Last week, I spoke with the CEO of a new fintech start-up. Still scarred by board headaches in his previous ventures, he wants to start on the right foot this time around.
Countless management teams share this CEO’s frustrations. They complain about directors’ tendency to put their noses where they don’t belong. Lamenting the absence of strategy on the board agenda, they may wonder whether directors are even aware that something is lacking.
When I made my living on the management side of the table, I shared the very same view. (A colleague and I would smugly place bets on how long it would take for a particular director to request an obscure regression analysis.) It wasn’t until I chaired a board that I realized how difficult it is to engage directors constructively, particularly when it comes to discussions on strategy.
As is often the case, the lesson was humbling. It took me more than a year before I found a productive balance between strategy and performance oversight for my board. Directors are within their rights and responsibilities to seek information about the organization’s health. They should use this understanding, however, to contextualize the foresight and strategic insight they bring to meetings. As it turns out, this is easier said than done.
Fortunately, a collaborative chair and CEO can do a lot to set directors up for success. I have found 4 practices that help engage a board constructively on strategy.
Start each board meeting with a CEO update
I like each meeting to begin with the CEO report. The pre-read should outline what has changed since the last meeting. The CEO’s oral comments should explain implications and related action underway. It’s tempting here for a CEO to show how everything is buttoned down and sailing along smoothly. Unfortunately, giving that impression bypasses a prime opportunity to seek the board’s input.
Tee up a single topic taken from the strategic issues inventory
Before launching into a roundtable of updates and probing questions, the CEO should give directors a strategic bone to chew. Effective boards keep a running list of strategic issues facing the organization with the goal of tackling at least one in each board meeting. A short report presents the fact base and frames the discussion with a question or two for the board to consider. Sometimes this report is most effectively delivered in the field, offering a first-hand account at a manufacturing facility, store or customer location.
It’s important that the directors feel ownership of the issues list and resulting dialogue. This accountability saves management from feeling like they have to tap dance for the entire meeting. After wrestling with particularly challenging issues, directors often feel greater empathy for management’s daily struggles. And when facilitated well, the discussion can create a feeling of the board and management being on the same team facing the world.
Help directors prepare at the right level
Management can make its life easier by providing the board with compelling pre-reading materials that tell a story, rather than merely stating facts. Sharing this information in advance, rather than in the meeting, frees the board to engage on implications and “What’s next?” kinds of questions.
Management should tee up each board topic – strategic or operational – with a one-page cover memo that reminds the board of the issue’s context, reviews available options, and presents a recommendation or question for the board. And rather than including information because it has always been there, management should consider what decision making a piece of data or insight enables. It’s human nature for directors to react to what is in front of them. CEOs can help the board avoid rabbit holes by preparing materials at a productive level of analysis.
Preview strategic choices before seeking approval
As a director, I find it difficult to approve a strategy that I’ve just met. And yet I feel forced to when a CEO reveals a baked plan in the final board meeting of the fiscal year. Backed into a corner, the board must choose between either holding its nose and approving the plan, or sending management back to the drawing board. Neither option does anything to improve the board-CEO relationship.
Fortunately, we can avoid this unnecessary trade-off by weaving the strategic planning process into the board’s annual calendar. In the first quarter, a post-mortem assessment can reflect on the organization’s performance in the previous year. Three months later, directors should wade deep into the trends and market forces affecting the organization. In the third quarter, the CEO can share a preliminary view of the organization’s evolving strategy. In the final board meeting of the year, the board should feel prepared to consider a strategic plan that reflects the year’s evolving dialogue.
Countless CEOs feel frustrated by their well-intentioned boards. There is a good chance, however, that directors would better hit their mark if given the right opportunities to engage with strategy. Whatever the tone of your board-CEO relationship, I think we can all benefit from tapping the strategic potential of boards.
Question: How effectively do your boards navigate strategy? What practices keep conversations out of the weeds?
Please share your response via Twitter, LinkedIn or e-mail.
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