Over the past 12 months, we have witnessed the very public demise, on both a national and local level , of organisational leaders – Chief Executives, Board Chairman and even whole Boards have either “fallen on their swords” or been dismissed for poor performance and failures to fulfil their fiduciary, governance and leadership responsibilities. Such unplanned turnover is disruptive, impacts on stakeholder perceptions and confidence and reflects poorly on all concerned in how the organisation arrived at this point, where such a decision is the only option available to restore stability to the business. Whilst no system is infallible, what we have seen over the past 12 months is governance at its worst from Boards and Leaders who should have known better. The failure was people, not systems and processes, so it is timely to reflect on these issues again.
One of the key success factors in achieving a good governance business model is to establish and maintain an effective relationship between the Board, the Chairman and the Chief Executive. In this article, we will identify these key success factors and also note a few early warning signals that generally mean that there is “all is not well “in the relationship.
Mutual respect, incorporating an open and honest approach to all matters: both parties are appointed to work in the best interests of the organisation at all times; it is not a competition, rather it should be a collaborative relationship that enables each to undertake their particular role with the knowledge and comfort that mutual support and regard is present at all times;
Clearly defined and articulated respective roles for the CEO, the Chair and the Board itself: confusion around accountability (i.e. for what and to whom) is a sure way to diminish the effectiveness of an organisation. The Board’s focus is on setting the direction, creating a shared vision of the future and ensuring the organization has the resources to do what is expected; the Chief Executive develops and implements the business plan that aligns organisational performance with the Board’s expectations. Documentation and communication will ensure valuable resources are not wasted “doing business with yourself!”
An agreed approach to ongoing feedback, both formal and informal: an open feedback system, both formal (annual performance review) and informal (monthly meetings with the Chairman) will go a long way to ensure alignment between strategy and implementation and a create the right culture for all to work within. If recalcitrant behaviour needs to be dealt with, this should be done immediately such behaviour becomes obvious, not delayed until the performance review. The two activities are quite separate and should be managed accordingly;
Mutual support: The Board and the Chairman has a responsibility to support , mentor and advise the Chief Executive, however the Chief Executive also has a responsibility to educate, advise and request support/input from the Board. The Chief Executive, by the very nature of his/her role, has far more information on any matter before the organisation and if the relationship is to realise the maximum potential of the collective knowledge and experience around the board table, then the Chief Executive must invest time and effort into the continuous education of the Board on matters that are not generally known to Board members. This does not mean that Board members should not make their own endeavours to better understand the nuances of the business they govern, this is fundamental to good governance, rather is should complement their efforts and generate a positive multiplier effect for the organisation; and
No secrets, no surprises: no one wants to find out about their organisation/business from the “front pages of the local paper” or a surprise agenda item at a board meeting. Relationships can be easily eroded through poor communication and are generally difficult to resurrect once trust is lost. An open, honest and transparent relationship will establish trust, encourage candour and create an effective governance model.
Sometimes, however, things do not always go to plan, so here are a few indicators that may suggest that the Chief Executive is not aligned with the Board’s expectations.
Employment relationships, even at the highest level, do not always work out and Board members should be vigilant in their attention to the performance and the attitude of their Chief Executive – he/she is their only direct report, so this should not be a difficult task.
In summary, for the governance of an organisation to be truly effective, it is critical that the relationship between the Board, the Chairman and the Chief Executive be one that is clearly defined, open, transparent and based on trust. Nothing should be taken for granted and feedback should be both formal and informal on an ongoing basis. Great organisations and governance models start with this framework and never become complacent in managing the relationship. And finally, it is not a contest, rather collaboration between key leaders who all have the same focus and that is to create a sustainable business and organisation. Apply this approach, and it is highly unlikely your organisation will end up in such a “ mess” as we have witnessed with many organisations, public, private and non-profit, in our country in recent times.