Crucial to the success of any new CEO, is the way in which he or she establishes, defines and sustains his or her relationship with the board in the first 100 days of tenure.
The CEO-board relationship is defined by roles that differ from, but depend on, each other. The CEO is in charge of developing and executing strategy while the board is responsible for approving and advising on it. Day-to-day operations are the responsibility of the CEO, with the board providing a broader perspective.
There are more checks and balances than ever for today’s CEOs and although the majority of US CEOs also chair the board, this is changing in the face of more stringent corporate governance regulations which have also seen a shift in power from CEO to board.
Board members are now intimately involved with the business and less forgiving of poor CEO performance so it is in the CEO’s interest to ensure a sound relationship with the board.
Forming a partnership
When new CEOs inherit a board, they need to determine quickly how to build a productive working relationship with that board – and who their business partners on that board are.
Board culture can complicate matters, especially if it doesn’t match that of the company. There’s also the issue of group thinking where the thoughts of individual board members clash with group opinion, but tend to be stifled for the sake of consensus. This can result in a wall of silence between board and CEO with the board effectively shutting out the CEO.
It is critical that board and CEO are on the same wavelength, but even so, many CEOs underestimate the importance of understanding the board’s interests and fail to develop and maintain the relationship necessary to determine the best strategy for the company.
George Tamke, former chairman of Kinko’s says new CEOs must ascertain who really shapes the board and solicit their views on the company. Chairman of The Associated Press, Burl Osborne, adds: “You need to know what their business expectations are; what their definition of success is; whether they can accept failure in search of success.”
Whether you are an internal or external hire, one-on-one listening and learning opens up communications, reveals insights about the company and business and highlights resources and potential problems.
When Kevin Sharer took over as CEO of Amgen, he asked members of his management team as well outside directors to share their insights into the company.
Individual board members can offer not only expertise but also private counsel and many CEOs rely on a confidant in their management team to act as a sounding board for new ideas.
Conversations with confidants and individual board members give new CEOs the opportunity to subtly shift the board dynamics, so that it becomes their board rather than that of their predecessor. The questions you ask, how you ask them and the answers you give demonstrate that you intend to make your own mark.
Establishing your credibility
You’ll have to prove to your board that they made the right choice. Business results will eventually speak for themselves but initially you’ll need to focus on establishing relationships and building credibility by developing a sound agenda, becoming familiar with the business, listening to and learning from the board, communicating, building a committed management team and maintaining a degree of humility.
Jonathan Miller, CEO of AOL, adds: “My experience is that they are looking to see if you, the CEO, have a handle on the business. It gives them the confidence that you’ll do what you say and deliver what you promise.”
When he took over as CEO at Space Holdings, Dan Stone discovered that simple things like professionalism, timeliness, communicating a willingness to accept feedback and demonstrating knowledge of the business all worked to gain him credibility.
Communication
Communication is vital in the first 100 days – one of the greatest dangers in making any kind of major change is if the CEO and board don’t share the same perception of the business, yet many CEOs neglect to keep their boards informed.
Get a dialogue going, advises Gillette’s Jim Kilts – tell your board what your priorities are, what you’re going to work on and what you see as being the success drivers. Allow the board to talk openly without you present –you need to trust them to attend to their business.
How it should work
In an open relationship, the board is an extension of the CEO’s management and support team. How you use the board will also determine success. Bob Nardelli of Home Depot looks to his board for advice and counsel. At PepsiCo, Steve Reinemund integrates board directors into the business to interact with corporate managers but he’s careful to draw a boundary between the board’s sphere of authority and his own.
The distinction between the authority of the CEO and that of the board is essential to a healthy relationship but one that is not always clear – especially when the former CEO remains on the board.
On one hand a former CEO is a valuable source of information and experience, but on the other his or her presence can undermine the new CEO and hinder change.
New CEOs generally agree with former Sunoco CEO Robert Campbell who argues that former CEOs and chairmen should never remain on the board. Jack Welch agrees. When GE appointed his successor, he left saying his presence on the board would have impeded the new CEO’s ability to assume leadership.
Conclusion
Your chances of establishing a productive relationship with the board depend on how you build a true partnership and how you lay the groundwork for working with your board. It is always a challenge to shape a productive relationship with a new business partner, especially one with the power to hire and fire you. Effective communication is critical to the partnership and, therefore, to your success.
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Note
This article is a summary taken from You're in Charge — Now What? published by Crown Business, New York, 2005.