April 23, 2019

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Richard Onley

Building CEO and Board Success Part 1 of 3

Is the CEO and Board Success Mutually Exclusive? 

In February 2018, Chief Executive Magazine reported: “One of the top reasons CEO’s stated for lack of success was the inability to build a connection with the Board” followed by failure to manage the Board.”   

The article went on to discuss best practices and success strategies including developing an engagement plan to target each board member.  Consider this:  

  • What is the cause of poor CEO and board connections when this is foundational for their mutual success?  
  • Is CEO time best spent trying to “manage” the board and individual board members?   

In this series, I will discuss how a useful governance model can create conditions for success. 

The Fundamentals that Cause Board and CEO Conflict: 

Leadership is about human beings. Its task is to make people capable of joint performance, to make their strengths effective and their weakness irrelevant.1 

My father was an expert negotiator and a great leader. When I talked to him about bringing conflicting sides together, he would ask: What has each party contributed to the conflict?  You first have to put yourself in the other person’s shoes.  Whoa!  As a board member, do I contribute to building a connection with the CEO? Let’s think about this from the board member’s side. 

Studies repeatedly tell us that board members often have a diverse understanding of what their role should be. This applies to the smallest not-for-profit to the most significant public company.  Why is this?  

Consider what Directors often say: 

  • I’ve been on several boards, and each one had a different way of interacting with the CEO.  
  • The Chair is the spokesman between the board and the CEO. 
  • We have never had any training or written policies. I was told not to worry and that it would take two years to understand what we do. 
  • As a board member, I usually call the CEO directly. 

Consider what CEOs often say: 

  • My Chairman told me that he wanted better communication so that when we spoke, he could better tell me what to do.  
  • The board gets too involved in operations. 
  • Board meetings consist of rubber-stamping the Executive Committee recommendations. 

When each of us brings a different view on our role as board members, it is no wonder that conflict and confusion can result.  It is the adage, too many cooks spoil the broth. Peter Drucker put it succinctly when asked about his views on boards, “they do not function.”2  Boards have evolved, but with everybody headed off in different directions, is it any wonder Price Waterhouse reported the average tenure of a CEO was five years? 

If you consider both sides, then, what is the path to mutual success? 

Would clarity about board and CEO roles provide a way? If sohow do we obtain clarity?   

What about best practices?   

What has been your experience with best practices?   

  • Are they situational and industry-specific or does one size fit all?  
  • Have you ever seen best practices written down? 
  • Have you experienced best practices bringing clarity? 

Thomas Kuhn challenged us to consider different paradigms. His view on best practices: 

“It is development by accumulation. It seems that persons in the field–academics and practitioners alike–can only focus on an intermittent slogging from one ‘best practice’ to the next.3 

Khun believed that change happens when we think differently about our role as Directors. 

In the wake of the 2008 financial crisis, legislation was created based on what was believed to be best practices. It may have provided a needed shock, but over time people forgot about the crisis and tended to find a way to work around rules.  The legislation created in response to a crisis often results in poor law.   

Like many best practices, strict rules-based management generally allows underperformers to hide behind the excuse, “I followed the rules.”  Have you ever seen innovative decisions coming from customer service when dealing with strict rules?  Some rules are needed, but they also need to be tempered. 

Is there a better way than building rules?   

In my next blog, I’ll discuss a principles-based approach to create clarity.  

References: 

Drucker, Peter F.  The Essential Drucker. New York: HarperCollins, 2001.June 2001 

2 Drucker, Peter F. Management: Tasks, Responsibilities, Practices. New York: Harper Collins, 1974, p. 628. 

3 Kuhn, Thomas.  Quoted by John Carver in “A Case for Global Governance Theory: Practitioners Avoid It, Academics Narrow It, the World Needs It.” Corporate Governance18:2, March 2010, pp. 149-157.  

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