform from which to effectively lead the board.

Just as boards hold the CEO accountable to a set of standards and behaviors, the CEO must require the same of their board. The CEO must clearly communicate what they need from board members and then demand they do more than just show up for the meetings. CEOs that allow board sessions to devolve into gripe sessions as opposed to

4. Be Proactive:
The number one rule of board management is not to hold the meeting at the board meeting. Put another way, the meeting never happens at the meeting. As the CEO, your role in board management is that of leader, executive, fiduciary, lobbyist and evangelist. As such, it would behoove of you to have individual phone calls or meetings with board members in advance of the actual board meeting to seek their input and advice.

Also make sure to get a draft of the board deck out to the lead director or key committee chairs well in advance of the meeting creating another opportunity for feedback and input. Use these proactive encounters to flesh out, and seek alignment on, key issues and positions.

Never reserve bad news for the actual board meeting, but rather air it out well in advance. If you’re going to get beat up by your board, it’s better to have it happen in private rather than on center stage where the beating can not only be more severe, but where the results may also be recorded in the minutes. Never hold a board meeting when you don’t know where your board stands on key issues in advance. An unprepared CEO is a CEO who will not endure the test of time.

5. The Agenda:
Make sure the agenda isn’t too crowded, and that there is sufficient committee and session time available to cover needed ground. Most board meetings don’t lend themselves to being held over the course of a single day. I would suggest have committee meetings on day one, a board dinner the evening of day one, and executive sessions on day two. Having a high powered board of directors does little good if you don’t give yourself the time to peel back the layers of critical issues. 

6. Display Backbone:
Smart CEOs respect their board—that said, they will not allow themselves to be run over by the board, or to allow board meetings to turn into the meeting into little more than glorified gripe sessions. The board’s role is one of governance not management, and sometimes it’s necessary to remind them of that fact. Don’t go to the mat over insignificant issues. Be willing to compromise where prudent, but you’ll also need to stand your ground and successfully make your case on mission-critical issues.

CEOs who make a habit of too easily acquiescing to the board have in essence surrendered to the board. They will have lost the respect of the board and will have rendered themselves ineffective as CEO.

7. Manage the Trickle-down:
Remember that what happens in the board room rarely stays in the board room. VC, private equity or other investor directors leave your board meeting only to make a report on their observations. Non-investor board members will usually discuss the goings on of your board meetings as well.

If you conduct yourself professionally and respect your board’s ability to add value, the down-stream communications that follow your meeting will advance your cause as opposed to undermine it.

8. The Environment:
What should be obvious, but what is often overlooked, is the importance of having your board members look forward to the meeting. In other words, make the meeting meaningful, productive and if possible enjoyable. If your board members dread attending your meeting, they will be predisposed to show up with a bad attitude. Bad attitudes bring out the worst in people, and that is not what you want waiting for you when you arrive at the meeting.

Don’t bore your members with meaningless drivel or worthless presentations. Rather be crisp in your delivery and be specific about the issues at hand. Feed them, make them comfortable, ensure they don’t feel their time was wasted, or that they didn’t have the opportunity to be heard—have them leave looking forward to the next meeting.

9. Set the Chinning Bar High:
While rogue CEOs have received most of the media attention in recent history, don’t fool yourself into thinking that rogue board members don’t exist as well.

Remember that all board members are obligated to make decisions in the best interests of the company. Moreover, personally motivated decisions that speak of self-dealing will eventually come out into public view and will be dealt with harshly.

Make sure all board members share a commonality of values and vision where possible, and hold them accountable to make decisions in alignment with the fiduciary obligation they assumed when they accepted the board seat.

10. Succession:
Many studies show succession as a major issue of importance for boards, yet in most surveys, often more than 50% of companies feel dissatisfied with present succession practices/positioning. The board should make great effort to ensure continuity and succession is a primary focus, roles of the incoming and outgoing CEO are clearly defined and understood, and that transitions at both the operating and board level serve to advance the succession, not impede it. There should also be succession planning as it relates to board members as well – board member for life is not acceptable.

Bonus – Board Development:
Regrettably, many CEOs believe their investment into the board begins and ends with compensation – big mistake. I’ve always said you cannot have a growing and developing enterprise when leadership fails to invest in growing and developing itself. This applies to both executive and non-executive leadership. An investment into board development simply means the board will be better equipped to excel in the performance of their governance function, as well as to develop their ability to challenge and stretch your thinking.

Please use the comments section below to share any other tips for working more effectively with the board. Thoughts?

