Five steps to boardroom success

Beverly Behan, managing director of Hay Group’s board effectiveness practice, outlines some survival tactics for the first few months.

Boards today are far more actively engaged and the length of CEO tenure is falling to unprecedented levels. The New York Times reports that US boards replaced roughly 1,400 CEOs in 2006, more than double the tally in 2004. Getting off to a good start with the board is not only crucial to a new CEO’s success, it can be key to his or her survival too. How can you cultivate a valuable relationship with the board that works from day one?

1. Find the minefields and opportunities in your boardroom
Most CEOs inherit their boards and often want to work with them in a different way to their predecessors. Often too, they find that the boards themselves want a different working relationship. Many board members feel they have more to contribute and want to bring more value to the board table. CEOs often report that for the time they are spending working with their boards, they wish they were getting more value from the board.
Both the new CEO and the board should begin by addressing their working relationship, surfacing issues and opportunities through individual interviews with directors within weeks of the CEO taking office. One incoming Fortune 500 CEO used this process within two weeks of taking the helm and uncovered significant frustrations with his predecessor. The discussion that followed the interviews between the new CEO and the board members both cleared the air and gave the incoming CEO a platform to discuss his planned new way of working with the board that would overcome many of the past problems.

2. Get the board’s backing on corporate strategy
A review of corporate strategy, whether or not it results in a major overhaul, is usually at the top of any new CEO’s ‘to do’ list. If the board doesn’t understand or buy in to the strategy, there is a good chance that it will unravel. Moreover, if you have an experienced board, there is no better place to exploit their expertise than in the area of strategy.
One new CEO, recruited from the outside with a mandate for a turnaround, simply presented a radical new strategy for an hour as an agenda item in a regular board meeting. Two months later, when he returned for approval of some key implementation items, the board blocked the sale of two business units and refused to fund other initiatives. Within months, his strategy was becoming piecemeal and he was frustrated. For their part, the board, who were never given the opportunity to understand the rationale for the strategy, concluded that they had picked the wrong CEO and told him so six months later.

3. Get comfortable with governance issues
Most new CEOs have limited experience working with boards. Often, their experience consists solely of interaction with their own board. One of the best professional development experiences for any new CEO is to find another board to sit on. This enables a new CEO to get experience on the other side of the board table and provides a front-row view of another CEO at work with his/her board. Most boards will limit their CEO to serving on only one outside board owing to the time commitment required. This necessitates a careful choice and the weighing of a number of factors such as potential conflicts, geographic location, personal interest in the industry etc.
New director training courses can also be useful. However a classroom environment can be inhibiting in terms of raising some of the more sensitive issues of concern. One new CEO followed up a training course at Harvard with a day and a half private governance tutorial. This enabled him to discuss confidentially some thorny board issues and canvass some alternative approaches.

4. Build a solid working relationship with your chairman or lead director

A critical ally for any new CEO is the lead director or non-executive chairman. It is useful for the new CEO to sit down with this director within a few days of taking office, review the descriptions of their respective roles, talk about whether these need to be revised in any way and discuss how best to work together. Regular meetings in the first six months will help develop a rapport and provide the new CEO with a gauge of how he or she is doing. The best chairmen or lead directors keep their finger on the board pulse. They will provide feedback that could prevent mistakes, provided that the new CEO makes it clear at the outset that he/she wants candid and constructive advice rather than a ‘you’re doing fine’ refrain.

5. Discuss your emergency succession plan

The new CEO is often the product of the previous emergency succession plan. Now that he or she has been appointed a new plan will be required. Discussing emergency succession is helpful. It demonstrates to the board that the CEO recognizes the importance of this issue and has the confidence to raise it. Second, it gives insight into how the board perceives the executive team – useful intelligence. Emergency succession planning is an area around which board and CEO can have an open discussion, cementing their working relationship while addressing a critically important topic and providing useful perspectives.

To find out more about Hay Group’s boardroom expertise, contact the author at beverly_behan@haygroup.com.