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The Board-CEO Relationship: Balancing roles

The other day, I attended a board meeting, where the deputy chair said, our role is to support the CEO, and over half the board members smiled and enthusiastically nodded.

Yes, amongst other things, I thought.  

I was heartened to hear later that the chair, had had a conversation with the deputy outside of the meeting to correct him.  

The board also has to

  • Keep the CEO and his management accountable,
  • Ensure that the company has a clear and well articulated Just Cause, Strategy and Annual plan, 
  • track whether the organisation is heading toward meeting those goals; and 
  • Ensure that the the plan adapts if new information comes to hand that necessitates a change in direction.

The Board’s relationship with the CEO is a complex one with multiple roles.  Some of these roles seem contradictory.  On the one hand, the Board needs to maintain the CEO’s morale while on the other hand, it has to be firm if it believes the CEO needs guidance.  There is a difference between a cheerleader and being supportive.  

Boards can’t become just another component of CEOs’ fanbases, nor can they be hunter-critics, forever having CEOs watch their backs. 

The board room environment should always remain respectful but challenging.  Raising a question should not be treated as a threat.  Nor should a question be used as a tool to undermine management.  This is where honesty and integrity are important.

Without these, trust can’t be formed and discussions become a dysfunctional Hunger Game.  

The basis of a good relationship between Boards and CEOs must also be founded on role clarity.  Boards must know what their roles, their duties and responsibilities should be.  CEOs must understand their roles too.  And it isn’t to “run the board” and manipulate directors to expedite a desired decision.  

Allow a business decision to stand or fall on its merits.  If a decision needs manipulation to achieve it, was the case strong enough to bring it to the board in the first place?

If the Board doesn’t know its role, duties and responsibilities then training is required.  This happens more often then you think, particularly amongst School Boards, volunteer organisations or organisations with elected public officials.  

For schools, the NZ School Trustees Association provides plenty of resources and training opportunities for board members.  The NZ Institute of Directors provides an equivalent service for all sectors not just education.  Having used both resources, its remarkable how much the two sets of material resonate with one another.  Probably over 90%.

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Startups should not be charities

Often a start-up takes off with a whoosh, with great enthusiasm, an idea is shopped and everyone wishes the new team well.

The goodwill often results in generous gifts of time, expertise and materiel. Advisory boards, and independent directors provide their services for free or next to nothing.

On the one hand, the generosity and support is well-meant and heartwarming.

But on the other hand, it can breed a culture of entitlement and a lack of professionalism.

Directors show up because they are doing the organisation a favour, and people promise to do things but they don’t or their late because, it was a favour.

Start-ups usually don’t succeed overnight, and freebies offered initially in the hope of gaining real paying customers soon becomes tiresome when the initial glow fades and the wait for a hoped-for paying customer stretches from days, into weeks, and into months.

Start-ups need to get out of the charity-mode as quickly as possible and start paying wages and fees like a real business.

That means do what it takes to get the funding so that the start-up can conduct its activities as a business. Build your team of advisors and employees. Pay them. Get that first customer. Work out how to win more customers and scale the business. Reward for success.

This is vital to building a “we mean business” culture in your organisation, at all levels, within employees and also at the board table.

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Discipline and systems allow businesses to scale | Kan & Company

In New Zealand, because of our flexibility and laid back attitudes, it’s easy to conclude that a lack of formality and bureaucratic procedure is part of the reason why New Zealand company’s succeed.

However, that conclusion is false.

Too many of New Zealand’s businesses are stuck in perpetual “start-up” mode, frozen at a small scale, still operating like small start ups with few standard systems and procedures even after decades of operation.

Consequently, new staff are always re-inventing the wheel, developing processes from scratch for routine operational processes.

Without documentation systems, new project teams have to develop their own processes for deployment and these processes can’t be easily handed on to the next set of new staff, leaving new staff to repeat the same grind.

Without systems, mistakes and gotchas can’t be flagged for subsequent staff to avoid.

Without timesheets how can the organisation control its costs?  How can it apportion its overheads to particular projects and activities?  How can the business know whether a particular activity makes money?

