CEO’s guide to getting the best from the board

Aug 01, 2019
CEOs aren’t given instruction manuals when it comes to boards. Kieran Moynihan explains how CEOs and executive teams can give respect to the board while also demanding excellence for the shareholders and stakeholders.

My board frustrates the hell out of me. We put a huge effort into producing our packs and I seriously question if they read them properly. They second-guess me and my executive team on a continuous basis, haven’t a strategic bone in their bodies and, to be quite honest, other than their watchdog oversight role, I seriously question if they add any value to this company.” These were the opening words from a CEO in a board evaluation I was leading some time back, and they’re nothing new. I have heard them from CEOs across a wide range of sectors, scale of companies and maturity/experience level. 

I asked this CEO to place himself in the shoes of one of his non-executive directors (NED) and imagine how open and engaging the CEO and executive team were towards himself and board. What is the level of genuine accountability and performance culture? Is respect being demonstrated in terms of getting a big complex board pack out four or five working days ahead of the board meeting as opposed to 24 hours beforehand? Are you and the other NEDs expected to drop everything to prepare properly? Finally, how much opportunity does the CEO give NEDs to get them involved in the formation of the company's strategy? 

The CEO responded very honestly that he had never really thought about the board in this way and that, in the cold light of day, he could see that he had been in a pattern of ‘managing the board’, and after many years, had arrived at a point where he basically had no expectations of them. This is a sad indictment on this board and the real losers here are the shareholders and broader stakeholders. 

The reality is that often the shareholders and stakeholders do not even realise what is going on. I believe that the vast majority of CEOs are very conscientious, and understand the value of a high-performing board, but often struggle with genuinely partnering with their board to enable an outstanding combination of executive and non-executive board members so they can deliver outstanding value for their shareholders and stakeholders. 

One of the reasons for this is that there is no 'Becoming a brilliant CEO' manual where CEOs can learn best practice for engaging with the board. As a former CEO, I can testify to the fact that in the early stages, I was very cagey with the board. I wanted to concentrate on the good news, demonstrate that I had the strategy all figured out, and so slipped easily into managing the board. This is a natural and understandable starting point for many CEOs. I was blessed to have an outstanding board chair who gave me a dose of salts early on and helped me engage with and leverage the board properly.
 

Best practice

There are a number of key areas that I have found represent best practice for a CEO and executive team in enabling high-performing board teams.

Respect for, and accountability to, the board

It should go without saying that a CEO should respect the board but in reality, some CEOs are quite disrespectful, both to the board itself and the board members individually and collectively. In many cases, this can be an aggressive, dominant CEO who merely tolerates the board. In other cases, it can be a lot more subtle.

Respect for the board is the key foundation for the CEO and executive team to demonstrate the highest levels of accountability (and, by extension, the shareholders). When a CEO and executive team are accountable to the board, they enable the non-executive board members to discharge their oversight responsibilities. When the CEO and executive team’s reporting is accurate, honest and timely in terms of the performance and progress of the organisation, it means the NEDs don’t have to deep dive into the operational and financial minutiae, or have to second guess the CEO. They can, instead, devote a far bigger portion of the board’s time to strategic discussion and, thereby, adding value to the executive team.

Performance culture 

Every time I see a high-calibre CEO properly engaging with the board, they not only set high expectations for themselves and employees across the organisation, but also set a very high bar for the board members themselves. Working closely with the board chair, a CEO is absolutely entitled to insist that the board works hard, is able to add value to the executive team and the company, has regular evaluations (both internal and external) and is continually looking to add that extra 10% to the board’s performance. 

