Someone wrote in a recent article that for the CEO, working effectively with the Board is "the mother of managing up." Today we are going to drill down a bit on this comment. We will provide insights on ways the CEO can best use the board for the benefit of the company and its equity owners, as well as to advise the CEO independently of management, as a check and balance on key decisions and for the CEO's own professional development.
This article is based on contributions from several veteran board members and chairs, including Kevin McNerney, John Schwieters and Reid Miles. Each has shared his viewpoint and what board members believe makes the relationship work effectively and, thereby, more benefiting the company, the employees and the investors. Here is some valuable wisdom.
The Board is Your Resource
First off, an effective CEO must understand what a board is and its purpose. That understanding should lay the foundation for what could be a solid and effective relationship. That sounds obvious but there is often a lack of clarity in the mind of the CEO, Do i really need a board? Will it have any real value to me and the company or does it exist merely to satisfy an investor or a banker? The wrong approach in developing these special working relationships often leads to fractured and unproductive relationships and often an unproductive board.
One key is to understand how to best employ its talents. The CEO should view the board as a priceless resource - a collection of individuals with varied talents and experiences and not some homogenous oversight unit. Nurturing the individual relationships and mining that talent will provide immeasurable benefits to the CEO in terms of both strategic input and in solving thorny problems. The board can also operate as an effective check and balance for the CEO's thinking on key decisions.
The board has core governance and fiduciary responsibilities to ownership. Within that framework, a healthy board should have several specific roles in support of the management team, including:
- Sources of new business ideas
- Input on strategic imperatives suggested by management
- Approval of strategy
- Input and support for transactions and ultimately decision making - M&A and financing
- Advice on handling complex issues
- High level business related relationship introductions
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...the board is a collection of individuals with varied talents and experiences and not some homogenous oversight unit.
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Straight Shooting
Too often, McNerney explained, an inexperienced CEO does not understand how to use and leverage the board. That manifests itself in keeping from rather than sharing with information. He repeated and emphasized one word - transparency. CEOs who tend to be control-oriented will thwart a healthy board relationship. Well informed board members will naturally have a fuller picture and, therefore, can offer more specific advice.
Similarly, Schwieters called this trust and had it at the very top of his list for traits that a CEO must exhibit.
...don't keep the board in the dark.
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"Transparency feeds value," emphasized McNerney. It is essential to provide the board the full picture on business and financial operations, the successes and good news, as well as the challenges and risks. This approach allows management to gain the benefit of the chair's and directors' experience and judgement before matters become problematic. Anything less will yield suboptimal results. The takeaway is "don't keep the board in the dark."
Management is a Team, Not Just a CEO
Too often at board meetings the CEO is the central player or sometimes the only one. All the guest contributors stressed the importance of having senior management team members speak, or at least attend, sections of board meetings. Many successful boards feature a select review of different areas of the business each meeting by the responsible executive as a way to expose both the
details of the business area as well as the executive. This approach has multiple benefits, including access to experts for board questions and developing the skills of the executive team members. In this vein, Schwieters looks for a CEO who grows people - his boards keep a close eye on the CEO's senior team members, their talent and performance, and how the CEO acquires and manages talent. He views this as a key indicator of an effective leader.
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The Fit and Style
Schwieters likes to see energy and enthusiasm but cautions that too much "selling" is a red flag that raises the trust issue. Chemistry among the CEO, the chair and the board is essential. He assigns it great importance but concedes that defining is an art - you know it when you see it. Another common theme relates to ongoing "use" of the board. A caution is "don't delegate up." Come to the board with your problems or challenges supported by your thinking and solutions. Seek their input and advice but the CEO should do the heavy "mental lifting." Board meetings should typically be held at least quarterly, or more often depending upon any number of issues the company may be facing, from rapid change in marketing conditions, to capital raising, or to strategic imperatives the company may be facing. Board meetings are enhanced with more complete information, analysis and reporting which should be provided in advance in a well thought out board book which lays out such information, with executive summaries and supporting detail as appropriate. Meeting agendas should be submitted in advance and the meetings should be structured and organized with crisp presentations and should allow ample time for discussion of each topic. Let the board know your expectations. The Chair is Your Partner
In most business structures the CEO reports to the board with either the chair or a designated "lead outside director" often taking on the role of point person for dealing with the CEO. CEOs should view the chair person or lead outside director as a "partner" in the business relationship. Get to know each other on a personal as well as a business level. Reach out to the chair or lead director often for input and advice, kick around emerging issues, be forthright and open. This will go a long way to building trust and confidence.
There should be a continuous communications loop, both formal and informal, between the two that encompasses performance data, potential risks, emerging challenges and other threats to the enterprise. The CEO should encourage feedback and advice along with "executive counseling" on how he/she is fulfilling the executive role. The CEO should appreciate an effective chair or lead director who will be not only a sounding board on tough issues but also a mentor supporting the CEO's development.
Business is a tough and competitive world for sure. And at the CEO and board level, the players typically are dominating and decisive personalities with strongly held opinions. Value those strengths and talents. A great CEO will work to leverage the value that a strong board can provide by understanding how to best manage the resource - using his intellect, instincts and emotional intelligence to successfully master the challenge of "managing up."
The Human Capital Advisor in our Archives.
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Meet the HCA team members who provide a range of advisory services to CEOs and Boards...
Founder & Practice Leader
Partner
 Partner
Other HCA team members include:
GUEST CONTRIBUTORS
*KEVIN MCNERNEY
Former COO, CFO of several technology companies, chair and director of several boards
*REID MILES
Founder of Miles Howland & Co., LLC, a global investment management and advisory firm, long career in investment management and leadership, served on a number of boards
*JOHN SCHWIETERS
Principal with Perseus Realty, LLC, former managing partner of Arthur Andersen's mid-Atlantic region, former chair of the Greater Washington Board of Trade and chair or director on numerous boards
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