Too few business owners and managers are disciplined enough to put systems in place to be able to answer these questions with any rigor.

These questions seem so obvious yet why isn’t answering them prioritized?  Often the lack of a systematic, disciplined approach results in poorly tested, and unreliable products and services.

Deployment under these circumstances results in much re-work and this gets in the way of product and service development, and places greater pressure on meeting contractual deadlines.  In other words, fighting fires.

Not surprisingly, profitability is impaired but often managers comfort themselves with high gross margins.  Such managers fool themselves into thinking they are still making money because all that re-work is still a hidden cost, buried among the overheads.

All that frenetic, frantic activity yet the company isn’t growing as it should.

Success is not just based on talent, expertise, knowledge, acumen or luck but also discipline.  Systems provide discipline.  Not just discipline for operational activity as we have just touched on, but also to strategy setting, business planning, goal and objective setting too.

In fact, if a lack of systems is creating bottlenecks that are constricting your company’s growth then implementing systems has become a strategic imperative.

Systems allow a winning formula to be replicated across a great many people and this is how businesses scale.

Implementing systems that encourage a systematic and disciplined approach to all your business activities (including sales and marketing) will allow your company to focus on the right things, control costs and scale to new heights.

Putting systems in place and gaining staff engagement to sustainably use them, takes leadership and hard work.  In my experience, it’s an investment that is well worth the effort.

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It’s not rocket science | Kan & Company

2 minutes

I dropped in on a CEO the other day. We talked about the lessons we had learnt about turning around non-performing companies.

We chatted about how it was so much about reinforcing values. About upholding standards of cleanliness, everyone pitching in, opening up communications between people, creating safe environments so people have the confidence to speak up, building trust, bringing discipline to operations, customer service, sales and marketing, engineering and technology development.

I noticed he had a number of Summer interns working for him. I asked him if they were paid. Before he could answer, I explained why I asked.

It reminded me of a conversation around a board table many years ago. The discussion was about whether interns should be paid as we had noticed that there was a growing trend not to pay them. Fortunately they decided that they should be paid.

All of our interns are paid, he said.  You can shaft someone, and there will be a short term benefit , but in the end, it comes back and bites you. You just have to treat others the way you want to be treated yourself.  It’s not rocket science.

Indeed, I replied. It isn’t rocket science, but what catches people is a lack of courage. Often when the decision has to be made, money might be tight, and the temptation to get something for free is at its height, to pad out the meager resources available and thereby buy more time.

You’re right, it’s not rocket science, but you do need courage to do the right thing.

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Artificial Intelligence and the future of humankind

3 minutes

“Danger, Will Robinson!”

Yesterday I attended an informative and fascinating talk by Kaila Colbin, a Curator at SingalarityU about how technology is impacting and likely to impact society.  The talk was facilitated by law firm, Anthony Harper.

She talked about how advances in technology were growing exponentially and that, the way humans are wired, makes us prone to underestimating the pace of change.

Advances in Artificial Intelligence (AI) meant that sentience wasn’t that far away.

Go is a board game that is much more complex than chess.  Only a year ago, an AI program beat the world’s best human Go champion 4-1.  A year later its successor has beaten the old program.

AI-enabled image recognition programs are better than human pathologists at recognizing cancer cells.

Law firms were already putting AI bots into play, carrying out the day to day research previously provided by Bots.

Already robots were turning out to be more economical than human labour resulting in mass lay-offs.

It’s clear, AI enabled technology can conceivably replace humans.  Disturbing.

The societal questions these raise are fundamental.  What will humans do instead?  Can we trust AI-enabled tech to do the right thing?

At the talk, Geoff Cranko of Strategy Creative asked about what advances had their been in adapting law to meet these new technological challenges.

I found his question thought provoking, particularly in respect of Artificial Intelligence.

Law is just an expression of ethics and so it is developments in our ethical thinking in respect of AI that needs to progress. Then all we need do is bake this ethical system into the AI.

Azimov’s Three Laws of Robotics is one step in this journey of ethical development. On the other hand, as AI fast approaches sentience, perhaps we need not re-invent anything: the 10 Commandments might prove to be timeless, after all.

 

 

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