Leading up and down: the dynamic relationship between the Board and CEO
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 it is defined.
It is also a relationship that often persists despite mutual frustration; each doing or not doing things that inevitably get up each other’s noses. This normalisation of Board-CEO tension is helpful to some point – the Board is an accountability vehicle for the CEO, so naturally some tension will exist – however, it can lead to negative outcomes for the board, organisation, customers, and stakeholders if left unchecked.
Issues between the Board and CEO frequently stem from a handful of easily managed circumstances. However, for some reason, the root causes of the symptoms being experienced are not ferreted-out, shone a light on, worked through, and resolved.
This article considers five of the most common root causes of a strained Board-CEO relationship and shares easy actions for a Board or a CEO to implement for a thriving relationship to blossom and sustain.
1. Lack of understanding of each other’s roles
Too many boards do not take the time to clearly article and document their role. At any time, each board has a certain role within a certain organisation (David Nadler shares his view on this in this seminal article). Only after this has been clarified – for all board members – can the CEO be clear on their role vis-a-vis the board and directors.
It sounds simple; so simple as to feel unnecessary. However, without clearly spelling this out for everyone, people will fill in the gaps with their own definitions, creating a clash of ideals, toe-stepping, and finger-pointing. Regularly take the time as a board to get everyone on the same page as to its purpose and the roles of the board members and CEO. It may feel like a redundant waste of time, but it will certainly save you time (and consternation) in the long run.
In a nutshell, the role of the board equals the role of directors/board members which, in turn, equals the role of the CEO. If everyone is responsible, then no one is responsible. With no responsibility comes no accountability. And accountability is necessary for good governance.
“Accountability is a relationship between an actor and a forum, in which the actor has an obligation to explain and to justify his or her conduct, the forum can pose questions and pass judgement, and the actor may face consequences.”1
2. People are being ‘too nice’ to one another
False harmony is not only a cultural red flag; it’s also a breeding ground for resentment. In their position of ultimate responsibility and accountability, the board must be able to respectfully debate and challenge each other and the CEO. A healthy level of candour is mandatory on each board.
When the board or the CEO are inclined to avoid conflict and not fully interrogate reality (to use a Jack Welch term), expectations go unmet, an air of resentment develops, leading to passive-aggressive actions and a lower ability to unite as a board behind decisions and behind the actions of the CEO.
Try introducing a healthy level of debate and building a safe environment for board members and the CEO to feel capable of raising their concerns in a respectful, conducive manner.
3. The tail wags the dog
The tension between who does what manifests in a situation whereby the tail (the CEO) waves the dog (the board). Here you see a CEO have an overly strong influence on the composition, activities, and decisions of the board. They have a stronghold over who is on the board, what the board does, knows about, and decides on, and the board goes along because ‘isn’t this how it is on every board?’
On the other extreme, the board (perhaps one or two board members) are overly involved in the day-to-day life of the CEO. They micromanage, nit-pick, and assert their will and whims onto the CEO and other staff. This (or these) board member(s) continue their domination on the board, making decisions on behalf of other board members and treating the organisation like their own personal kingdom/queendom.
Both extremes are toxic and problematic. The solution lies somewhere between.
The Board and CEO have an equal and balanced role in the overall organisation. The Board largely concerns itself with governance and oversight, and the CEO with achieving the (mutually agreed on) strategic objectives of the organisation while managing the day-to-day business. Working through issue one above, coupled with a strong Chair, will go a long way to solving – or avoiding entirely – this issue.
In fact, Board independence is known to decline over the course of a CEO’s tenure. This decrease of independence over time is due to the CEO’s participation in or control over the director nomination and appointment process.2 Maximum term limits for board members is critical to maintain a healthy dog-tail wagging ratio (this can also be referred to as the board effectively ‘leading down’ to the CEO, and the CEO effectively ‘leading up’ to the Board).
4. The relationship is not nurtured
It takes work to have a thriving Board-CEO relationship. It won’t naturally happen and will not spontaneously exist without intentional effort. This effort is largely lead by the Chair of the Board. They have a special relationship with the CEO that, ideally, helps the CEO work effectively with the Board, helps to Board work effectively with the CEO, avoids any potential issues erupting, and gets the best out of the CEO and the Board.
Unfortunately, many people who hold the Chair position lack the special coaching and governance skills required from this position and its dynamic with the CEO. They are doing their best; however, it’s often at the expense of wasted time, mistakes that could easily be avoided, and a dysfunctional relationship with the Board and the CEO (and everyone is frustrated!).
It is critical for the Board to appoint a capable individual as Chair of the Board; I would argue that it’s one of their most important tasks. It is beneficial for the Chair to receive education and mentoring themselves on how to be an effective Chair, particularly as it relates to working with the CEO and the rest of the Board.
The CEO must also learn how to effectively manage and lead ‘up’ to their board. This is where the Chair can help the CEO best navigate their work with the Board, ensuring they have what they need to execute on strategic and governance goals. Sometimes this might look like the CEO proactively bringing the Chair in on bigger decisions that they are making (even if they are appropriately delegated) to ensure there are ‘no surprises’ and the Board does not feel that they have lost control. Or it may mean reaching compromises with the Board on certain things, so the Board feels that it has a sufficient level of control and ‘say’ over what happens in the organisation.
5. Trust is not Proactively Built (Both Ways)
Trust is the cornerstone of every thriving relationship. It is true for the board members as a collective, for the Board-CEO relationship, and the Chair-Board-CEO dynamic.
Trust arrives on foot and leaves on horseback.3
Each and every interaction, action, and inaction from any part of this equation causes trust to be reinforced or diminished. This must be kept top of mind so that you are conscious of whether you are adding or subtracting from the trust bank.
How trust is built within a group and with individuals of that group follows a broad set of principles, with an overlay of the unique cultural elements of the group. This article shares some simple techniques and areas to build and maintain trust.
Being conscious of these common root causes of a strained Board-CEO relationship and knowing how you can proactively create and sustain a thriving relationship will make your board more effective and efficient, and enjoyable for everyone. Be courageous to call out areas of friction and work together as a team to create a Board-CEO dynamic that works for everyone.