A couple of high-profile CEO resignations in Vancouver this week got me wondering: do stakeholders expect the board of directors to be transparent about the reasons underlying a CEO's untimely departure?  Do they believe the published account put forth by the PR folks?  I think I can safely answer 'not usually' to the second question.  Sometimes the situation is what it seems - health reasons, family reasons, turns out not to be the job they want.  But often, there is something else going on.  And a couple of conversations (thanks to the universal law of 'six-degrees of separation') can quickly get you closer to the truth.   

The number one reason people leave jobs and companies is to escape their boss.  CEOs are just like the rest of us.  An unexpected CEO departure frequently has its roots in the relationship between the CEO and the board, often the board chair.  There is a mis-alignment of vision.  There is no chemistry.  The CEO isn't listening or open to coaching.  The board chair is meddling.  The board is being pressured by key stakeholders around results.  The board has questions about the CEO's style, decisions, leadership effectiveness.  The CEO railroads the board.  The board tramples the CEO.  The board is suspicious information is being withheld.  The CEO is suspicious the board is talking to people behind his back.  The board feels the CEO they have isn't the one they thought they hired.  The CEO discovers the job she was pitched doesn't match the one she is doing.  With one CEO and 10 board members, most of whom have pretty strong egos, the potential for dysfunctional interpersonal dynamics to emerge is not insignificant.  And once it starts, it does not take much to spiral someone right out the door.  That person is, almost always, the CEO.  

This takes me back to my first question: does it matter to stakeholders when boards don't tell the whole truth about why the CEO is leaving?  

I sit on the board of a not-for-profit organization engaged in transforming leadership in the not-for-profit sector and we design and deliver a lot of governance education to executive directors and their boards.  We strive to lead by example and model what we teach.  We just completed our annual board evaluation process and many things are going extremely well in how we operate and govern.  And then there is this comment: “We need to be careful to keep taking the longer view - we easily slip into the weeds in discussion.”  Sigh.  We are just like everybody else.

Pretty much every chief executive I have ever worked with has logged the same ‘observation’ of the board: they can get awfully mired in the detail.  When I try to reassure them their experience is not unique, I tend to get a look of profound skepticism.  Because when you are the chief executive and your board is triple-checking the math or debating the word in a sentence, you can get a little paranoid.  A board that dives down and gets stuck in the weeds is, unfortunately, the rule rather than the exception.  This dynamic occurs even though directors would rather shoot themselves than be described as tactical or meddling.

One of the most difficult and often unexpected tasks a chief executive undertakes is the management of his or her board.  A first-time CEO is often blown over by the nuanced complexity of this task.  And for some reason, prior experience as a board member seems to be little pre-requisite for effectively managing your own board. 

Rather than write one more article reminding us all of the role of the board and the difference between governance and management, I thought it might be worth exploring - from the point of view of a psychologist - why the ‘detail-absorbed board’ phenomena is so prevalent and what you can do to alleviate it.  

Why boards get in the weeds

Some of the reasons boards struggle with maintaining a strategic focus have more to do with being human than they do with being a board member.

The human brain uses data and detail to create big pictures and spot trends.  Our brains formulate narratives by accumulating details.  Because the board member’s brain actively engages with the organization sporadically, it takes time, and a lot of data, to build up a coherent picture and elevate facts to insight.  Management tries to help by providing (often hundreds of pages of) information which it expects board members to digest in 7 days or less.  It reminds me of my first week in graduate school when each professor handed out 350 pages of reading for discussion in next week’s class.  When board members ask a lot of detail-oriented questions, it is probably because their brains are still trying to piece together information and make sense of it.  And some brains require (and adore) more data than others.  Given the nature of the human brain, it is possible that ‘dropping into’ an organization a few times a year may not be an ideal rhythm when the goal of the board is to provide strategic oversight and input.

The role of the board member is complex and multi-faceted.  In the world of not-for-profit board governance and leadership excellence, we talk about three roles boards play: fiduciary, strategic and generative (Chait & Ryan & Taylor, 2005).  Fiduciary responsibility is a natural draw for the detail-oriented.  Strategic responsibility can also elicit its fair share of detailed questioning as board members seek to understand an organization’s priorities, rationale and method of executing on those priorities.  Generative responsibility is the playground for future-oriented, strategic, conceptual thought.  It needs more than a 10-minute time slot.  If you look at your board meeting agenda and the topics up for discussion, it will probably become painfully clear why board members show up with their pencils sharpened.