A partnership model between execs and non-execs 

At the core of outstanding board teams is a genuine partnership model between the executive and non-executive board members, which balances a strong level of oversight and significant value-add by the board. The best boards simply embrace the highest levels of robust challenge and debate in order to stretch their brain cells and understand complex issues, get to the bottom of performance problems, see around dark corners and, ultimately, make the very best decisions. A progressive CEO will set the tone for this partnership. By working closely with the board chair, the executive team will be able to deliver their part of this partnership model. In return, the CEO and executive team are entitled to expect the NEDs to add strategic value, bring diverse and independent thinking and, ultimately, enhance the thinking and decision-making of the executive team. This partnership model is illustrated in Figure 1.

figure-1-partnerships

High-quality information model and information flow to the board

A progressive CEO understands that the board is highly dependent on the quality and timeliness of the information provided. In board evaluations, I regularly see the common problem of a very dense board pack with reams of complex reports but very little or no quality guidance from the executive team on what’s critical, the areas the NEDs need to focus on, the areas the executive team need help with or the areas of concern for the CEO and executive team. Combine this problem with the bad habit of sending board packs out late and you can understand why NEDs often feel that they have to second guess the CEO and ask detailed questions at the board meeting.

Inspire NEDs to bring their independence and A-game

If you read any of the memoirs of highly successful CEOs and entrepreneurs, you will often see the following phrase positioned prominently in the early chapters: “I made a very conscious decision to surround myself with people who were a lot smarter than me”. I often come across CEOs who are very sharp but yet quite happy to pack their board with mediocre NEDs who simply do not add any value. While this is clearly a failure of the board chair, the CEO in many companies has a key role in selecting board members. 

Progressive CEOs see the critical value of diversity in their NEDs across age, gender, ethnic background, sector and, most importantly, thinking style. When it comes to NEDs, a CEO and executive team who are partnering extremely well with the board are perfectly entitled to expect each NED to bring their A-game consistently, underpinned by a strong work ethic and commitment to the company. Where NEDs are not doing this, a CEO should work with the board chair to replace those NEDs with ones who will perform and deliver serious value – shareholders absolutely deserve nothing less.

Partnering with the board on strategy

One of the biggest changes in recent years with how CEOs engage with their boards is in the whole area of strategy. High-performing boards have increasingly moved away from the traditional model of the CEO coming into the boardroom with the company strategy 90% cooked, looking for the board to rubber-stamp the document and allow the executive team to get on with it. Apart from the fact that this legacy approach is very disempowering to the NEDs around the table, and can lead to very serious flawed strategies and group-think problems, CEOs are realising that making big strategy calls in today’s marketplace is a lot tougher than five years ago. These days, the CEO and executive team develop a range of strategic options that they bring to the board at an early stage. This enables every single NED to be involved. In addition to encouraging high-quality challenge and debate around the strategic options identified by the CEO and executive team, it helps the NEDs to put other options on the table which the executive team may not have considered and could ultimately result in a stronger strategy being adopted.

Crisis management and asking for help

Most companies have to deal with a serious crisis (either self-inflicted or outside of their control) at some point. This could be a significant change in the competitive landscape (business model, pricing, innovation), technology disruption, serious quality problems in products/services, poor sales performance, financial problems, a cyber-attack or a business-impacting loss of critical staff in the company. No matter how strong and battle-hardened a CEO and executive team are, it can be very difficult in the eye of a storm to get an objective perspective on not only root causes, but the optimal way for the company to navigate stormy waters. 

A high level of good will, respect and trust that the CEO and executive team have built up with the board over the years is critical in crisis situations. This is where a CEO and an outstanding board can turn to their NEDs, who will roll up the sleeves, get stuck in and provide high-quality help to the executive team and, most importantly, provide a cold, independent perspective to help with the tough decisions. 

Setting the example in terms of culture, ethics and behaviours

We are in a new era where the spotlight on the behaviour, ethics and culture being demonstrated by a company’s CEO has never been greater. The genie is definitely out of the bottle and the days of some CEOs feeling that it is perfectly acceptable to demonstrate disrespectful bullying, aggressive and passive-aggressive behaviours to their board, their employees and shareholders/stakeholders are coming to an end. Any board worth its salt should be setting the highest of standards for the CEO and executive team.

Summary

The impact of the CEO and executive team’s approach to the board has a fundamental impact on the effectiveness and performance of a board. I am always moved by the powerful impact it has on the board when a CEO and executive team partner with the NEDs in a respectful and accountable way, demonstrate the highest level of behaviours, ethics and integrity, provide high-quality information flow, partner on strategy, inspire NEDs to go the extra mile and integrate with them to excel on behalf of their shareholders, employees and stakeholders. 
 
Kieran Moynihan is the Managing Partner of Board Excellence.

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