Rising Board Dysfunction: Strategies to Lessen Its Impact
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In today's business landscape, maintaining a healthy and effective working relationship between CEOs and boards is crucial for an organization's success. This article explores strategies that can help prevent CEO-board dysfunction, with a focus on clear expectations, accountability, board limitations, and alignment, especially in polarized times.
Setting Clear Expectations and Accountability
A strong foundation for a successful CEO-board relationship begins with establishing clear roles, responsibilities, and performance metrics. CEOs and boards should agree on deliverables and priorities, with ongoing communication to keep expectations realistic and aligned. Regular, transparent communication cycles help maintain accountability and clarify progress or challenges.
Building Two-Way Communication and Trust
Creating open and inclusive dialogue channels encourages board members and the CEO to express differing perspectives constructively. This openness can mitigate conflicts and build trust, which is foundational for accountability and support. Developing trust means recognizing the CEO’s accountability to the board but also the board’s responsibility to support and challenge constructively.
Acknowledging Board Limitations and Leveraging Strengths
Boards benefit from recognizing their own limitations, such as expertise gaps, and leveraging external advisors or training to address these. By embracing diverse perspectives as opportunities for innovation rather than sources of division, boards can foster more effective governance.
Using Structured Processes and Tools
Employing frameworks like conflict resolution protocols or technology (e.g., board portal software) enhances meeting efficiency and helps clarify agenda items and decisions. This reduces misunderstandings and keeps discussions focused on strategy rather than personalities or procedural issues.
Creating Alignment in Polarized Times
In contexts of polarization, reinforcing alignment through reiteration of the company’s mission and long-term vision at every meeting helps keep focus on shared goals. The board chair or executive director can actively mediate disputes to maintain cohesion. Additionally, prioritizing relationship-building with key stakeholders during transitions reinforces a unified front and clarifies shared purpose.
Navigating Challenges in a Polarized Environment
In today's politicized environment with economic uncertainty and escalating tariffs and trade wars, the problem of board dysfunction could worsen. Values-based leaders seek to understand issues from multiple perspectives to maintain alignment within the board, leadership team, and employees. Social media creates the perception that an immediate response is required, potentially leading to hasty decisions and further dysfunction.
Preventing and Addressing Dysfunction
Without an appreciation of the balance their respective roles require, CEOs and boards may end up in conflict. Clashes between CEOs and their boards are common, with examples including Steve Jobs and Apple's board, and Pat Gelsinger and Intel's board. Approximately 25% of boards in companies are dysfunctional. The National Association of Corporate Directors (NACD) is focusing on ways to improve the working relationship between boards and CEOs.
Key Takeaways
- Maintaining a healthy board-CEO dynamic is crucial for the success of an organization, and requires understanding of respective roles, clear expectations, and mutual accountability.
- A lack of accountability as a CEO can lead to conflicts with the board.
- Acknowledging that board members should not overstep responsibilities, especially in the day-to-day operations of the company, is essential.
- CEOs must understand that the board is their boss, and they should minimize surprises for the board.
- Board members should not get more deeply involved in running a particular division of the company without proper authorization.
- Some CEOs expect the board to act more as a rubberstamp committee, instead of digging in and asking tough questions of management.
- CEOs, board members, and other executives may choose not to make a public statement on every issue, particularly if it is outside the company's area of expertise.
- Testifying before Congress on important issues can be a way for organizations to use their influence to draw attention to certain matters, as long as the board, leadership team, and the CEO are aligned.
- A scenario where a board member interfering in a decision made by the CEO can lead to a leadership crisis.
- Directors expect regular updates from the CEO on operational performance, strategic direction, leadership and talent development, and succession planning.
- To prevent CEO-board dysfunction, the practice of clear expectations and accountability should be implemented, ensuring that the CEO and board have agreed upon deliverables, priorities, and performance metrics, with ongoing communication to maintain accountability and alignment.
- In the realm of corporate governance, it's crucial for board members to acknowledge their limitations, whether it be expertise gaps, and leverage external advisors or training to address these, fostering a board that can effectively drive a business's success through alignment, best practices, and thoughtful board management.