Under stress, strategists become obsessive-compulsive detail-oriented problem-solvers.  Personality is a funny thing.  There are our normal tendencies and then there are our stress behaviours.  For some strange reason, stress behaviour is often the exact opposite of normal behaviour.  Since the issues boards face are rarely run-of-the-mill, are frequently high-stakes, and the voting members do not have any control over their execution, stress responses kick in.  Suddenly you find yourself staring down a group of highly strategic people who all want to dive in and solve the problem - or even argue about the right method to solve the problem - instead of formulating brilliant questions that cast a light on the shadowy corners. 

How to elevate the contribution of the board

There is a tendency for us to make assumptions and draw conclusions about the character and competency of board members when it might be more helpful to take a step back and think about them as human machines with predictable patterns of behaviour.  If you can anticipate, you can try to over-ride.  Here are three suggestions for facilitating the strategic contribution of the board:

Manage the human brain.  The way information is prioritized and communicated can lighten the cognitive load and help the board maintain a strategic focus.  If you communicate strategically, you increase the likelihood of getting strategic input in return.  

• Provide a cognitive ‘map’ by grounding content in a framework (ie, your strategy, policies, etc.) and making links clear and obvious  
  
• Remind people where you are in the ‘journey’.  Serial tv programs usually start with a flashback to get the audience back in the action for a reason.
  
• Organize reading material and verbal presentation to start at the top (get to the point) and then work down through levels of detail to support the conclusion or recommendation. Don’t start with a data-dump, and don’t stop at a data-dump. 
  
• Anticipate questions or concerns and address them proactively.  

Make space for generative contribution.  Recognize the board is being asked to play multiple roles.  If you want a strategic contribution you have to create the time and headspace for that.  The middle of the audit committee meeting may not be the best place to insert a conceptual discussion about the evolution of the risk management model.  

• Evaluate the board agenda and the proportion of time dedicated to fiduciary, strategic and generative contribution.  Adjust as desired.
• Label tasks and be explicit around desired input.  Rather than make assumptions about what you expect from those sitting around the table, clarify the type of contribution the discussion is meant to elicit.  
• Establish shared expectations between the chief executive and each board and committee chair.  It is healthy to review the status quo and align around how the committees and board want and need to spend their time.  Often, routines emerge that no one is satisfied with but that continue until someone steps in to shift or re-focus.

Anticipate stress reactions.  When people walk into a room to deal with an issue, they have probably had just a few days or weeks to get their heads into it and, suddenly, you are asking them to make a high-stakes decision.  As a board member, what I hate most is being surprised with something and then told a decision is urgent.  What it says to me is that the chief executive is a) not on top of the business, b) lacks respect for me, my role and my decision-making process and/or, c) wants to rush something through before I’ve had a chance to think about it.  If you are going to ask the board to confront an important decision that will likely cause anxiety, plan for that.

• Prepare well-considered materials for review (nix the power point and write a detailed memo instead where your clarity and depth of thinking can come through)
• Proactively engage members in discussion in advance to allow them to formulate questions and articulate their concerns.  Talking stimulates active thinking in a way that just reading about something does not.  The default, ‘if they have questions they should call me,’ is an avoidance tactic, not an engagement tactic.
• Make sufficient time available during the board meeting for discussion, and don’t leave the important conversations for the end.  Perhaps do something crazy and organize the meeting agenda in order of priority.  

A board can make a significant contribution beyond fiduciary due diligence.  And this is, in fact, why most people sign up to serve.  Not just for the pleasure of combing through financial statements and risk management policies, but also to ignite the strategic capacity of an organization.  Do they get too stuck in the detail?  Probably.  And, maybe, it isn’t just their fault.

Sources
Governance as Leadership: Reframing the Work of Nonprofit Boards.  Richard Chait, William Ryan & Barbara E. Taylor.  John Wiley & Sons, Inc, 2005.

