How a board of directors can be a major asset
By: Chris Catliff
We CEOs rely heavily on our strengths.
Boards are a mirror of our weaknesses and thus, can create a balance. Having reported to boards for 25 years and been chair of many, I have absolute faith in their value and ability to do what’s right for an organization.
Today, with many industries facing digital disruption, boards can save the day by providing a vital strategic check on both a company’s plans and its ability to execute.
Surprisingly, many fellow presidents I run into say they have no need for a board. Often, they are entrepreneurs experienced only in doing it on their own, or families running multi-generation businesses with no desire for outsiders to play around with their evolution.
I understand that they do not want a board to share power with or uncover sub-surficial issues they have happily left unresolved. But this is not right.
Entrepreneurs need to realize that to exit the business in the future and obtain a maximized price, they must be selling corporate systems, structure, and governance. Otherwise the value and credibility of the company walks out the door when they do. That is not smart.
Family-run businesses face a similar threat. Without a core governance structure in place, they often mix up two things: The dividends that family shareholders get as owners and the job prospects and salaries for family members who are working in the business. A board experienced in family enterprises can mediate and optimize both, and help implement the systems that ensure the sustainability of their business across generations.
My current chair for the past six years has shepherded BlueShore Financial’s board and executives on when to speed up, when to slow down, where to focus, and what the optimal balance of profit, growth and risk targets are. Because of this, we have had consistent low risk and profitable growth.
Using a board to approve business plans need not compromise agility and speed-to-market. In fact, boards can provide valuable counsel – considered but distant judgement – on when to “test and learn,” or whether to bet the farm and boldly launch a new initiative with a big bang.
Strategic counsel, not a firing squad
A board of directors is not there to subvert your decisions. Rather, with unique perspectives, they are a key sounding board to assess a company’s mission-critical projects from all angles and ensure no blind spots.
The fundamental role of the board is to review the execution of the strategy and oversee the CEO’s performance accordingly. Any potential turmoil can be reduced by a CEO who values and takes into account the insights of a strong board by listening intently.
The board can also offer an objective viewpoint on the success of projects. I know from experience it can be difficult to critically assess a strategy you are emotionally invested in. A board can evaluate progress without a sunk-cost bias clouding their judgment, and it can make objective recommendations on when to continue and when to cut losses.
This is why 70 per cent of public companies have separated the role of CEO and board chair. These roles should work closely together but never be the same person.
In essence, the chair should be the voice of the board but not the board itself. The chair can then offer consistent impartial guidance, mentorship, and feedback to the CEO.
Regular, transparent communication where thoughts can be shared without undue feelings of vulnerability is critical for executive leadership and corporate health. Otherwise, it can get very lonely at the top.
Our board has been an invaluable strategic resource. When our executives and I were exploring a significant strategic shift to target an affluent market, outside consultants advised us not to move forward. They anticipated that our long history as a community credit union for blue-collar workers made it impossible to successfully make the leap. This certainly made us question our approach.
But when we presented our strategy to the board, they believed our vision was feasible, as long as we tested our new client demographic focus and had a careful fall-back plan. With their considered support, we implemented our plan and have seen transformative success. Extending our market reach, our client segmentation shifted organically, growing our assets under administration from $720-million to over $4.6-billion.
Pick your board wisely
While boards used to be chosen based on the network of existing board members, or worse, whoever volunteered, today almost all boards first determine what key skills and competencies they are missing, and then go far afield to find experts in those areas. Now, web-based registries of directors have popped up to smooth this search.
At BlueShore, we recognized the unprecedented digital disruption coming to financial services . In order to ensure we were on top of that threat, we recruited directors highly qualified in strategic thinking to digitize our mature business. In the process, we have managed to implement the right innovations.
In today’s fast-paced business world, the requirements of the board change constantly. But there are a number of factors that should always be considered:
- The board should have significant leadership capabilities and diverse expertise, and be well-balanced in its strengths and perspectives.
- Directors should have an evident commitment to the business and be willing to invest what can amount to considerable time and energy. They must also be top-down thinkers, quick to grasp key complexities and not reluctant to offer sage advice and question proposed strategies.
- Ideally, candidates should have an Institute of Corporate Directors Designation (ICD.D), demonstrating their lifelong dedication to excellence in the boardroom.
Ultimately, I place a great deal of trust in my board of directors and their guidance. After all, a board is the highest form of governance, ensuring an organization’s fundamental accountability and stability. In turn, this garners vital legitimacy with one’s stakeholders.
The CEO cannot be all things to all people. The focus of today’s CEO must be to provide forward-thinking strategy, to embody the brand and corporate values, and to deeply understand the external environment. A strong strategic board can probe and improve that strategy, adjusting as needed for long-term success.