The Managing Up Kit part 3 – are you on the board as well as being CEO?

It's not unusual for the CEO also to be a member of the board; that's where the title "managing director" came from. Being on the board, as well as being CEO, brings an added layer of complexity which is worth your while thinking, and talking, about.

The CEO "reports" to the board in a line management sense, and is certainly accountable to the board for the performance and success of the organisation. But there are no grades of directorship. Every director has the same duties, responsibilities and liabilities under the law – subject only to their obligation to employ their individual skills and expertise in a way that any similarly skilled person would reasonably do so as a director. In their capacity as director, the CEO is a brother or sister in liability with the rest of the board.

This dual nature of the CEO's role can cause some difficulty however, particularly for the CEO's participation in board meetings. I think the key to successfully managing the duality is to accept it as inevitable, and to be clear which hat you are wearing – CEO or director – at any given stage in the board meeting. In presenting reports to the board, or discussing the organisation's performance, you are unavoidably wearing the CEO hat, and should expect the board to ask searching questions or make incisive comments – in other words not treat you as one of them. When the board is making important decisions or approving significant transactions, you are entitled to put on your director hat, and exercise your rights as director on an equal footing with the rest of the board.

This is sometimes a hard thing for the board to recognise. It is an issue which is worth a specific discussion with at least the chair, to ensure that the rest of the board should expect there will be times when you will not be answering to them, but standing side by side with them.

In my experience this is not a card to be over-played, and tactically it is usually preferable to put on your director hat only when the context really requires it. This may be when you feel that the board may not be heading in the right direction, or when consensus is not appearing likely and a vote may be needed. The power of your director's hat is probably inversely proportional to the number of time you explicitly put it on.

One thing you should bear in mind about your position on the board is the information imbalance. As CEO you will be aware in great depth of the organisation's circumstances, performance and prospects. Non-executive directors touch the organisation much less frequently (see a previous post on "Managing the board") so be conscious when you do wear the director hat that you will have information the rest of the board does not, and act accordingly.

 

The Managing-Up Kit part 2 – Embracing the Power of the First Draft

It is usually unrealistic to expect that people in non-executive positions will have the time (or possibly the experience or know-how) to be preparing important material that impacts on you personally or on the organisation you lead. What senior or non-executive people can contribute much more practically is to review drafts. That has likely been a large part of their more recent lives. Giving a chair or a director a blank sheet of paper is mostly a recipe for disappointment, or an invitation to be given something back you don't want or won't like.

Some of the things you should consider doing as a first draft, if you haven't got them in place already, are:

• Your job description – it's likely that the only one which exists is the one prepared by the recruitment agency or the headhunter; suitable for that process but not so useful for explaining what you will do on a day-to-day, or quarterly, or annual basis. Have a go at writing down what you do – a high level description including the purpose of your job; then your responsibilities; then the things you are held accountable for; and then functional things. Think about how it can be expressed in terms of deliverables. Then share it with the chair. It will be interesting to get their perspective on what they think your job is. They can discuss, comment, amend, delete – but it is very unlikely that they will scrap it and re-write it from scratch.
  
• Your own performance goals and KPIs – there will inevitably be a negotiation process with the chair and even the board in coming to the final version. In doing your first draft, it's helpful for both you and the person doing your review if you can be as specific as possible in setting up measures, as tangible as possible , and as objective as you can make them. Some goals may be more difficult to nail down as numbers, particularly around the assessment of your leadership. This may be a place to use 360 degree feedback or staff engagement scores. When performance review time comes, you'll find you will be managing up more effectively, and be having a more fruitful conversation, with a good framework to hang the conversation on.
  
• The board meeting agenda – The way the board meeting runs, and therefore the way the board and management interact, are both heavily influenced by the board meeting's agenda. Sadly, the construction of the agenda often ends up in a vacuum, or defaults to the company secretary if there is one. The final authority over the agenda rests with the chair. For the reasons discussed in "Managing the board", they are unlikely to draft it personally. There is usually a priceless opportunity available to produce a first draft of the board agenda, which is more likely to be appreciated by the chair than to be seen as presumptuous. There will invariably be some adjustment to your draft, but you will have taken an important step in influencing the context, and thus the outcomes, of the board meeting.
  

The Managing-Up Kit – how CEOs can work more effectively with their boards (part 1)

For an organisation to run most effectively, the CEO needs a sound working relationship with their board. Boards by their nature have a number of features which need careful attention from management:

• Boards must produce collaborative decisions and results derived from a number of individuals with different skills and backgrounds
  
• Directors usually have other jobs, and do not touch the organisation on a frequent basis
  
• Directors face particular, and sometimes stringent, legal duties and obligations
  

 

This blog series provides a number of suggestions and tools to help CEOs develop productive relationships with their boards.

