How the board of directors should support the CEO in 2023
The economic headwinds of spiralling energy costs, high inflation and increased interest rates will probably lead to a recession in many markets. As the global economy recovers from the pandemic, there are lingering issues with the global supply chain, a potential resurgence of Covid in the northern winter, along with the risk that the ongoing conflict in Ukraine could escalate. All this means volatility is set to be the ‘new normal’ as we enter 2023.
This places tremendous pressure on organisations, particularly the CEO, to lead and manage the business, and deliver all-important growth.
However, the CEO should not be left alone to devise all the answers. To secure the long-term success of their organisation the board needs to effectively support the CEO during these challenging times.
The question is how?
Clarity on board of director roles
Clarity on the where the role of the board stops and that of the CEO begins is essential for an effective board. Ambiguity and confusion over the roles of the CEO and board directors, particularly in an unpredictable world, will have a negative impact on decision making and board effectiveness. It’s the role of the chair to provide clarity in this area and facilitate the discussion where the boundaries between board and CEO are unclear.
An enabling board culture
Effective boards have a culture where bad news comes to the board more quickly than good, where there is constructive challenge and where the boardroom is a safe place for a CEO to say that “they don’t know”. It’s important for boards to consider whether their culture is an asset, enabling leadership and collective wisdom to help the CEO navigate through a complex set of circumstances. If the culture of the board is not enabling then the board may struggle to support the CEO in these difficult times.
Board Directors and CEO only time
The role of the CEO is often a lonely one, it’s imperative to create the time and space for dialogue between the board and the CEO, with no other management present. It’s a tremendous opportunity for the CEO to share what’s on their mind and access the collective wisdom of the board. It is also an opportunity for the directors to consider how they can best support the CEO. This CEO and board only time allows the CEO to cover the successes since the last board meeting, the issues that are developing, what’s keeping them awake at night and canvass areas where they need advice, challenge or validation. This needs to be a regular board meeting agenda item. However, for the best advice, the board must comprise of a diverse group of directors.
It’s widely recognised that diverse boards are more effective than those that aren’t. Therefore, the board needs to consider whether its current composition is the right one to support the CEO and take the organisation forward. To effectively do so they should look at their board through the prism of the five drivers of diversity™ – demographics, skills, experience, thinking styles and circles of influence – and contemplate how well the current line up matches up. True board diversity is broader than any one of the five drivers™ and delivers wider perspectives, improved decision making and outcomes.
Have relationships amongst the board of directors that are fit for purpose
Trust, respect and honesty are three fundamental currencies that enable effective relationships between the leader of the management team, the CEO, and the board of directors.
These currencies are vital when it comes to the most important relationship in the boardroom, between the chairman and the CEO, because of the enormous impact it has on the performance of the organisation. As well as having role clarity at the foundation of the relationship – that the chairman is the leader of the board and the CEO is the leader of the business – to be a value adding one it must be built on trust and respect, where there’s candour and honesty on both sides. Smart chairmen must reflect on how well this relationship is working and, where appropriate, recalibrate it to ensure that the rapport between themselves and the CEO is an asset to the board and the business.
Agile board of management
The pandemic underlined the importance of boards being agile. Agility and adaptably remain key today for those boards that are serious about supporting the CEO in responding to new challenges in a way that will ensure the long-term success of their organisation.
With the interplay between the three critical elements of risk, strategy and return commonly based on assumptions at board-level,the board must ensure that any assumptions, from the CEO or any director, are challenged to validate their relevance. Only then is it possible to have assurance that the right path is being taken – something that is particularly important when quick decisions are required during periods of volatility.
Making sure future strategy is live in the boardroom, and not something to focus on once a year, is vital for any organisation to ensure it successfully navigates its way through these challenging times. Therefore, the board must keep the focus of the CEO on future strategy – how the organisation can achieve its purpose – by looking at new opportunities, rewards, as well as the risks.
Review the CEO
One of the most important roles of the board is in ensuring the CEO has the right skills and mindset to lead the business forward. As we enter 2023 it’s critical to have in place a CEO who is fit for the future. To ensure this the CEO needs to be regularly evaluated – a basic board hygiene process.
At the conclusion of any board review process there must be clarity, not only on the performance, but on the next steps in personal development for the CEO, with deliverables agreed by all parties. These can then be revisited and reviewed regularly to check on progress.
After the Covid health emergency it’s time for boards to step up again to support the CEO during a new period of volatility. By doing so they will effectively assist the CEO in ensuring their organisation successfully navigates its way through a turbulent 2023 and experiences long-term growth.
Integrity Governance works with chairmen, company secretaries, CEOs and boards around the world. For almost 20 years we have delivered the best local insight, combined with a global perspective, to ensure effective governance at organisations. For more information on how we can support your board with your boardroom and governance challenges, please contact one of our highly experienced consultants.