How the role of the chairman is evolving
The world remains a volatile place in 2023, as businesses emerge from the COVID era, contend with the impact of geopolitical uncertainty, grapple with the challenges of supply chain disruption and high inflation.
At this challenging time for boards the focus is on the pivotal role of the leader of the board – the chair or chairman – to help navigate the board through these uncertain times to business success.
However, the speed of external change requires an evolution in the role of the chair of the board to be an impactful leader and to ensure an effective board.
Working closely with boards and chairs has led us to identify how the characteristics that deliver chair effectiveness have evolved.
Time to move beyond the traditional board hygiene
The old adage that a good chair runs a good meeting is now simply not enough. The most effective chairmen today manage board processes from meetings through agendas, papers and minutes, along with other board specific procedures.
The role demands the chair brings an ability to make sense of things, together with the courage and integrity to take and lead the board through tough decisions. For example, the decision to part company with the current CEO.
Furthermore, the chair should provide “air cover” where necessary, which means protecting the group from the individual and the individual from the group. For example, the chairman may step in and provide “air cover” to prevent an over eager board tearing apart a proposal from management which if presented now would be premature and half-baked, when management needs time to work on the proposal to get it right.
Those chairs who are clear about their role are the most effective, particularly in understanding where their role stops and the CEO, as the leader of the business, begins. They should also know their responsibilities in ensuring the board delivers good governance and their function in any crisis.
As a priority, chairmen must have a very clear view of the value that they are going bring as the leader of the board, including their view of good performance and accountability. As a result, the move from a mindset of “director tenure” to one of individual director and board contribution needs to be led by the chair.
The chair as a leader:
The personal characteristics of effective chairs
Thoughts on the characteristics of effective chairs evolve with time and circumstance. Andrew Kakabadse and Ali Qassim Jawad have identified five key leadership intelligences in their 2019 book – The 5Q’s for thriving as a leader.
These five leadership intelligences addressed the need for contemporary leaders to bring:
- Intellectual capability
- Ethics (moral quotient)
- The ability to use and gain influence (political quotient)
- The ability to recover from setbacks (the resilience quotient)
- Emotional intelligence
In our experience of working with effective chairmen in today’s environment three additional “intelligences” are demanded: agility, adaptability and the understanding of the practical, profitable application of digital technology to deliver better outcomes – the digital quotient.
It’s effective chairs that foster a culture of agility and adaptability on the board. This requires them to promote an entrepreneurial spirit both on the board, and beyond – with the help of the board – to the management and the wider workforce. This way the potential of directors and employees to provide new ideas to help take the business forward is unleashed.
Furthermore, chairs must bring to the board digital intelligence. Not only in the employment of digital technology in a virtual world of board meetings, portals and information flows, but more importantly by bringing a practical understanding of the profitable application of digital technology to business to deliver better outcomes and returns.
The chair as a facilitator
One of the most important attributes of any chairman is to be a good facilitator. They listen, bring emotional intelligence and self-awareness.
In fact, the traditional “command and control” approach by the chair needs to evolve to a more facilitative leadership – one that embodies emotional intelligence.
Those chairmen who are emotionally intelligent are empathetic and have self-awareness when communicating; enabling them to build engagement, generate trust, respect, and provide leadership.
They can also counsel and supervise the board in a way that helps to steward the creation of value. This way they can create and nurture a board culture of psychological safety, where bad news travels to the board more rapidly than good, where directors have the courage to constructively challenge, and where it is fine not to have all the answers, particularly during these difficult times.
Additionally, board and governance success demands three critical currencies – trust, honesty and respect. The governance system breaks down if any one of these currencies is absent. It is an essential task of the chair to create and enable a culture which builds these values on the board.
The critical role of the chair in relationships
Effective relationship skills and competencies are demanded of chairs today, particularly because they have a vital role in managing the complex array of relationships of those on the board.