Why Accountability Matters

By Mike Myatt, Chief Strategy Officer, N2growth

Don't let accountability be your weak link...Accountability and transparency are hot topics today, and rightly so…Given this new found popularity, I felt that a piece delving into the topic of accountability would be both prudent and timely. Frankly, considering what the lack of accountability has done to our nation’s economy and political structure we should all be spending more time on the topic. However the truth is that few people really like to hear the “A” word applied to their individual circumstances, choices, decisions, and performance. Regrettably, this is precisely why we are embroiled with many of the daunting challenges facing our country today.  Nothing keeps personal and corporate train wrecks from occurring more than a solid framework of accountability. In today’s post I’ll examine the many  reasons for why accountability should matter to all of us…

Regardless of where you are in the corporate hierarchy, accountability is a fundamental principle associated with success. Administrative and support staff needs to be accountable for the quality and timeliness of their work. Sales people need to be accountable for not only production volume, but also the manner in which they represent the company brand while attaining said volume. Management needs to be accountable to their subordinates, as well as to executive leadership. Executives need to be accountable for their quality of leadership and decision making, and as we discussed yesterday, board members need to be accountable to shareholders. I would be remiss at this point if I didn’t also take a moment to remind politicians that they are accountable to their constituents.

Accountability is the lowest cost, most practical, and most productive form of risk management and quality assurance that can be implemented across an enterprise. It is really nothing more than a common sense understanding that decisions made within a framework are going to have a greater chance of success than those made in a vacuum. Decisioning options vetted in the full light of public view will by default go a long way toward the prevention of self-dealing.

It is those individuals or organizations who don’t believe they are accountable to anyone, for anything, or at anytime that are nothing more than a disaster waiting to happen. All human beings, regardless of who they are, can be capable of making huge mistakes when operating in a vacuum or under a veil of secrecy. While there are certainly those individuals who are just predatory, bad to the bone people, clearly not everyone who makes a mistake is evil with the intent to do harm to others. Rather many people when faced with a tough situation simply were not operating in an accountable manner, and therefore made a decision that they would not have likely made if they were openly operating under the scrutiny and review of others.

All one has to do is to just pay attention to the recent headlines to understand the critical importance of, and need for accountability. I truly believe that if most of the public figures falling prey to bad decisions of late had been operating in the open light of day, and had they sought counsel in their decision making, that the outcomes of their recent debacles may have been quite different. If you think back to any of the bad and/or regrettable decisions you’ve made in your life, it is highly probable that you didn’t seek the counsel of others (or ignored said counsel) prior to making the wrong decision. Setting up an enterprise wide framework for accountability is as simple as implementing the following five items:

1. Have a clearly articulated statement of corporate values: Not only state the values that you want the entity to use as a foundation for operation, but also use the values to frame your vision, mission, strategy, tactics, and processes. Hire and manage based upon the corporate values. If you hire someone who doesn’t share the corporate values, or don’t hold existing employees accountable for maintaining the corporate values, then you will get what you deserve.

2. Have a written delegation of authority: A written guideline for corporate decisioning will help individuals make good decisions. Describe in great detail which employees are authorized to make what decisions. Establish budgetary and approval guidelines for all decisions, making sure that good checks and balances are in place to help keep employees accountable.

3. Implement a good leadership development program: Utilizing training, coaching, mentoring, peer review, talent management, and other development best practices will help insure that your leaders will continue to grow, and that corporate accountability guidelines are being consistently reinforced.

4. Active Oversight: Engaged management oversight is key to preventing poor decisioning. It is fairly easy to course correct if you’re only a few degrees off course for a short period of time. However, if allowed to wander far astray for great lengths of time, it may be virtually impossible to prevent a disaster. All small problems can be dealt with. However the bigger the problem, and the longer it has been allowed to fester, the more difficult and costly the solution (if there is a solution) will be.

5. Compensatory Penalties: Those individuals who believe they are substantially at risk for poor decisioning will simply make fewer bad choices. Fines, liquidated or punitive damages, compensation forfeiture, restitution, and/or termination will keep most people on the right side of the line.  

The bottom line is that individuals, teams, business units, divisions and corporations will be better off when a culture of accountability is adopted. Don’t run from accountability; rather embrace it as a way to manage personal and professional risk.

Related Post: “Rogue CEOs & Board Accountability

Rogue CEOs & Board Accountability

By Mike Myatt, Chief Strategy Officer, N2growth

Accountability should be more than fine print...Rogue CEOs…given the recent failure of banks and financial institutions previously thought to be untouchable, there has been a tremendous amount of justifiable venom being spewed at the CEOs of these firms. Their ignorance, and in some cases their arrogance, allowed these rogue CEOs to operate outside of normal business rules, conduct self-serving agendas, and partake in self-dealing transactions all while receiving outrageous compensation. Before I go any further, let me state that I believe we should understand that the overwhelming majority of CEOs operate within the bounds of reason and ethics consistently placing stakeholder interests ahead of their own. The real question we should be asking is where were the boards of directors during this period of mismanagement? You see it is the board who is responsible for holding the chief executive accountable. Even where you have a CEO who is inclined to misbehave, an actively engaged board of directors simply won’t allow it to happen. In todays post I’ll examine the role of the board of directors in keeping CEOs accountable… 

