Navigating the intricate CEO board relationship is a crucial component to the success of any organisation. The collaboration between the two should ideally be akin to a partnership. But while they may be on the same team, they don’t have the same roles. It’s the board’s job to govern, but it’s the CEO’s role to manage – and it’s important not to confuse the two.
For a new CEO, there are four critical areas to consider that can make or break the CEO board relationship. In this article, we explore these considerations, as well as provide more context about the role of the board and of the CEO.
The board’s role in overseeing CEO performance
One of the most important roles of the board is selecting, monitoring and mentoring the CEO, which includes delivering CEO performance reviews, and undertaking CEO succession planning. The ability of the organisation to survive and thrive in most cases depends on how effectively the board undertakes these tasks.
To support this, BoardOutlook offers a CEO 360 framework that allows the board to provide objective feedback and ensure that the CEO isn’t second guessing key priorities.
It’s still far too common for CEO performance feedback to be delivered informally over a coffee. A comprehensive framework with qualitative and quantitative data provides a rich foundation for the discussion, allowing the board to demonstrate to the CEO that they understand the depth and complexity of the role.
How to build a strong CEO board relationship
We’ve identified four key areas that a newly-appointed CEO should consider in order to build a strong CEO board relationship as quickly as possible.
1. Get mutual clarity on expectations in your first six months
Understanding and aligning expectations is the cornerstone of a successful CEO board relationship. It’s recommended to write these down and present them back in order to decipher both the spoken and unspoken expectations and get to the heart of what is most important. Expectations should cover, amongst other areas:
- Delivering results
- Strategy
- Leading the culture
- Leadership style
- Stakeholder relationships
- Partnering with the board
- Driving change and transformation
It can be helpful to workshop this with the Chair to ensure clarity, before presenting back to the board with points on how success will be measured, as this work can form the basis of the annual CEO performance review. Historical context should also be considered in case there are any habits from previous CEO board relationships that need to be reset or optimised going forward.
2. Focus on the Chair relationship
Investing time in the relationship with the Chair is a key step to building a strong CEO board relationship overall. Trust and transparent communication are non-negotiable. The Chair should serve as a sounding board, confidant and mentor, providing an honest and objective assessment of the CEO’s performance.
In some cases, it may be helpful for the CEO and Chair to complete a psychometric assessment and share the results with each other. An assessment will help to understand the other’s interpersonal style, shedding light on where there is the potential for misunderstandings.
3. Understand the role of the board
For new CEOs, understanding the role of the board is important. Think of the CEO board relationship like an F1 team. The board are the race engineers on the radio to the driver (the CEO). Ultimately, the driver makes decisions in the moment, but the engineers provide oversight throughout the race. Reviewing the board charter and constitution can be a good first step for new CEOs to deepen their understanding of how the board operates.
It’s also important to recognise that some friction is normal in a CEO board relationship. The board isn’t there to make the life of a CEO easy – they’re there to represent shareholders. Their views may not always be aligned with the day-to-day operations of the business.
4. Build a partnership with the board on strategy
At BoardOutlook, we run hundreds of board performance processes every year, primarily for listed entities across the globe. A common theme in the results of these processes is that boards typically want more involvement in strategy. When a CEO hears this, they may assume this means the board wants to own the strategy – but this isn’t always the case. They often only want to be treated as a partner. Some other ways to frame the board’s interest in strategy include:
- The board wants to collaborate on smaller chunks of strategy more frequently: This practice is already common in the UK, and becoming more popular in other countries, such as Australia.
- The board wants a role in shaping the strategic agenda, rather than just being presented to: Running a comprehensive feedback exercise prior to the strategy meetings can help shape the agenda and ensure the focus is on the right initiatives, opportunities and challenges.
- The board doesn’t have sufficient clarity on the most important KPIs: Sometimes the desire for more involvement can be as simple as better understanding and visibility. Mutually agreeing on critical KPIs can be transformational for the CEO board relationship.
Build the CEO board relationship with performance front of mind
Building a strong CEO board relationship requires continuous effort, communication and mutual understanding. By addressing expectations, fostering a strong relationship with the Chair, collaborating on strategy and, most importantly, understanding each other’s roles and responsibilities, new CEOs can pave the way for organisational success.