I’d just finished describing why standing committees were the ideal vehicle for a CEO to work with in mapping out and fine-tuning processes for board engagement in key governing areas when one of the association CEOs attending my program on “building high-impact board-CEO governing teams” raised a question that, to judge from his worried expression, bothered him mightily. I’ll paraphrase what he asked: “OK, Doug, let’s say you sit down with the board’s performance monitoring committee to discuss, for example, how to strengthen both the content and format of financial reporting, and the discussion gets really detailed, like whether it would be good to use bar charts in reporting actual vs. budgeted expenditures, or whether you should use a different set of cost categories for reporting expenditures – say, reporting by major operational areas rather than line-items like travel. Aren’t you opening Pandora’s Box, inviting the board members on the committee to get into your business and, therefore, opening you and your staff to micromanagement? I was taught that any really strong, self-respecting CEO keeps the board’s focus on the big picture, the forest – setting long-range goals, for example – and away from the trees. It sounds like you’re saying, ‘Welcome to the trees; come on in and get involved in my and my staff’s work.’ That seems pretty weak and dangerous to me, so you’ve got some more explaining to do.”
My immediate, gut response was a trifle glib, in effect: I feel your pain, but welcome to the real world. More seriously, I pointed out, in the first place, that the supposed solid line – the fire wall, if you will – separating the board’s forest from the CEO’s and staff’s trees is a highly abstract theoretical construct that always breaks down in practice, and that trying to defend the line as a hard and fast barrier can jeopardize your CEO position and even your career. It doesn’t take much thinking to understand how fallacious this traditional little golden rule for distinguishing the board’s work from the CEO’s and staff’s work is. For example, everyone knows that the annual budget is a preeminent governing product: putting in place both annual operating goals and plans and the annual expenditure plan. It’s without question one of the big kahunas of governance, deserving serious board attention. What attention exactly? When? How? Do we open the annual budget process with a retreat? How many budget work sessions does the planning committee host? And so on. The board-savvy CEO knows that board members should have a say in how they participate in such processes as annual budget preparation for three obvious reasons: first, they are spending significant time and energy; second, they have preferences, knowledge and experience that need to be taken into account in mapping out their role; and third, if they don’t play a role in determining precisely how they will be involved in governing areas like budget preparation, they can’t be expected to feel any accountability for, or ownership of, the resulting product, be it an annual budget or a long-range plan.
Far from being seen as weak, in my experience, CEOs who invite committee members to participate in process design are viewed as strong, secure leaders who aren’t afraid to discuss the how, as well as the what, of governing work with committee members. I might have mentioned earlier in this book that I spend a lot of time interviewing board members one-on-one in preparing for retreats and other consulting engagements. Thinking about this chapter over the past weekend, I pulled out of my files interview notes from recent engagements. In one instance, the CEO had worked closely with her board’s planning committee to update the board’s role in the annual operational planning process, including reaching agreement on the upcoming board planning retreat that I’d been retained to facilitate.
Here are some of the responses to the question “What is it like working with Denise (the CEO)?” “She’s great to work with, mainly because she really takes our input seriously.” “She’s open to our ideas about our role and doesn’t have a defensive bone in her body.” “I was stunned – and pleased – when she brainstormed with our committee on how to strengthen our board’s involvement in the budget process. That’d never have happened with her predecessor.” “So far as I can tell, she really does want to understand our expectations about playing an important role in shaping the budget, not just thumbing through what staff have produced.” I could go on, but I’m sure you get the point. This was a tremendously board-savvy CEO who’d earned the board’s appreciation and respect through her collaboration in mapping out the board’s involvement in one of the most critical governing processes. She’d also expanded her psychic line of credit with the board by signaling that she trusted board members not to take advantage of her invitation to get involved in in process design by lapsing into micromanagement.
Excerpted from Doug’s newest book, The Board-Savvy CEO (Governance Edge Publishing, 2014): www.theboardsavvyceo.com