A Director’s Responsibility to the CEO

Today’s unprecedented pace of disruptive innovation in the market and conflicting demands of multiple stakeholders are creating relentless pressure on the CEO. Is the board contributing to the CEO’s performance and ability to function?

So, what should board members do to fulfill their responsibilities to shareholders as they assist the CEO in facing the business realities of today — and tomorrow? Below are seven suggestions:

Facilitate straight talk in the boardroom. Balancing the tension between the organisation’s vision and the reality of significant challenges and the possibility of failure to achieve the desired future state requires straight talk and transparency. This requires respectful relationships, trust and authenticity in the boardroom, as the board sets the tone for such strategic communications.

Help the CEO prioritise through discussions connected to the strategy. Experience, judgment and insight are vital to directors as they focus on understanding the real business issues the CEO faces and as they contribute to boardroom conversations that lead to actionable policies and initiatives that will make a difference.

Review, consult, advise and approve — don’t direct. Being a director doesn’t mean being directive. Directors should be prepared to participate in strategic conversations in each meeting with the CEO. The board members’ role in relation to the CEO isn’t to make decisions unilaterally or immerse themselves into the business as de facto managers but to review, consult on, approve and support specifically designated decisions and empower the CEO to carry out those decisions. Board members advise the CEO and management team in a manner consistent with their fiduciary duties. And finally, directors inculcate a relationship with the CEO based on trust, shared values and transparency. Metrics and standards of CEO performance are developed in consultation with the CEO in alignment with the strategy and are used to hold the CEO accountable for results.

Encourage a relentless focus on markets and the customer experience. Directors should ensure that the CEO uses an external, outward-looking lens that emphasises customer value creation and customer experiences as keys to success. They should also encourage timely escalation of market opportunities and emerging risk issues.

Be aware of the importance of culture. The board chair or lead director sets the tone for a constructively engaged culture by working with and through the CEO to develop and sustain a productive working relationship in which differences are valued. Board members should set reporting protocols and controls and work with the CEO to develop an appropriate dashboard of key metrics and measures. A well-informed board is an effective board.

When advising the CEO, prioritise the guidance provided. Directors should be sensitive to when it’s time to tap the brakes on adding more details and issues to the CEO agenda. Just remember that practical common sense and actionable advice win hands down with the CEO in challenging times.

Ensure the board’s collective experiences and skill sets enable each director to participate in supporting the CEO. Board composition and individual director contribution should be periodically reviewed. More discussion is warranted around thoughtful, reasoned departures from boards to maintain the board’s overall currency with market developments and the ability to provide value to the CEO. Markets are changing. Companies are evolving. Is the board aligned with the times while remaining knowledgeable of the business?

Don’t neglect succession planning and CEO well-being. Succession planning is a dynamic conversation. Updating candidate selection criteria and choosing an executive search adviser with a proven methodology and successful track record facilitate the preparatory process. A strong executive bench of exceptional leaders breeds qualified candidates. It’s also important to ensure the CEO is focused on well-being. A healthy CEO is best positioned to look after the health of others and the business. Directors should watch for signs of unrealistic demands and expectations regarding how long key change and transformation initiatives will take to implement. Goals and targets based on forecasts and assumptions that are not grounded in reality can impose unnecessary stress, drive burnout, lower morale, and encourage inappropriate shortcuts and unacceptable risk-taking.

CEOs need collaborative, on-point sharing of ideas from their boards to be successful. They need value-added guidance and advice. They need empowerment. They don’t need theory that isn’t actionable. They don’t need extraneous agendas that drain energy and focus from the core strategies and challenges they and their boards have chosen to take on. The board’s challenge is to stay focused and position itself to engage in productive strategic conversations with the CEO in these challenging, disruptive times. In summary, directors should set the tone for an environment that encourages transparency, trust and candor.

Read the article here.

(Board Perspectives — Issue 161)

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