Are CEOs harnessing the full value that their boards can deliver? And how can CEOs gain the full benefit and backing of their board while juggling the operational day-to-day of their business?
CEOs and board members must partner together to solve complex issues. For new board members, shifting gears from an operator to a strategic advisor is a new experience, one that can take some getting used to. In parallel, many CEOs—themselves new to the board experience—may not maximize the full value that their board can deliver. There’s much more to managing a board than quarterly meetings; CEOs must set expectations on time and commitment, form trustworthy relationships, and relentlessly push their agenda forward.
Adding to the hurdles: the role of the board has evolved. More than ever, boards must get much more deeply involved in the business. They’re expected to form relationships with the executive team and mentor up and coming leaders, nurturing the leadership talent bench. They must learn the business and become an ongoing advocate. Site visits. Press engagements. Ad hoc meetings. These are the new realities for the modern board director. More than ever, CEOs must be one step ahead—thinking more critically about who they need on their board, and how their expertise can be applied to the business’ top imperatives.
Read on to see how five CEOs within the Athena network are making it happen.
How different the jobs are, and how hard it is to shift your mindset from that of an operator to that of a board member.
Make sure every board member has a distinct job. Build your board as a team, just like you would build your executive team.
That they show up wanting to be a productive member of a team. They don’t show up wearing an ‘investor’ hat or and ‘operator’ hat. They show up wanting to build a great company.
What do you know now about working with boards that you wish you had known when you first became a CEO?Boards are part of your team. You need to keep them motivated.
Early transparency pays off big time.
I try to give each board member a defined role beyond committees. For example, one board member may be designated as an expert on product strategy.
I try to talk to one board member per week.
They add diversity to the board. They offer additive / complementary skills. They believe in the long-term opportunity. And, they show up and are responsive.
My first experience as CEO was in a public company, taking over from a founder with a “founder’s board.” I was extremely fortunate in having a highly experienced CHRO who advised me on board management. The CHRO gave me two invaluable pieces of advice: (1) Make sure the board is populated with independent directors, not just “friends of the founder,” and (2) Even if the board is relatively independent, if they’ve all been with the company a long time, it is essential to add some new blood—even if that means expanding the board. Thanks to her advice, I followed a process of enhancing the board (I wrote about it here). In comparing notes with fellow CEOs who did not have the benefit of similar advice, they had a much rockier time with their boards.
It depends on whether it’s a public or private board. If it’s a public board, work with the Nom/Gov Chair to identify at least one new board member, approaching it from the point of view of adding someone who will complement your skills and serve as a board member who, like you, is “seeing it with new eyes.” For example, if the previous CEO had a lot of sales experience, and you’re more on an engineering type, considering adding more sales experience to the board. It’s important to approach this very delicately and not make it a non-negotiable demand. If it’s a VC- or PE-backed board, and there are no independent board members, get one as soon as possible. Most VCs or PE won’t object to a seasoned outsider, and it will change the dynamics in the boardroom in a substantial (and positive) way.
This also depends a bit on whether the company is public or private. Points of commonality for both are consistent attendance at board meetings as well as time not formally scheduled for advice and brainstorming. In addition, it is expected that the board member become familiar with the company’s business, market, and past performance and future plans. As a best practice, I have typically scheduled a half-day (or longer) on-boarding for board members, with presentations from my team, all of which I attend. Presentations would include financial plans from the CFO, a brief technology overview from the CTO, market environment and competitors from the CMO, an overview of the sales organization and channels to market from the CRO, and an overview of the team from the CHRO (obviously in smaller companies, not all these roles exist, but the information should be presented by the CEO if necessary). Points of difference: in public boards, there will be an expectation of committee membership, but onboarding for that will be handled by the relevant committee chair. In private companies, there will often be informal board calls on a more regular basis, such as monthly board calls and quarterly board meetings. In all cases, board members will be expected to leverage their network and contacts on behalf of the company.
The trite answer is “as often as you need to.” If you’re in the middle of a big strategic situation (M&A, fundraising, a revenue crisis, a company-changing deal, etc.), then you may have individual calls with board members, perhaps as often as a couple times a week, and perhaps several telephonic board meetings to discuss the topic.
I look for people who know the general market and can add skills that the board as a whole is lacking, or adds expertise in areas where I am weak. The person must be willing to roll up their sleeves and help the company move forward, have the time to serve, and be enthusiastic about helping the company progress.
It’s good practice to have one-on-one time with every board member once or twice a year in an informal setting, such as dinner.
Never surprise your board. I have always made it a practice to send out regular updates, in some cases once a month, in some cases mid-quarter, covering a short update on the business, especially current forecast vs quarterly/monthly plan. For situations where there are major unexpected situations—such as a looming personnel issue, a sudden change in the competitive environment, or a significant miss versus plan, then I pick up the phone and call each member and brief them individually, giving them enough time to ask questions, and solicit their input/advice.
I think the biggest “aha!” that happened after a short amount of time is the realization that the Board is there to help. It is easy for a first-time CEO to have an adversarial view of the Board, while in reality (assuming it is a high functioning organization), they are there to help achieve the strategic objectives that you, as the CEO, have set for the company. I think the Board can be quite helpful to CEOs if they are asked. They bring different viewpoints, they have different experiences, they may have domain expertise that is useful, they could mentor up and coming execs, and so on.
On a well-governed Board, there are detailed charters for the Board and the specific committees. If not, developing the charters is a good way to have clear, shared expectations of who is responsible for what. So, for new Board members, it is important to go over those charters and clarify expectations. I really like the phrase “nose in, fingers out” to describe the role of Board members versus that of management, so reminding them of that expectation is also a good idea.
Now, the reality is that the charters will not cover everything, so initial alignment conversations and periodic reviews are very helpful. Public Boards are well remunerated, so as a CEO it is absolutely fine to expect your Board members to dedicate the right amount of time and effort to be fully prepared for Board meetings, to have read the material given to them in advance, to be fully present during the meetings (not reading emails or on their cell phones). I believe most Board members do this, but, if they don’t, the best approach is to have a conversation with them openly and promptly. In my experience, there is about a week’s worth of work for every Board meeting. So, a Board that meets 4 times a year and has an additional strategy session, should take approximately 200 hours of work for each Board member. This can go up significantly if the company is involved in M&A or has legal or financial issues that it is dealing with.
I think of the ideal Board (and ideal relationship) with a Board is very similar to an ideal boss: you need absolute mutual respect. If you don’t respect the people on your Board, you probably don’t want the job. And just as with a boss, you can build and maintain respect through your behavior: listening, being transparent, understanding what matters to each member, and setting clear expectations.
I communicate quantitatively (e.g., x meetings per year, y hours of calls or in-person consults per month, etc.). I also try to make sure that I over-estimate vs under-estimate their required time commitment.
Overall, I look for people more committed to our vision than their own success or ego…and then it is all about diversityand balance: we want a diversity of talent, experience, and perspectives to give our executive team the benefit of multiple perspectives, all aligned to the same objective of building shareholder value.
© Athena Alliance 2024
