How CEOs can get the most from boards
There is no shortage of information on how boards can more effectively oversee management. But there is still much to be learned about how CEOs can orchestrate their relationship with the board to optimize its potential to become a strategic asset for the company, as distinct from its more traditional role as overseer of management.
Long gone are the days when boards were composed of the CEO’s best friends and fans. The CEO is often seen as carrying the bulk of the responsibility for running the company, and accountable to a vast number of stakeholders. But it’s easy to forget that although CEOs are ultimately answerable to their boards, these boards also embody a tremendous reservoir of experience they can tap if they actively step up their engagement with directors.
Today, CEOs need boards to help them maneuver through the whitewater of constant disruption. Boards must reach difficult decisions that require deep and diverse insight – decisions that only happen by dint of composition, team dynamics and well-developed relationships with their CEOs. To this end, we believe CEOs should be taking a more proactive role in nurturing their boards to become strategic players.
This may seem unnatural to CEOs accustomed to taking a more reactive or passive stance toward the board’s role in oversight, compliance and the execution of its fiduciary duties. But when it comes to the board’s potential to contribute to strategy, our interviews with directors and CEOs have made it clear that most boards are not naturally positioned to drive this shift. Many, in fact, are looking for guidance and leadership from the CEO.
One reason boards may be inherently reticent to play this more strategic role could be a data imbalance. One chair-CEO told us: ‘There’s a huge information asymmetry. They’re here for eight days, we’re here for 365 days.’ Boards may also feel, once they’ve hired a CEO they believe is perfect for the job, that their work is done. One director said boards ‘like to enforce the theme, We gotta let the CEO be the CEO.’ This can go all the way to boards being overly deferential to management.
In addition, some boards have a tendency to avoid confrontation, self-censor or fail to communicate clearly with the CEO when something seems wrong. It is therefore equally incumbent upon the CEO to take action to change this dynamic and foster a more open, productive environment that allows for constructive tension. Today, it’s both necessary and legitimate for CEOs to step up and play a proactive role in making their boards more effective.
To better understand how CEOs can actively engage their boards to make them become strategic assets, we conducted research involving more than 50 conversations with Fortune 1,000 CEOs, board chairs, directors, academics and external board advisers to ask them to share their experience and perspectives. Here is some guidance we can offer from our analysis.
- Be open, transparent – and fearless
Boards and directors reminded us that they want their CEOs to succeed, and so CEOs should feel more inclined to solicit board feedback in a fearlessly transparent and open way. There’s no room in this scenario for insecure CEOs who feel threatened by the presence of this group they wish would just go away or an overly self-assured CEO who thinks he or she is God’s gift to the business world. CEOs – like everyone else in the organization – need feedback. They should balance humility with confidence to engage authentically and in plain language to ask for it and receive it.
How? CEOs can practice asking questions and actively listening to show they can hear the feedback, respond thoughtfully and give feedback to the board, collectively and as individuals. Often, board members may better understand their CEO’s ideas if presented with partially formed strategies or works in progress. This has the advantage of enabling the board to appreciate better the CEO’s thought processes as strategies become shaped, and the method allows input from the board before final versions are fully baked.
CEOs can also model this fearless transparency for their executive teams and send a strong signal that it is okay to share information with the board even if it is not picture-perfect: the point is not to impress the board, but to engage it.
- Tension can be beneficial – learn to walk this tightrope
One leader told us: ‘Diversity of thinking is not free.’ Tensions and disagreement are part of the package with all boards. Without tension, nothing would ever evolve. CEOs should learn to use this tension for everyone’s advantage. That starts by first getting comfortable with it.
From our conversations, it became clear that tension is natural and can potentially yield highly beneficial outcomes. The challenge for both CEOs and boards is to fight the natural tendency to evade it or smooth things over, rather than harness it to achieve higher-value decisions.
When tension is not overtly addressed, it can take people down the wrong path or strain relationships. When openness and mutual respect are maintained, this tension can ultimately be followed to its resolution, wherein might reside new insights and understanding. Exploring tension to a real, rather than glossed-over, resolution will help strengthen relationships, become a force for positive change and encourage real engagement next time it presents an opportunity to engage over it.
Helping facilitate (rather than simply diminish) tension around an issue with their board may be new for some CEOs, but it can result in a greater level of mutual respect, trust and support among all. One director said, ‘Don’t be too quick to cut off conversation in the boardroom instead of letting it play out.’ Allowing these conversations to develop may lead to a path different from the traditional ‘let’s get this approved and move on’ mindset.