 

Managing the board

If your board is comprised of part-time, or "non-executive" directors, there are some important factors you need to bear in mind as a CEO or senior executive, to ensure that you have the most productive relationship possible with the board.

Because of the intrinsic nature of their interaction with the organisation, non-executive directors generally do not touch it or its business or operations on a regular basis

There are two major consequences which flow from this irregular interaction:

• You cannot assume that directors will remember in detail what has happened in previous board meetings or strategy retreats. It is usually helpful to give a quick recap or summary of what has been previously discussed or decided by the board before launching into any new stage. When preparing reports or presentations, it is simple enough to commence with something like: "Directors will recall that at the last board meeting, it was agreed that there were three important factors to be taken into account [then list them], and it was decided to take the following actions [then summarise them]"
  
  
• Because of their intermittent touches of the organisation, non-executive directors form impressions, fairly or not, on the basis of the occasional things they see or hear which affect them personally, or push one of their particular individual hot buttons. It is useful to draw on your observations of the board generally, and directors individually, to identify particular hot spots they might have. You will then be in a better position to minimize the chance for any unproductive interactions. For instance, lawyers on the board (like me, sadly) are likely to react adversely to typos; accountants generally don't like to see numbers that don't add up. Give yourself a head start by eliminating avoidable errors.
  

Top tips for new NEDs

I was talking over lunch to a bloke who had just scored his first serious non-executive director appointment – a very serious one, in fact, to a top 10 listed company. I made so bold as to offer him my top 3 tips on being a good NED.

1. Before you say anything in a board meeting, ask yourself why you're about to say it. I've seen too much boardroom discussion which is ego-driven, banging on about old hobby-horses, or just not being of any use to the topic or agenda item under consideration. A slight pause before you throw in your bit can help to ensure that it has relevance, is not being driven by some collateral purpose, and will have the right tone for that moment. This might even include a bit of calculated frustration or stroppiness, which can play a useful part in the board dynamic – as long as it is calculated.
   
2. Master the art of the intelligently naive question. Management will often, intentionally or not, start discussions at a place some distance from the most sensible starting point for the board's purposes – often because they would prefer not to explain or justify some of the basic underlying assumptions. Testing these assumptions is a vital part of the NED role: while you might initially appear to be a bit dumb in bringing the discussion back to a more basic level, it is more likely than not that your seemingly naive question will flush out some crucial piece of information not previously revealed, or something worth debating.
   
3. Don't let an acronym pass you by if you don't know what it stands for. I guarantee that you won't be the only person in the room in that position. That may include the person spouting the acronym. I once caught out the director of the technology division (surely the high temple of the cult of the acronym) talking about a vital and expensive piece of equipment called a GGSN. I asked "What does that stand for?", and he didn't know. It turned out to be a compound acronym, where one of the letters stood for another acronym. Informed debate needs everyone to understand clearly just what is being debated. Like the GPRS Gateway Service Node, not the General Gauge Sensor Network or the Great Green Sea Nymph.
   

I'm not sure the new NED was quite ready to display as much ostensible naïveté as I was recommending, so early in his tenure and in front of his heavy-hitting colleagues. I suppose it is ultimately a matter of balance, but you don't always have to look clever to be clever.

The Board Coach

Recruiting not-for-profit directors part 4 - The Recruitment Process

After you have done the skills analysis, put in place your building blocks, and assembled the recruiting materials (see the previous blogs), the next issue to be decided is “Who will be responsible for the recruitment process?” This can depend on the resources available to the board. The most common route is for the board to establish a committee (historically called the “nominations committee”) to oversee the process, in line with the board’s guidelines and the results of the skills analysis. The ultimate aim of the committee is to come up with recommendations to the board for appointment – either a short list or a preferred candidate.

Your board may not be large enough for the luxury of another committee – if that is the case, then either the whole board can run the process, or a lead director (with sufficient time on their hands to do what is necessary) can be given the job of coming up with the recommendations to the board.

Remember though, the final decision on appointment is of course for the whole board to agree on.

The next issue is “How will we locate and target the right candidates?” If you can afford it, or can secure the services pro bono, you can try the executive search process. Alternatively you can advertise in suitable publications or forums. And you can tap the various networks which the current directors have.

Whichever route you decide to take, make sure you stick to a consistent process. For example, if you take the search option, then it is important that any potential candidates identified through other sources (like tapping the networks, or the inevitable “I know someone who would be perfect for the board”) are fed into the search pool. This helps counter the effect of the Old Mates Act, which has been responsible for plenty of poor board appointments, whether in commercial organisations or NFPs.

