Over the years, I’ve had several CEO clients who have had issues working with their Board of Directors. There have been a variety of reasons for this, ranging from a lack of Board understanding of their role to a lack of trust – sometimes of the Board and sometimes from the Board’s side not trusting the CEO.
Regardless of the reason, it is vital for any organisation to have a strong, productive relationship between the CEO and the Board.
The relationship between the CEO and the Board is crucial for the success of any organisation. A strong and positive relationship between the two can lead to better decision-making, improved performance, and increased shareholder value.
Conversely, a dysfunctional relationship can have disastrous consequences for the organisation, its employees, and its stakeholders.
In this article, we will explore the importance of a strong relationship between the CEO and the Board, whether the organisation is large, small, or not for profit, and what can be done to address dysfunction when it arises.
Why a Strong Relationship Is Important
The CEO and the Board have different roles in an organisation, but both are responsible for ensuring the organisation’s success. The CEO is responsible for the day-to-day management of the organisation, while the Board provides governance, oversight, and strategic guidance. A strong relationship between the two is essential because it helps to ensure that the CEO has the support and resources needed to execute the organisation’s strategy effectively.
A strong relationship also fosters open and honest communication between the CEO and the Board. This communication allows for a better understanding of the organisation’s goals and objectives and ensures that everyone is working towards the same objectives. It also helps to identify potential risks and opportunities, which can be addressed in a timely and effective manner.
What Happens When the Relationship Is Dysfunctional
When the relationship between the CEO and the Board is dysfunctional, it can lead to a variety of negative consequences. These may include poor decision-making, decreased morale among employees, increased turnover, and a decline in shareholder value. Dysfunctional relationships may also create a toxic work environment, with employees feeling caught in the middle of conflicts between the CEO and the Board.
Addressing Dysfunction in the Relationship
It’s essential to address any emerging issues between the CEO and the Board as soon as possible. The following steps can help:
Acknowledge the Problem
Both the CEO and the Board need to acknowledge that there is a problem and that it needs to be addressed. This requires a willingness to be open and honest about the issues and to work towards finding a solution.
Seek Outside Help
Sometimes, a neutral third party can help to facilitate communication and address any underlying issues. A consultant, coach, or mediator may help to identify the root causes of the dysfunction and work towards finding a solution.
Establish Clear Expectations
The CEO and the Board should establish clear expectations for each other’s roles and responsibilities. This helps to avoid misunderstandings and conflicts down the road.
Stay in your own lane
The Board should NEVER be involved in the day-to-day operational requirements of the business.
For example, in a recent Australian case, according to Commissioner Hayne’s final report on Misconduct in the Banking, Superannuation, and Financial Services Industry, Commissioner Hayne found that boards should not involve themselves in the daily management of the organisation. Instead, they should monitor and question management, seek clarification, offer insights, and share knowledge and experience to hold management accountable.
Since management is more involved in the organisation’s operations, board members depend on them to promptly provide all relevant information needed for decision-making. Additionally, the board expects management to seek advice and make use of the directors’ extensive experience when appropriate.
Improve Communication
Communication is key to any successful relationship. The CEO and the Board should make every effort to communicate regularly and openly, sharing information and seeking feedback from each other.
Focus on the Big Picture
Finally, it’s important to remember that everyone involved in the relationship is working towards the same goal – the success of the organisation. By focusing on the big picture and working together towards a common objective, the CEO and the Board can overcome their differences and achieve success.
To sum up, the CEO and the Board have a crucial role in ensuring the success of any organisation. A robust and favourable relationship between them can result in enhanced decision-making, better performance, and increased shareholder value.
On the other hand, a dysfunctional relationship can lead to severe effects on the organisation as a whole. Nonetheless, by acknowledging and addressing issues, seeking external assistance, setting clear expectations, improving communication, and prioritising the overall objectives, the CEO and the Board can collaborate to overcome any differences and achieve their common goal.
Jo Attard Watters is the Managing Principal and Founder of PeopleEdge Coaching & Consulting. Jo is a professional, Master’s degree qualified Executive and Career Management Coach, Consultant, Business Adviser and Academic who works with individuals and organisations to help them “be the best they can be”. With significant experience within both the Corporate and Not for Profit sectors, Jo is passionate about seeing her clients succeed in their areas of interest.
Contact Jo at jo@peopleedge.com.au for more information.