Issue No. 295 of Your Weekly Staff Meeting highlights a must-read new book on governance—with 18 cautionary checklists for CEOs and board members. Yikes! As we’ve seen this week, boards can create or destroy value. Plus, this reminder: check out my Management Buckets website with dozens of resources and downloadable worksheets for your staff or board meetings.
Fumbling CEOs & Executive Overassurance
The latest hot-off-the-press governance book warns, “Like neutrinos and Higgs bosons, early signs of faltering chief executives are often hard to detect.”
The co-authors of Boards That Lead add, “Most chief executives are constitutionally optimistic, and since by definition their role is to surmount challenges, the tenor they bring into the boardroom is likely to be relentlessly upbeat. Taking executive overassurance into account will aid directors in detecting nascent troubles ahead, but it is only one piece of a very complicated puzzle.”
That’s the first paragraph of Chapter 8, “Spotting, Catching, or Exiting a Falling CEO,” in this excellent book that delivers three big take-aways for board members. They’re summarized in the arresting subtitle:
“When to Take Charge,
When to Partner, and
When to Stay Out of the Way.”
“From our several decades of witnessing more than fourscore fumbling CEOs,” they write, “we have noted that, in virtually every case, warning signals were noticed early by at least one or two directors but were commonly not shared with directors. We learned of the indications in real time because alarmed board members privately disclosed their rising qualms about the CEO in our work with them.
“The concerned directors were nonetheless hesitant—no surprise—to get the ball rolling. After all, they had helped pick the top executive, and they realized that a forced exit could be not only a career-ender for the executive but also a reputation-killer for themselves. Perhaps most inhibiting of all, they knew that the CEO often retained avid defenders among the other directors.”
What should board members do? “…it is useful for directors to keep a weather eye on early signs of executive deficits. Assuming that the company’s central idea has been well formulated in the boardroom [Editor’s Note: You must read more on this—it’s worth the price of the book.], three embryonic indicators, if ignored too long, often mushroom into far more:
• lack of strategy
• failure to execute, and
• wrong people calls.”
Oh, my! Just when you thought you were knowledgeable in governance, along comes a 219-page poke-in-the-ribs, plus an incredible 40-page section with 18 checklists for board members, a bonus chapter on “Trends in Director Monitoring and Leading,” a director evaluation worksheet, and six golden pages on “Division of Responsibilities Between the Board Leader and the CEO.”
Boards That Lead is a timely must-read for directors of both corporate boards and nonprofit boards. In the past six months (including this week) we’ve seen three high profile Christian nonprofit organizations on the Internet front page (and wishing they were not)—all three for different reasons—but the negative news was all prompted by board actions.
Board service is not
for the weak of heart.
If you’re leading a board, on a board, or considering board service, you’ll want to read Chapter 3, “Recruit Directors Who Build Value.” The co-authors, including Ram Charan, author of Owning Up: The 14 Questions Every Board Member Needs to Ask, are big on questions. This chapter asks eight mission-critical questions of prospective board members, including: “Will the candidate be ready to stand tall and engage constructively when vital issues are on the line, the stakes and stress are high, and leadership of the company becomes even more essential?”
“Root Out Dysfunction” is Chapter 4’s theme. “In our experience, as many as half of Fortune 500 companies have one or two dysfunctional directors.” The authors identify three types:
• “Some see themselves as the smartest person in the room.
• Others seek recognition.
• Others are frustrated would-be CEOs.”
They add, “Whatever their personal motives, they tend to micromanage or take boardroom discussions down dark alleys. We have seen a director interrupt the first five minutes of a CEO’s boardroom presentation and sour the mood of both board and management for the remainder of the day. The result is to impair, even negate, a board’s capacity to lead the firm. As in any group, a dysfunctional member can sabotage the entire team.”
The authors recommend six personal qualities to look for in a board leader (often the board chair in nonprofit circles): 1) Executive experience, 2) Respect and confidence, 3) Collaboration and restraint, 4) Personal bonding, 5) Personal comfort, and 6) Resilience.
Again—not for the weak-hearted. Board leaders (or board chairs) “can anticipate at least one major crisis during their tenures.” Under the “personal comfort” commentary, they share this wisdom: “Yet another factor defining the board leader is a sense of comfort in one’s own skin and place in life, with nothing yet to prove or still to achieve, most often the product of a long and successful career as a corporate leader in one’s own right—no coveting of the chief executive’s office, no longing for operational control.”
Learning boards will discover vast insights and practical next steps:
• Boards should ask new CEOs to draft a succession plan immediately (and the annual self-assessment should measure progress).
• Caution! Leaders can change dramatically when they get the brass ring.
• Nothing can make up for the wrong choice of CEO.
• Ten principles for finding the right CEO (Warning: “Review outside consultants carefully to prevent conflicts of interest.”)
• In risk management, why quantification alone is a false crutch.
• The value of a one-pager with agenda/decision highlights sent before every meeting
• The learned art of what to feed to the board
• How to coach new board members to stay at the right “altitude” in board meetings
• How to get maximum value from an advisory council or board (They quote Roger Kenny who says advisory boards are “like the Marines: They get you on the beach.”)
And then this PowerPoint-worthy wisdom:
“Execution is where
and the board stops.”
Oh, my. There is sooooo much more I’d like to add—but I must stop. This is a 2014 Book-of-the-Year contender, and it’s only March. Enjoy!
To order from Amazon, click on the graphic below for Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way, by Ram Charan, Dennis Carey and Michael Useem.
Your Weekly Staff Meeting Questions:
1) In Chapter 11 the authors present two real-life case studies: one board created value, the other destroyed valued. “It was as if the board had embraced Will Roger’s famous dictum, 'If stupidity got us into this mess, then why can’t it get us out?'” Can you think of a board that either created or destroyed value?
2) In Checklist 12: “Retaining, Reviving or Relieving the Chief Executive,” the authors ask “Are performance metrics and severance terms well in place before advancing toward dismissal?” How about your organization—is the answer to that question in writing in your Board Policies Manual?
“Permission-to-Play” Values - Insights from Mastering the Management Buckets: 20 Critical Competencies for Leading Your Business or Nonprofit
In my cycle through the 20 management buckets, this issue features Chapter 8, The Culture Bucket, and this reminder: If your staff and board can’t recite, from memory, your core values—then they can’t live them out.
For a reminder on the four kinds of values (as described by Patrick Lencioni), read my review of his Harvard Business Review article, “Make Your Values Mean Something.” What many organizations describe as “core values,” Lencioni says are merely “permission-to-play” values and are not unique to your organization.