Orders from above

  • Date:01 Apr 2014
  • Type:Company Director Magazine
What boardroom habits most frustrate management? Domini Stuart asks a range of experienced executives to detail the behaviours of directors that get them hot under the collar.

Both the CEO and the board have a duty to work in the best interests of an organisation. It stands to reason that they will be most effective if they work as a team, but some CEOs feel that their directors are more adversaries than allies. So what does a CEO really want from a board?

“The obvious response is clear oversight, governance and strategic direction with well defined accountabilities and decision-making parameters,” says Nazha Saad GAICD, CEO of St George Community Housing (SGCH) (Twitter @SGCH_Ltd). “There’s an expectation that directors will be skilled and experienced, but I believe that an alignment with, and commitment to, the company’s purpose, vision and values is just as important because the board sets the tone and culture of a company.

“Today, organisations need to move fast and to seize opportunities so directors need to come to meetings well prepared, ready to ask probing questions and express a range of perspectives. To do this effectively, they must understand the organisation’s key risks and have the knowledge and experience to grasp the outcomes quickly and provide appropriate guidance.”

Not surprisingly, CEOs are frustrated by directors who do not read the board papers.

“It’s essential that they give some thought to the issues that are going to be raised before the meeting,” says Rob Seljak FAICD, CEO of Teachers’ Union Health (TUH). “It also helps if they contact the CEO or chairman if they‘re unclear about a particular point or would like to ask questions about a proposal.”

Lack of knowledge is another common grievance. “It’s very frustrating when directors could answer their own questions just by looking at the website,” says Elizabeth Foley GAICD, CEO and managing director of Research Australia.

“And, of course, it wastes an enormous amount of time.”

“Good decision-making is at the heart of a company’s success and sustainability and it’s a director’s job to make good decisions,” adds Saad. “That means they need to be knowledgeable enough to ask penetrating questions, to express concerns, to check key assumptions and to ensure they understand the risks associated with any proposal or new business model.”

They also need the confidence to challenge each other as well as the CEO. “Directors must have the courage to make the best decisions for the organisation,” says Andrea Slattery FAICD (Twitter @ASlattery_SPAA), managing director and CEO of SMSF Professionals’ Association of Australia (SPAA). “They must be free from any conflicts of interest so they’re able to form an independent opinion and they should be willing to voice that opinion as part of a rigorous debate. But they should also respect a range of views and then be willing to work collaboratively once a decision has been reached, even if it isn’t the one they were pushing for.”

A good board may be a championship team rather than a team of champions, but the relationship cannot be so collegial that the whole board succumbs to “groupthink”. “Boards are not for the weak,” says Slattery. “As a director, you must be able to provide strong guidance and governance.”

TOO MUCH DETAIL

The board may be charged with debating business strategy, strategic priorities, key measures and risk appetite. But Superpartners’ chief information officer (CIO) Gary Martin GAICD says that does not have to happen at every meeting. “Directors miss the opportunity to add real strategic value if they’re constantly looking for more detail or diving into a level of detail not appropriate to the discussion. CIOs also find it challenging when directors base their opinion of IT on something they’ve read in the Qantas Club magazine or who refer to technology they have implemented in other companies without regard to its current relevance.”

Long discussions without consensus are particularly exasperating. “A board strategic planning session may be less structured than regular meetings, so it’s particularly important that the chairman summarises the views and determines whether the directors support the strategy being discussed,” says Seljak.

There is a saying that there is nothing more dangerous than a politician with a good idea. Seljak says this also holds true for some directors. “It’s easy to come up with good ideas, but they have to be able to be implemented and fit with the strategic direction,” he says. “CEOs who feel obliged to chase down multiple suggestions from every meeting will have less time to implement the board’s strategy.”

If the board persistently delves too deeply into operations the CEO will also feel less confident about implementing strategy.

“The CEO expects to deal with the board on a strategic level,” says Seljak. “Boards that get too involved in operational matters present one of the bigger challenges.”

Of course, the board may be called on to play a more active role when the company is in the process of a major change such as an acquisition or significant sale. But Saad believes that even here, directors should leave the work and due diligence to the management team. And, while a trend of worsening performance against key measures will also drive a good board deeper into the detail, there should still be a well-defined line between directing and meddling.

“The board needs to ensure that management is addressing any matter in the right time and with the right sense of urgency, but the best way to add value is to draw on the directors’ experience and ask the right questions,” says Martin. “Good boards provide a strong sense of ‘challenging support’ – they’re looking to add value rather than duplicate management.”

