Four Documents Supporting the Board-CEO Relationship
As I wrote a couple of weeks ago, the Board-CEO relationship is a dynamic, interdependent, and intricate one. It is two sides of the same coin, each relying on the other to enable organisation success, however success is defined.
In that article, I wrote about common points of friction between the Board-CEO and offered, in my first point, that a root cause of this friction may be caused by a lack of clarity or understanding of each other’s roles. From this perspective, I find setting clear expectations of the CEO role and providing the tools to get the job done establishes a solid base to build a thriving relationship between the Board and CEO.
With this in mind, four documents help achieve this outcome, helping to set clear, realistic expectations, and supporting the board in their performance oversight and monitoring of the CEO.
- Contract and Position Description
Although technically two documents, these two documents must exist in harmony with one another.
The CEO contract will include items relating to the terms of engagement between the organisation and the CEO. Expect to see things like: term of employment, location, reporting requirements, hours of work, general duties, remuneration (incl. superannuation), remuneration review, bonus/incentives, allowances, expense reimbursements, leave entitlements, termination, the required termination notice, garden leave, IP rights, confidential information requirements, non-competition clause, return of property belonging to the organisation, the requirement to adhere to organisation policies, surveillance (particularly of computer use), review date, and schedule of particulars of a specific contract.
The contract will likely provide a generic clause along the lines of ‘managing day-to-day operations as directed’ and ‘ensuring the achievement of the strategic plan or objectives’. The particulars about managing day-to-day operations are detailed in the position description, the strategic plan/objectives will be defined in the strategic plan (number 2, below), and both of these areas are likely reflected through particular KPIs (number 3, below).
The position description comes in many shapes and forms. The commonality is that it will define: key relationships, key skills and experience required for the role, required or desired qualifications for the role, particular working conditions, and it will list expectations regarding key objectives and deliverables (or words to that effect). These key objectives and deliverables will be particular to each organisation and provide a great point of reference on which to assess the performance of the CEO.
Some examples of particular deliverables in a CEO Position Description may be:
- Develop and enhance partnerships with key stakeholders to achieve strategic goals.
- Write a monthly report to the Board that updates the board on progress towards strategic goals, and all other relevant activities, issues, and concerns.
- Lead the organisation in delivering the agreed strategic priorities including setting expectations, monitoring and evaluating outcomes, and translating strategy into operational goals.
- Strategic Plan
The strategic plan is a document defining the particular goals or ambitions that the organisation (a collaboration between staff and the Board) has set for itself.
The CEO contract provides that the CEO role is there to ensure the achievement of the strategic plan or objectives, and the CEO PD states particular activities around leading the organisation to achieve the strategic goals and providing updates to the Board on its progress towards its achievement.
It’s obvious then, that there must be an actual strategic plan that exists which defines exactly what the vision, mission, strategic priorities, and may even provide a series of strategic initiatives supporting the achievement of strategic priorities.
- Key Performance Indicators (KPIs)
KPIs are the next logical document cascading from the contract, position description, and strategic plan. It translates what, until now, may be non-specific or slightly vague deliverables required of the CEO.
It will break down the strategic priorities and initiatives into milestones (outcomes set to timeframes) to be achieved and include other adjunct organisational outcomes within the CEO’s responsibilities. These may relate to financial outcomes, employee-related outcomes, risk management outcomes, compliance outcomes, and/or other organisational outcomes deemed important by the Board.
- Delegation of Authority
For the CEO to achieve their designated KPIs (and, consequently, meet the performance and outcome requirements of the strategic plan and position description), the Board must empower the CEO to get on with their job. A comprehensive Delegation of Authority is the mechanism for the Board to delegate certain responsibilities and parameters in which the CEO is allowed to operate without having to gain Board approval for each instance.
Great delegation of authorities I’ve seen include a policy and a comprehensive schedule, stipulating for a wide range of activities the limit which the CEO can operate without Board approval.
The items outlined in the delegation schedule align with the organisation (including ‘business as usual’ activities) and its strategic ambitions, the delegate, and the delegation limit. For example, the schedule may include: the purchase of plant and equipment up to the value of $10,000; contracting permanent employees within the bounds of the approval annual employee wage budget; and the authority to represent the organisation with the media.
A well-designed delegation of authority policy and schedule will support the Board and CEO in enabling the CEO and organisation to progress towards achieving its goals without the Board providing a bottleneck or the CEO running rampant with organisational resources.
These four documents will help to establish a solid base to build a thriving relationship between the Board and CEO. It will clarify expectations, enable to CEO to get their job done, and will support the board in overseeing and monitoring CEO and organisational performance.
Has your Board got these documents in place? Do you find they support the Board and CEO in their roles?