Before I proceed further, and for contextual purposes, I believe it’s important to actually define the role of the board of directors. While there are certainly a variety of opinions as to the roles and obligations of a company’s board of directors, from my perspective they can all be boiled down into four simple responsibilities:

  1. Shareholder Accountability: A board member’s primary responsibility is to act in good faith as a fiduciary in representing the long-term best interests of shareholders. A board’s actions and decisions must be able to pass the litmus test of public scrutiny (legally, morally, and ethically), rise above personal agendas, and always place shareholder interests above all else;
  2. Corporate Governance: A board must insure that the corporation’s charter and by-laws are adhered to. Moreover a board must use its best efforts to hold executives accountable for insuring that corporate actions fall within other legal, financial, regulatory, and compliance boundaries. Ignorance and apathy are not the traits of a good board. Great board members are proactive, involved, supportive, consultative, experienced, and savvy. They know the rules, play between the lines, and do the right things. 
  3. CEO Oversight: It is the board’s job to select the CEO, provide the CEO with support and guidance, and to hold the CEO accountable. Good boards exercise great care and prudence in profiling CEO candidates, recruiting the right CEO for the job, providing the CEO with a clear job description, successfully onboarding the CEO, and holding the CEO accountable for meeting a set of clearly defined expectations. Good boards do not attempt to micro-manage a CEO, rather they understand their highest value in being a value added resource for the CEO focused on helping the CEO become successful. 
  4. External Visibility: A key responsibility of the board is to serve as an external champion of the corporate brand. Board members should have a clear understanding of the corporate vision and mission, and where prudent, evangelize the message for the benefit of the corporation. Whether this requires providing networking assistance, investor relations support, or engaging the media, a highly regarded and active board can add substantial value to the enterprise.

In the text that follows I’ll offer several points that will help a board evaluate whether or not they have the right CEO for the job:

  • Tenure: In a previous post entitled “CEO Term Limits” (a must read for board members) I stated that there is no such thing as a standard shelf-life for a CEO. No rules of thumb apply when evaluating whether a CEO has outworn his/her usefulness purely from a chronological perspective. I’ve witnessed CEO’s where the company has outgrown their skill sets, and/or abilities within a year of hire (a bad hire…), and I’ve also observed many instances of CEOs that have successfully guided companies for 20 years. The question is not how long a CEO serves, but rather what he or she does while serving. Whether age 32, or age 72, a board must ask themselves, is our CEO doing the job, and perhaps the better question is, are they the best CEO for the job?
  • Performance: The topic of performance is a multi-faceted issue. A CEO’s performance should be benchmarked against a variety of key performance indicators which are clearly spelled out in the chief executive’s employment agreement. When evaluating performance, a board must evaluate whether a lack of performance exists across all areas or in a single area, whether the lack of performance is a short-term aberration vs. the likelihood of it being a burgeoning problem, and whether the CEO can be coached through the performance gap, or whether the lack of performance is an irreconcilable issue.
  • Ethics Violations: The character of the CEO is often synonymous with the brand of the enterprise. Once a chief executive has violated the public trust, or made a gross or negligent error in judgment which could taint the corporate brand, a board should move swiftly to restore the integrity of the corporation. Many things can be spun, justified, rationalized, or managed, but a lack of ethical behavior on the part of the chief executive is not one of them. Let me also be clear that a good employment contract will make null and void any favorable severance packages where malfeasance, misfeasance, gross negligence, or fraud on the part of the CEO is present.
  • Loss of Confidence: Once the board, the employees, the capital markets, the press, or other key constituencies have lost confidence in the CEO, the board must replace the CEO. A CEO cannot lead, motivate, or inspire without the trust and confidence of those they serve.
  • Lack of Development: The corporate enterprise and the business world in general, are dynamic, fluid, and evolving environments. Therefore great chief executives cannot be static in their personal or professional development, or in their strategic and tactical approach to doing business. A CEO that does not exhibit the ability to change, innovate, and grow with the world around them is someone who will likely need to be replaced.

In the final analysis, the board’s decision as to whether a CEO should be replaced is a decision that should be made within the framework of managing risk and opportunity. The board must weigh the transitioning a CEO against the financial costs, the impact of the business disruption and lack of continuity that can come with replacing the CEO, the market reaction to a change in leadership, and whether the decision is ultimately motivated by right thinking. Lastly, and perhaps most importantly, the title of “Director” should not be synonymous with “Crony.”  Any board member not willing to uphold the aforementioned duties and responsibilities should be replaced in a New York second.