Slattery believes that an easy flow of communications, supported by good procedures and processes, reduces the likelihood of meddling, though even this may not eliminate it.

“Sometimes, directors want to meddle because it’s easier to do simple, finite things than to take a broader, strategic view,” she says.

Seljak suggests drawing up a clear board charter and delegations of authority policy that sets out the decisions reserved for the board. “All other matters should be left to the CEO,” he says.

DIFFERENT EXPECTATIONS

Overall, expectations are slightly different in the not-for-profit (NFP) sector. “The old American saying ‘give, get or get off’ is harsh, but it rings true,” says Sue Donnelly, executive director of the Queensland Theatre Company. “Along with governance and support NFPs need money – not necessarily from the directors themselves, but through their introductions and connections. Directors need to be active advocates for the company and to talk the organisation up to potential sponsors, donors, politicians and friends. They should be willing to join in extra-curricular activities, whether that’s a fun run or an opening night. If you’re not engaged with the organisation and proud to be associated with it, it can feel like a lot of extra work. But some directors are only there because they feel it’s a good place to start their career or that it will look good on their resume.”

BALANCED RELATIONSHIPS

It’s easy for directors to overlook the fact that CEOs can feel very isolated. “A director’s role isn’t only to govern and motivate, but also to provide support,” says Foley. “It gets exhausting when every board meeting is treated as an opportunity to air a shopping list of complaints.”

Maree Slater, executive general manager of human resources at Echo Entertainment Group, says research shows that people who are critical in meetings are generally perceived to be more intelligent and thoughtful. “But it’s detrimental to treat the CEO as guilty until proven innocent. Constructive feedback is at least as important as criticism. Hard-working CEOs deserve to be recognised for what they’re doing well.”

CEOs appreciate strong and collaborative leadership from the chairman. “If the board doesn’t have a good chairman, it’s not going to be the best it can be,” says Slater. “Typically, there are two ways chairmen fall short. Some have a laissez faire attitude which means that meetings are a free-for-all where the dominant people in the room can hold sway. Others are just the opposite – too autocratic. They think they’re still CEOs and are the ones dominating the discussion and imposing their views on the rest of the board. Good chairmen encourage everyone around the table to contribute. They also ensure there are no cliques on the board – two or three directors who are particularly close and who can make everyone else feel excluded.”

The relationship between the CEO and the chairman is particularly important in terms of corporate performance but, again, it is a question of finding the right balance.

“I’ve seen a CEO and chairman so close that the board was just along for the ride,” says Slater. “I’ve also seen them so misaligned that there was total confusion. The chairman needs to keep a sense of perspective. It’s great to have a good relationship with the CEO but if the CEO is falling short, the chairman needs to be able to recognise that and provide counsel.”

 Twitter @DominiStuart

HOW TO WORK WELL WITH YOUR CEO AND EXECUTIVES

Seven executives share their tips on how directors can develop a good relationship with management:

Elizabeth Foley

  • Take responsibility for your own education – get to know the organisation, the industry and the CEO.
  • Don’t be afraid to ask probing questions, but make sure you’re not asking for basic information that’s freely available elsewhere.

Rob Seljak

  • Be engaged in meetings and strategy sessions.
  • Attend relevant industry events to understand the organisation’s operating environment. 
  • Use your skills to govern the company while resisting the temptation to run it.
  • I believe the Australian Institute of Company Directors’ Company Directors Course is a must for all new directors. 

Gary Martin

  • Debate the strategy priorities, metrics and measures actively with management, then step back and support this with appropriate review, risk consideration and financing.
  • Focus broadly on the “what” and allow management to focus on the “how and when”. 

Sue Donnelly

  • Be clear about what you’re there for, what you’re trying to achieve and how individuals can best work together to achieve that mission or goal.
  • When you’re new to an NFP board, take the time to observe and don’t jump to conclusions. It may be organised differently but that doesn’t necessarily mean it needs to change.

Nazha Saad

  • Ensure the CEO is aligned with the board in terms of values and strategic direction.
  • Ensure you’re all committed to having the sometimes difficult conversations that will help to maintain a culture of trust as well as performance.

Maree Slater

  • Be very clear about where the company stands and develop a clear vision of what needs to change.
  • Find the right people to do the job and empower them to do it.

Andrea Slattery

  • Establish a robust process of board evaluation.
  • Remember that no-one is entitled to a directorship; it’s not a role to be taken lightly.