Making the final decision

Your skills analysis process should give you a clear guide to make the decision on whom to appoint. Remember, you are recruiting into your gaps. You will have the concrete set of core business and functional skills to take into account, and the filter of the organisation-specific factors to overlay on the pool of identified people. The last filter is “How will any of our candidates fit in with the dynamic of the current board?” That question may vary if your current board dynamic is not as effective as it should be, and might instead be “How will any of these candidates help us improve the dynamic?” This might be, for example, by increasing diversity on the board.

The last step before formal appointment is the delivery of your sales pitch, developed during the building block process, and a frank discussion with the candidates of the expectations the board will have of its new members. Are your candidates up for it? Really? Believe me, it can be far easier to appoint a new director than to remove an existing one.

The formal resolution for appointment

Check the constitution! There will be a section headed “appointment of directors”, or something similar, which will set out how directors are validly appointed. It may be by the board resolving to fill what is known as a “casual vacancy”, because someone has recently resigned; or it may be by filling an empty spot which has either not been filled for some time, or has never been filled. These two kinds of appointments are usually valid until the next annual general meeting, when the appointees will have to re-elected through the normal AGM process.

But the appointment process can vary widely between constitutions, so check your own very carefully and don’t assume it will be like anyone else’s. The safest route is to use the actual words of the constitution to frame the formal board resolution – for example:

Pursuant to clause 43.1 of the company’s constitution, the board resolves to appoint XYZ as a director of the company, to fill a casual vacancy and to hold office until the end of the next annual general meeting of the company.

The constitution will also specify the maximum number of directors who can hold office at any one time – make sure you won’t be exceeding that maximum.

So that’s it. Good luck with finding the right people for your board, who will add value, enhance the board dynamic, and help your organisation achieve its vision.

The Board Coach

Recruiting NFP Directors Part 3 - Assembling Your Recruiting Materials

With your building blocks in place, you will be ready to assemble the final part of your recruitment materials. There are 3 vital documents which will allow you to approach potential directors with confidence:

• A statement of what the board will expect of new directors. This should have been previously agreed by the board. It should cover matters like the annual board schedule, including commitments outside board meetings such as the annual strategy retreat, if you hold one, and fundraising events; a willingness to align with your organisational values; and preparedness to sign up for the way the board works together, as set out in the board protocol. A reasonable assessment of the amount of time which a new director would need to spend to meet the necessary duties and commitments is also a great help in giving a realistic picture of the job, and in ensuring that the new director will know what they are up for.

• A letter setting out the major terms of the appointment. The letter should be clear on the term for which the new director is being appointed, and a summary of any of the “expectations” which are of a sufficiently formal nature to warrant inclusion.

• The sales pitch which you will present to potential appointees. You need to give candidates a great and compelling story if you want to get the best ones. The sales pitch should cover:

Why we want you – including the skills, experience and personal qualities identified in stage one, the skills analysis; how we found you; why we think you would be a great fit for our board and our organisation

What our organisation does – a summary which can be supported by other accessible written material if necessary

What we can offer you – such as comprehensive board papers, sound management, good risk management, board training and development, or any other strong features you might like to emphasise

“What’s in it for me?” – what a director in your organisation can expect to get out of being involved, beyond just a warm inner glow. This might include exposure to new networks of contacts, the opportunity to receive training or learn new skills, value for your CV or any other tangible positives you can identify.

With these materials assembled, you can now establish the actual recruitment process.

The Board Coach

Recruiting NFP Directors Part 2 - Recruitment Building Blocks

Given the difficulties in finding any not-for-profit directors at all, it can be pretty competitive to attract the best ones to your organisation. You should make your recruitment process as professional, and your offer to potential appointees as attractive, as possible. This means having the right building blocks in place.

The most important recruitment building blocks are these:

• A clear articulation of your organisation’s values and vision. What is its reason for existence, where does it want to make its major impacts, and what will it hold sacred and immutable while doing so? Being able to give a coherent and passionate explanation of these factors will put you well ahead of other organisations in the recruiting race.
• An agreed and explicit document which sets out the role of the board. What areas will it choose to be active in, besides those few functions which the law says it must cover? What roles will it aspire to play, such as being a role model in the sector, or setting the culture and tone for the organisation? What will be the split of responsibilities between the board and management. A clear statement of the role of the board is probably the factor most widely lacking in NFP governance.
• A board protocol on how the board will work together. This should be a clear and agreed statement of the board’s group dynamic, which can range from turning up on time to and being properly prepared for meetings, to being prepared to engage in robust but respectful debate on crucial issues. It should be something from which a potential director can evaluate just what kind of a culture they would be operating in.
• A version of your strategic plan which can be shared, without giving away too much confidential information. It will be very helpful for a potential director to get an idea of what the major strategic challenges will be.
• A current directors’ and officers’ liability insurance policy, with an available summary of important terms and a certificate of currency. Without this, you won’t even be in the race to recruit new directors.

Armed with these building blocks you will be able to embark on the next stage of your recruitment process.

The Board Coach