The latter may yield board agreement on an action that needs to be taken. But that bypasses the opportunity to gain a more thorough understanding or comprehensive solution that can lead to greater commitment to the ultimate decision. If the board cannot hold the tension of a difficult agenda item being addressed, then a CEO can contribute considerable value by moving into a subtle co-facilitator role if he or she is not leading the meeting.
- Bridging from a series of board meetings to a more continuous board experience
As the board’s strategic importance increases, so should the quality and frequency of interactions the CEO has with each director. This requires a sense of continuity. Boards generally meet as a group only a few times a year, which limits relationship building and information sharing. Increasingly, CEOs are finding innovative ways to engage their board beyond formal meetings, which results in them feeling more informed, involved and committed.
Many directors admitted to us that much of the ‘real’ work of boards happens in between meetings. CEOs should invest time and effort in frequent, regular outreach. Remember that information sharing – which we will discuss in more detail below – should reach all board members equally, at the same level and preferably at the same time. The board portal is not exactly personal, so keep it reserved for formal resources and governance matters.
Also, be thoughtful about how to design experiences to connect with your board, enabling directors to connect with each other in ways that go above and beyond board meetings. Organizing separate events with speakers, attending conferences together, arranging informational site visits and off-site or other unique educational opportunities are some of the means now being used by CEOs.
- Curate information, and curate some more
How information is presented to the board members is critical to their success not only as directors but also as strategists. Many board members complained of an indigestible volume of information, particularly now that tablets and laptops are ubiquitous and carry no reasonable limit on the amount of information that can be stored and shared.
As one director told us: ‘There used to be a limit. It was called the UPS box. If it didn’t fit into the box, it didn’t go to the board. Too much information can be just as bad as too little information.’
CEOs with whom we spoke have begun to experiment with different formats and lengths in their presentations to the board. Although there is no one rule of thumb, board members generally appreciate information that is presented in a crisper, more concise format. One CEO told us: ‘When you read a two to three-page summary instead of a deck of slides, you get a much stronger flavor of a CEO’s position and what it is that the CEO wants to discuss.’
Returning once again to the theme of openness and transparency, CEOs should seek feedback from board members, suggest options for effective formats to disseminate information and solicit ideas and preferences. What is working, and what is not? Is the right information getting through? Is there enough or too much? There may not be complete agreement or consensus, but there can be a clearer understanding of what type of information is most desired by the board and the channels required for providing it.
- Should CEOs also be board chairs?
The question of whether the CEO should also be board chair is a highly debated topic, with strong opinions on both sides. One interviewee called the issue a red herring, saying: ‘There are multiple ways to get to the same place.’ Others thought that for CEOs to use their board’s strategic skills more effectively, they needed to give up the chair role.
It is a delicate question, made all the more so because no two situations are alike. We advocate taking a careful look at the existing structure, assessing the engagement level of the board, seeking insight from governance by-laws and weighing that against the personalities and qualities of those in the role of CEO and chair to start. As CEOs work with their boards to determine the most effective structure, examining these factors can help CEOs to determine their best path, given the specific circumstances of their board and organizational environment.
- CEOs should speak up about board composition
In an age where ESG concerns are moving front and center, it is incumbent upon the CEO to keep advocating for including the right skills, experience, diversity and, ultimately, the right mix of people on the board. This means not only should the board be periodically refreshed to avoid falling into the rut of sameness, but new potential members should be sought with specific and various skillsets that allow for effective guidance and advice on the future strategy of the company and the disruptive factors on the horizon. One director told us: ‘Skillsets need to be thought of as a moving target.’ CEOs have a critical perspective on what these needed skills are, and they should actively promote the need to address these capacities on the board.
We live in a business environment that’s shifting faster than most companies can move, not least as a result of the Covid-19 pandemic. Success in these circumstances requires exceptional leadership. The stakes have never been higher for CEOs as they are expected to manage, make sense of and take advantage of unprecedented levels of ambiguity and uncertainty. To help do this, they need board members who are fully engaged and willing and able to prod, push, challenge, champion and work with their CEOs to get to better insight and decisions. It’s a tall order but, properly served, can lead to great outcomes.
Maureen Bujno is a managing director in Deloitte’s Center for Board Effectiveness. Benjamin Finzi is a managing director with Deloitte Consulting and co-leads Deloitte’s Chief Executive Program
Other contributors to this article were: Maureen Bujno, a managing director in Deloitte’s Center for Board Effectiveness; Benjamin Finzi and Vincent Firth, managing directors with Deloitte Consulting and co-leads of Deloitte’s Chief Executive Program; and Kathy Lu, a senior manager of Deloitte’s Chief Executive Program