The most important relationship is between the leader of the board – the chair – and that of the business – the CEO. It is one which demands role clarity, a friendly tone, but with the professional distance that the CEO and chair can never be, or be seen to be, friends.
If the board or shareholders lose confidence in the chair to hold the CEO to account and, if need be, replace the CEO, then the board will lose confidence in both the chair and the CEO. This is not a good state of affairs for any organisation.
Additionally, if the relationship between the chair and CEO is not working, one, or both, will usually end up leaving the organisation.
Chairmen must nurture a whole series of important relationships to enable the board to be effective: from the corporate secretary – a vital link to board processes – through to committee chairs, senior or lead independent directors and members of the management team who frequently present to the board.
Beyond the boardroom and management team successful chairmen spend time and energy cultivating effective relationships with the owners of the business, be they shareholders or members, and other key stakeholders that are priorities for the board. For example, major donors in a not for profit organisation, regulators, etc.
Effective chairs are future focused
At the most basic level effective chairs bring a strong, intuitive sense of when, how and where an issue will “land”, which helps them to guide the board and anticipate next steps.
On a deeper level, they have a very clear view of the value that their leadership will bring – the priorities, the deliverables and the workplan at board and committee level – to enable value creation.
Chairmen must focus on developing the board, the CEO and themselves to increase the capacity, capability and effectiveness of the board, and ensure that the board, the governance of the organisation and the leadership of the business are “fit for the future”. This means chairs need to promote regular reviews focused on the effectiveness and performance of the board, individual directors and the CEO – something that is essential to good governance.
It is the role of the chair to ensure that the assessment is objective, and if performed externally, that the reviewer is free from conflicts of interest. Most importantly, they must make sure that there is accountability for follow up on the agreed actions to improve board effectiveness.
Future Focus: Succession planning
Ensuring there is good succession planning for the CEO, committee chairs, directors and their own role is a must for chairmen. The succession planning should be appropriate and relevant to the organisation and needs to be reviewed at least annually to assess progress and development based on the context of the board, the CEO and the organisation.
During challenging times effective succession planning delivers an all-important smooth transition in the leadership of the organisation with minimal disruption and business continuity.
Future Focus: Risk
The pandemic has highlighted the failure of many boards to effectively understand and predict risk.
The chair’s role is to support the board in understanding risk, set the risk appetite, structure for risk management, ensure that risk is being mitigated, managed and monitored, and to challenge assumptions around it.
Beyond this the chair must recognise that effective risk management is not solely about avoiding losses, but in enabling value creation through looking at risk as an opportunity. Risk planning can provide a new opportunity, a competitive advantage, to drive long term business success. After all, boards are charged to generate the best return from the capital of the company, which calls for forward thinking and the ability to anticipate the impact of uncertainty on outcomes.
The emerging role of the chair in the culture of the board
Setting the board culture “the way we do things around here” or “what we do when no one is looking” is the primary role of the chair.
Board culture can be a source of advantage where it is open, enabling and provides the appropriate environment for constructive disagreement in a psychologically safe environment where people can disagree but never be disagreeable.
A culture of inclusion
Diverse boards bring different perspectives, generate better decisions and outcomes than those that aren’t. As a result, chairmen need to look at the board through the prism of the five drivers of diversity™ – demographics, skills, experience, thinking styles and circles of influence – and consider how well the current line up matches up.
Though it’s important to highlight that diversity on boards is an illusion without inclusion. Therefore, the role of chairs today is to create an environment on the board where every participant feels welcome, wanted, respected, valued and listened to. This moves diversity beyond the veneer of tokenism to enable the culture on the board to be one of inclusion, to gain the benefit of the different viewpoints brought to decision making by a diverse board.
To sum up, effective chairmen today need to be more like a hospitable dinner party host who ensures that everyone feels welcome, wanted, listened to and respected.
For more information on how we can support your board with your boardroom and governance challenges, please contact one of our highly experienced governance consultants.