Evidence shareholders are being short-changed by traditional board composition is mounting with every research report linking the participation of women in senior management and on boards to positive business outcomes.  In Canada, diversity is being given an extra push by the Ontario Securities Commission’s ‘comply or explain’ policy.  Companies will need to publicly release information about how they are promoting and actively managing gender diversity.  Board diversity is more than just about rectifying bad optics.  It is about getting the best talent around the table.  To do that will require more than good, heartfelt intent, which I believe we have a lot of in corporate Canada.  Underlying the existing board composition patterns are a set of beliefs and attitudes that drive board recruitment and selection decisions.  To change the outcome requires some fundamental shifts in how we think about and recruit board members. 

Board Recruitment Attitudes and Practices Help Maintain the Status Quo

Historically, board members have been drawn from the pool of retired CEOs, COOs and CFOs with experience in a similar or related industry and often with a connection to one or more influential members of the board.  Board recruitment was, and in many cases still is, informal and personal.  The introduction of recruiters to the process has broadened the search, but the ideal candidate profile has remained relatively consistent.  The traditional recruitment model poses a number of challenges when the goal is to diversify.

1. To identify diverse candidates, boards will need to reach beyond their existing networks.  Last month my not-for-profit board launched our 2015 recruitment strategy.  We asked current board members to identify potential candidates from amongst our networks.  This is a strategy most organizations employ.  When existing directors don’t have a strong network of diverse candidates, the recruitment process stalls.  The ‘lack of awareness of potential diverse candidates’ and ‘belief there are not enough diverse candidates’ have been identified as two of the top 3 obstacles to increasing board diversity (Spencer Stuart, 2013).  It turns out directors know potential candidates just like them, but not so many who are not like them.  To be successful in achieving diversity, boards will need to re-think their recruitment strategy.
2. Expanding and diversifying board candidate criteria would significantly increase the pool of director candidates.  As long as director talent pools are defined in a way that excludes a majority of women and minorities, diversity goals will be difficult to achieve. The number of women and other under-represented groups who have been CEOs or COOs in any industry is minuscule.  A recent study of 3000 global companies found a mere 3.9% of current CEOs and 8.5% of business unit heads are women (Credit Suisse, 2014).  As long as CEO or operating experience remains a key criterion for board selection, the pool of potential female candidates will be breathtakingly small and continue to reinforce the belief there are no qualified women.   
3. Board directors need to value broader, more diverse expertise.  One solution to the board diversity dilemma is to broaden the kind of background and expertise boards typically seek.  For example, expanding the candidate talent pool to include those who have served in any senior executive role would increase the number of female candidates by 400%.  The global Credit Suisse study reports 17.5% of top finance and strategy roles and 19% of top legal/HR/marketing/administrative jobs are held by women.  But to make this recruitment strategy work will require a fundamental shift in attitudes at the board table around the value of different kinds of expertise.  While 93% of board members rate financial expertise and 68% rate operational experience as ‘very important’ only 22% rate HR or legal expertise in the same way (PwC, 2014).  For diversity initiatives to take hold, sitting directors will need to re-think the value they place on the types of background and expertise they need around the board table.  

 
Diversity as a Strategy to Build Talent on the Board

Increasing diversity is more than just good PR.  It helps boards and organizations better address key business and governance issues.  There is tremendous breadth and increasing complexity in the issues facing organizations today.  For example, according to Deloitte, the top board concerns for 2014 included: enterprise risk management, executive compensation, corporate strategy, shareholder activism and sustainability.  The Conference Board (2014) identified the top five challenges for CEOs as: human capital, customer relationships, innovation, operational excellence and corporate brand and reputation.  While former CEOs will continue to form the nucleus of corporate governance, boards made up of members who bring deep and diverse expertise are probably better equipped to help organizations anticipate, tackle and solve their most pressing problems.  Diverse boards bring a more comprehensive collective view, are more attuned to risks and opportunities, and are in a better position to provide guidance and oversight to the organization.  When talented people across multiple domains with diverse experience and perspective come together in the pursuit a common objective, good things can happen. 

Sources
Spencer Stuart Board Index.  Spencer Stuart, 2013.
Governance Trends Shaping the Board of the Future: Board Performance and Diversity.  Annual Corporate Directors Survey, PwC, 2014.
The CS Gender 3000: Women in Senior Management.  Credit Suisse, 2014.
Deloitte Center for Corporate Governance, 2014.  www.corpgov.deloitte.com/site/us/board-governance/.
The Conference Board CEO Challenge® 2014: People and Performance.  Conference Board of Canada, 2014.