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Board - LT Interaction

Building a positive working relationship between the Board and the full leadership team is a great achievement. The Board increases its exposure to the key people in the business, learns first hand about the challenges and successes of each operational area. The leadership team helps take on the brunt of challenges the Board puts on the CEO and also has a chance to demonstrate their potential for successor opportunities should that arise (a bit of a double-edged sword depending on the politics).

No matter what, the Board should encourage and be encouraged to be exposed to more than just the voice of the CEO. Each side has its share of responsibilities to make sure the mutual interaction is profitable -- the Board members need to be mature in the way they press the leadership team. The leadership team members need to be prepared to enter an environment where serious and strategic business issues are discussed efficiently and openly (ideally).

In this section, we'll look at where this goes right and where it goes wrong along with who might be responsible for moving it towards a successful outcome overall.

Who is In Charge

The CEO is in charge of the Company - or so it is supposed to be. The CEO is hired by the Board to carry out the approved business plan which includes making all the necessary decisions within the context the plan defines. The more specific and clear the plan is defined, the better everyone understands who is empowered to make important decisions and with what criteria. A simple example would be hiring new staff. If the plan identifies the pace of hiring as well as the key attributes of compensation for each role, the Company can bring new team members on without needing Board involvement. The plan was approved so therefore the authority to hire is implicitly granted. The prudent CEO will still involve Board members to keep them informed as the more the Board is aware of the current state of the business, the more they can participate insightfully in key discussions that affect the business.

Many inexperienced CEO's gradually give back authority to the Board as contentious issues come up. This can lead to an operational hesitance which often negatively affects the overall success of the business -- the CEO starts turning to the Board for approval of each decision. In the above example, an inexperienced CEO might proceed with a handful of hires even though revenues and pipeline are behind plan. The CEO reports business status at a Board meeting and the Board members are upset that hiring occurred without proper judgment. The CEO argues its in the plan and the Board looks at the CEO as someone who is not able to handle the driver's seat without lots of oversight. More controls come in.

It's not really a governance issue that is in question, but rather a mishandling of the key operating metrics and how they play into what was really approved. Normally a hiring plan is approved in the context of certain revenue and expense goals -- once those goals are off-track, it is often left to implicit interpretation that hiring plans are to be reviewed. Ideally the Board discusses these situations in advance with the CEO to understand how the CEO would operate when certain operating metrics go astray. The Board needs to know what latitude to grant the CEO (and the leadership team) so the Board does not have to stay deeply involved in operating issues. Unfortunately many Boards make too many assumptions about how CEO's (and leadership teams) will manage when off-plan so they inevitably find themselves intermingling (interfering) with issues of all sizes.

If you step back and examine an ideal situation, the business plan should actually be in charge of the Company. If properly defined and operationalized each year, it governs what decisions can be made and how off-plan items are handled. It becomes the objective arbitrator for the Company and in some sense takes out of the hands of the CEO and the Board the risk that one is seen interfering with the other, the source of most all Board discontent.

Communication Rhythm

Effective communication is a recurring theme through most of the sections on InsideSpin. It applies to Board - Leadership Team interaction with equal importance as any other aspect of inter-company communication. Although typically there is no specific issue with communication skills in this case, the type of information exchanged with the Board, the frequency of communication, the openness of communication and the effort required to communicate normally become the obstacles. Some basic principals apply:

Communication tends to be a central element of any successful relationship. Quantity is not the goal, but quality. Establishing expectations and sticking with them is paramount. The Board is but one element of Company structure, the only element where the CEO is not in full control with full authority to govern. This does not make it impossible for the Board to be valuable, but without effective communication, often the Board does not even know that it is off-side, wasting time and offering little value.

Board Exposure to the Leadership Team

The Board needs to understand who are the key players in the Company. Hearing only from the CEO on all issues is not a badge of pride for the CEO. In fact, many experienced CEO's would prefer to have key team members present operational issues to the Board, even if the CEO is very capable of presenting them. Deeper discussions can occur and resultant decisions become easier to manage down stream as guidance is communicated first hand. Some things to keep in mind:

The CEO should pick occasions where specific LT members will be given some exposure to the Board. The CEO might regularly bring in the Finance leader and/or someone from R&D but not often expose the sales or marketing leaders to Board meetings. Pick a scheduled event, perhaps a quarterly Board meeting, and have the LT attend to present the current status of the business.

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