Platt Perspective on Business and Technology

Joining, serving on and leading a board of directors – 14: vetting and interviewing, hiring and managing a prospective CEO – 1

Posted in job search and career development by Timothy Platt on October 7, 2011

This is my 14th installment in a series on boards of directors, and joining and serving on one (see my Guide to Effective Job Search and Career Development – 2 postings 179-191.) And I come to one of the most important and decisive issues that board members have to deal with, with this posting. At least in effectively organized boards and organizations, the CEO reports to their board of directors. But more than that, boards play a key deciding role in the selection and hiring of a new CEO and if things are not working out they play an equally decisive role in a failed CEO’s dismissal.

Board members do not and should not have the only voice in these types of decisions but at least for effective boards that are really working with the organization, they have a core, deciding voice. This posting focuses on the processes and actions that go into making these and similar oversight decisions. And I begin with the cautionary notes, and with my basic board taxonomy as cited in earlier postings in this series.

• A true rubber stamp board is wholly owned and completely controlled (and often brow-beat) by the CEO. So this type of board has no real say in managing or supervising or even in objectively advising their CEO, and capability to challenge, reprimand or dismiss are out of the question. If a CEO leaves such an organization and for whatever reason, this type of board is thrown into complete disarray. They have never learned how to work together to make even minor decisions and they were probably selected individually for their lack of willingness or ability to make independent decisions. Looking at CEO tenure end points – hiring and beginning, and ending by whatever means, rubber stamp boards are a disaster in action and the one thing that can reliably be assumed to come out of them here is bad decisions, and decisions passed on to others.
• A ruggedly independent board does not necessarily do much better, and for several reasons that all stem from a common cause. Members of these boards do not work well together and they do not work well with members of the executive team, CEO or non-CEO CXO (where CXO is a generic placeholder for Chief Officer for some functional area X.)

And this brings me to a particular challenge that I briefly discussed in one of my postings on joining and working on an executive team: Transitioning into Senior Management – Part 12: CEO Board Chairs, and the challenges of dual roles. This creates multiple points and sources of conflict and regardless of the details or specifics of the individual event.

Consider hiring a new CEO where this dual role is involved:

• If the new CEO is drawn from the board, this probably reflects a failure in due diligence in looking outside of the organization for new leadership and a fresh prospective. And the board members who make this decision face immediate conflicts of interest as they simultaneously seek to find workable balance in their own interpersonal and functional dynamics within the board, and still find and secure a candidate who would be a good leader for the organization and its executive team. I will add that if the board member candidate votes on their own selection this is a rubber stamp board in the process of being born.
• If a new CEO is brought in from the outside and comes in as playing both CEO and board chair roles, much of the first bullet point still applies.
• If a CEO is brought in from the outside and is then made board chair, the board has just limited its effectiveness and effectively removed much if not all of its capacity to make independent decisions.

Consider scenarios now where a board might have to criticize, reprimand or even dismiss a CEO where this dual role is involved:

• A board cannot in any meaningful way challenge let alone reprimand or dismiss their CEO if they are board chair too unless they break into genuine revolt against their erstwhile leader, pushing the organization they are board to into at least a period of chaos.

These endpoint decisions and capacity to perform through them form crucial diagnostics for board effectiveness overall.

• If a board cannot objectively, independently hire or dismiss a CEO they cannot in any meaningful way manage or advise them either.

Turning to effective boards which I identify in my taxonomy as being strategically aligned, I repeat and stress that a board of directors does not run or manage the organization. But they do manage, supervise and advise the CEO, and they manage and supervise because:

• They have final, official say in hiring or dismissal, and
• They have to be able to share information and perspective that the CEO would not want to hear – but that they do have to listen to and act upon while they are CEO there.

As an aside, anyone reading this has to assume I have seen effective boards but I have very definitely seen and worked with ineffective boards too. And in this context I repeat a basic point I have made throughout this blog and in numerous contexts. Our best and most compelling examples as to how to do something right are often found in seeing how they can be done badly, with lessons learned as to the how and why of that. This applies to learning how to manage and lead others and it definitely applies to learning how to effectively serve on and participate on a board too.

I am going to continue this discussion with my next series installment, there focusing on the positive and proactive side of board participation and working with the CEO.

I have been posting on the general topic area of jobs and careers to my Guide to Effective Job Search and Career Development directory. I have recently started a second, continuation page to that directory at Guide to Effective Job Search and Career Development – 2 and you will be able to find this and subsequent series on jobs and careers there.

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