Ensuring the board is an effective decision-making asset is the chairman’s key role.
As we enter 2021, good chairmen must consider how they and their board can continue to be successful and add value. They should also be optimistic as they look forward at the year ahead, but also pragmatic because of considerable existing uncertainty fuelled by the pandemic.
Clarity is key
Role clarity is the foundation of an effective board and chairman. Good chairmen will reflect on the role that they play in helping the board add value to the business, the boundaries between the role of the chairman and that of the CEO, along with how each director can better contribute to the work of the board.
Successful decision making by the board will be impeded by any uncertainty over roles, particularly in today’s highly volatile world.
Oversight is a critical role of the board, but there’s a danger in focusing too much time and energy on past performance – what has happened and what cannot now be changed – rather than on the future.
Chairmen need to focus the attention of the board on future strategy. Look at how the organisation can achieve its purpose in a new year that will bring new risks, rewards and opportunities. In fact, it’s time to make strategy live in the boardroom – not something that’s done once a year at a “strategy away day”.
Too often the interplay between the three critical elements of risk, strategy and return is based on assumptions at board-level. It’s up to the chairman to lead the board where assumptions on these elements can be challenged, to validate their relevance. Only then can the board have assurance that they are on the right path.
In an increasingly virtual and challenging world, there’s a need for adaptable, agile leadership. Therefore, it’s time to move from the traditional command and control style of chairman to a more facilitative leadership – one that embodies emotional intelligence.
Chairmen with emotional intelligence can create and nurture a board culture of psychological safety, where bad news travels to the board more quickly than good, where directors have the courage to constructively challenge and where it is fine not to have all the answers, particularly during these difficult times.
Are the board fit for the future?
Effective chairmen focus on whether they, their board, the CEO and the top team have the capacity, capability and culture to deliver success for the organisation.
With the board only having one direct report, the CEO, the most important thing they must do is ensure that have the right CEO to lead the management in these different times. To maintain a good relationship between the CEO and the board it’s important to establish clear expectations on deliverables, good performance and ways of working together.
The answer is informal “fire side chats” along with ongoing feedback between the board and the CEO. This ongoing feedback should ideally be complemented with a robust, repeatable annual assessment of the CEO to provide assurance, and identify any development needs. This evaluation has to be driven by the chairman.
The logical time to review last year’s performance is at the start of the calendar year. This is vital in 2021, when many CEOs have been severely challenged during the pandemic. After all, 2020 has seen some CEOs demonstrate that they are “leading lights” while others have been revealed as “lite”.
The CEO review process should deliver a 360-degree view of their performance, involving the board, CEO and their direct reports, in surveys and interviews. The findings will help the board clarify how to better help and support the current CEO but may also prompt the board to consider if a different CEO is now needed to ensure the business strategy can be delivered.
Strong relationship with the CEO
The most important relationship in the governance system is between the CEO and the chairman. For a successful relationship between the two there must be honesty and candour, and while it’s important to be on friendly terms, they should never ever be seen as friends. Furthermore, the relationship must be built on trust and respect, and absolute role clarity.
Smart chairmen reflect on how well this relationship is working and take the opportunity to recalibrate where required to ensure that the rapport is an asset to the board and the organisation.
Composition of the board
Now is the time for chairmen to consider whether the current composition of the board is the right one to take the organisation forward and ensure it is fit for the future. They should always look at their board through the prism of the five drivers of diversity™- demographics, skills, experience, thinking styles and circles of influence, and consider how well the current line up matches up. True board diversity is broader than any one of the five drivers™ and delivers wider perspectives, improved decision making and outcomes.
Also, chairmen must think about how they ensure all directors feel welcome wanted and valued – particularly new starters. Diversity without inclusion is an illusion and will prevent you gaining added value from board candidates that are not like you.
It’s not only a case of looking at the CEO and other board members to see if they need training, development, support or to exit. Chairmen should honestly ask themselves if they are the right leader for the board in 2021. Key questions they need to be asking include “are they leading the board in a way that’s adding value?” And “is their approach enabling or constraining the work of the board?”.
It’s good chairmen who will consider if they need additional training, mentoring, experience or development, to ensure what they bring to board leadership remains relevant and truly value adding.
Board and chairmen review processes can bring additional data and perspectives. However, the really good chairmen are self-aware, reflect on their own role and performance, and put in place a clear development and succession plan for themselves, the board and the CEO.
Proactive succession planning
The chairman should focus on succession planning for the CEO, board members and themselves early in the new year. Such a plan is vital for the CEO because of their critical position at any organisation and the maintenance of business continuity. There’s always a significant risk when recruiting a new CEO, so reduce this by having a succession plan in place and reviewing it annually to ensure the right leadership team is in place so the board can achieve its purpose.
With succession planning the first thing boards need to do is discuss and agree what they need from the next generation of leader. When they have an understanding, they can identify and mentor existing talent within the organisation, or identify, have conversations with and monitor external candidates the board deem suitable.
Rethinking director induction
Traditionally, the induction process meant sending a box of reading material to the unfortunate new arrival. This is not the way to enable a new board member to add value as early as possible. What’s required instead is a thorough induction and learning journey that should unfold over 18-24 months.
It must include formal governance and company specific governance training, organisation, customer and sector experiences, and an effective buddy system to compliment the work of the chairman. The chairman must lead the induction programme and continuously improve the process based on objective feedback.
These resolutions, if they are made and actioned, will ensure chairmen preside over a highly effective board to which they add significant value.