The Sunday Mail
BOARDROOM TALK
Dr Proctor Nyemba
FOR generations, corporate governance has largely hinged on the chemistry between a CEO and the chairperson. And in these volatile times — with a looming recession, ongoing international conflict and natural disasters — that connection may be more important than ever.
In this fast-changing environment, new challenges, questions and concerns emerge almost daily.
But cultivating the right kind of relationship is not easy.
In our programmes for professional directors, we often tell participants this: When managing the CEO relationship, the goal is to have the right CEO be accountable to the right people for the right things.
These words and phrases are each a building block for a productive relationship.
Here are the tools and mindset required for board chairpersons to better manage their relationship with CEOs.
Lead with the right CEO
The CEO is the board’s single employee, and that relationship should be managed by an independent, non-executive chairperson.
Between the CEO and chairperson, a professional relationship and a high level of trust, respect and collegiality are the objectives.
But that connection can easily slide into extremes — from overly friendly to increasingly adversarial. Neither is productive for an organisation.
Consider that chummy relationship. It is lonely at the top and CEOs, especially new ones, may reach out to the chairperson for coaching and mentoring. Over time, as a personal friendship blossoms, the CEO might become the right friend for the chairperson, but not the right CEO for the organisation.
That is because that friendly relationship can impede the chairperson from holding the CEO accountable.
The necessary work to ensure the integrity of the CEO and challenging their decisions about budgets or audits becomes more difficult.
In some cases, we have even seen chairpersons and CEOs essentially form their own executive committee and begin actively working together to push proposals through. Chairpersons should always remember that the CEO is the employee of the whole board, and the chairperson is acting as a liaison, but is not the employer themselves.
Meanwhile, in these challenging times when hard decisions must be made quickly, the relationship between the chairperson and CEO can turn tense.
When relationships get too confrontational, however, it is difficult to form trust — and keep the right CEO on board.
A trusting informal relationship between a chairperson and CEO is almost as important as a clear formal employment relationship, and this requires a level of collegiality and mutual trust.
To ensure you are leading with the right CEO, follow these best practices:
· Make them separate: In some organisations, the same person operates as both the CEO and board chairperson. They should be two different individuals. The CEO is charged with running the daily operations and the chairperson is responsible for oversight of the governance system.
· Embrace consistency: Board chairpersons should turn over, but not too frequently. In some organisations, particularly non-profit ones, the chairperson turns over each year. That constant change is a recipe for building unsustainable relationships. Give the chairperson and CEO time to form the working relationship that will best support the organisation.
· Plan for succession: Boards routinely tell us that they do a poor job at succession planning, but it is critical for the longevity of any organisation, so you always have the right CEO on the job. Boards should have three different succession plans in place — emergency, planned and long-term. Admittedly, conversations about succession can be awkward to have, which makes the importance of a professional relationship between CEO and chairperson even more important.
Conversations about who might replace them are not so personal.
Hold them accountable
When we hold CEOs accountable, we are continuously testing that we have the right CEO on board. But holding them accountable requires more than just questioning their decisions.
First, CEOs must have the appropriate direction so that it is clear what they are held accountable for. That starts at the broadest level, with job descriptions and performance mandates that include annual goals tied to the organisation’s business plans.
Those goals should then inform both formal and informal evaluations — from continuous conversations about the health of the organisation and progress on various goals to the CEO’s annual performance evaluation.
The chairperson also plays a key role in ensuring the appropriate quality and level of constructive challenge with the CEO.
Chairpersons should be ready to rein in board members who are inclined to dive into questions about pet projects, instead of trying to understand and test the diligence and strategic decisions the CEO is bringing forward.
A great board member does not substitute their judgement for the CEO’s; a great board member gains confidence that the CEO is exercising sound judgement.
Finally, the focus should always be on integrity — both the CEO’s personal integrity and that of the organisation.
Integrity issues must be tested for from the top down, including with other C-suite members.
The relationship between the chairperson and CEO must be in place and solid so that the latter understands that board committees hold brief in-camera sessions with other C-suite members because it is best practice — not because they are out to get anybody.
Rely on the right people
It is a chairperson’s job to speak in one voice — to be a representative of the entire board’s wishes and expectations.
That might seem intuitively obvious and simplistic.
But, as we have covered, when they are not careful, board chairpersons and CEOs can fall into an unhealthy rhythm, even disenfranchising the full board from decision-making.
In our work, we have seen chairpersons give direction that is not board-approved.
What is more, if the chairperson is not leading the board properly, individual board members can sometimes speak up on their own — adding contradictory voices to corporate conversations and creating confusion about who is in charge, and which voice the CEO ought to listen to.
Board chairpersons should remember this: Their role is to bring the position, questions and concerns from the right people — the board — forward; to always be in alignment with the board’s wishes; and to protect the CEO and other managers from interference.
Remember the right things
Finally, it is up to the board to provide direction for the CEO — to ensure that they are always focused on the right things.
The CEO’s job description, goals and objectives should align with the organisation’s strategic plan, business plan and annual budget.
Clear and robust delegation of authority is essential.
Too often, there is silence about who has the authority to hire or fire senior staff, or approve line items on budgets, for example.
A comprehensive delegation of authority document should cover dozens of decisions and actions, clarifying the formal relationships and who is responsible for what.
These documents ensure everybody is on the same page and reduces the risk of individual board members attempting to boss the CEO around, based on their own expectations.
The bottom line is: Building that professional relationship between board chairperson and CEO requires diligence and clarity.
It relies on well-crafted governance documents and thoughtful business objectives that are built around a singular goal — to create a strong, resilient organisation.
It relies on individuals with character, humility and integrity.
When done right, that symbiotic relationship can lead organisations into the future.
*Dr Proctor Nyemba helps board members and executives understand their role in governance so they can succeed in the boardroom. For comments and feedback, please send to: [email protected]/ Call 0772469893
