Does your board lead?
I've recently pondered the question of excellence and leadership in the boardroom.
With that in mind, I interviewed Bob and Gregg Vanourek, authors of the new book, Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations . Bob and Gregg interviewed CEOs, board members, and officers in sixty-one organizations in eleven countries for this book and have served on or advised numerous boards. Bob is the former CEO of two New York Stock Exchange firms. Gregg was a senior executive at a high-growth startup and a nonprofit foundation and now teaches at the Stockholm School of Entrepreneurship.
What are the leadership responsibilities of an excellent board?
An excellent board sets the overarching priority of building an “excellent, ethical, and enduring” organization (what we call the “triple crown” of leadership), imbuing a “culture of character,” a purpose beyond maximizing shareholder value, and a set of shared values to guide behavior.
At Tyco, John Krol, the new outside lead director, and Ed Breen, the new CEO, replaced the entire board after epic leadership scandals. “The fall of Tyco,” Krol told us, “was brought about by lack of governance and board responsibility.”
Krol and Breen involved the new board in reviewing and approving new values, board principles, written charters for board committees, delegation of authority documents, a new company code of conduct, and the necessary implementation processes for them. Krol and Breen reviewed these subjects at every board meeting until the board “owned them.”
Twice a year, all Tyco employees receive an evaluation using this values-based framework, resulting in a promotion, bonus, or dismissal. CEO Breen personally reviews the appraisals of the top fifty executives with the board. Krol emphasized, “It starts with the board … If you don’t have the board in synch and driving these things, you’re going to lose some of the power of changing the company culture.”
Mike Critelli, former CEO of Pitney Bowes (the global mail stream manufacturer and service provider), told us that the board’s Corporate Responsibility Committee oversaw the firm’s culture change. Executives at Infosys, the global IT juggernaut whose original mission was to be the “most respected firm in India,” told us their board was actively involved in building the firm’s culture.
A corporate board does not manage the culture—that is management’s responsibility—but the board works with management to define the desired culture and then monitors how management protects and enhances that culture.
An excellent board ensures that officer promotions go to leaders with character who achieve excellent results without ethical compromises. DaVita, the kidney dialysis firm rescued from the brink of bankruptcy, insists officers operate by the firm’s shared values and terminates officers who don’t perform accordingly.
Where could a board focus to be more mindful of excellence today?
Ben Heineman, former Senior Vice President for Law and Public Affairs at GE, told us many boards today just want to trust the CEO and not dig into the essentials. He believes the board must redefine what the CEO does, demanding “high performance with high integrity.”
Great leadership is a group performance, not a solo act by a heroic CEO. The board has active leadership responsibilities, which too many corporate board members don’t recognize.
Excellence is ongoing work. We see this exemplified today in Johnson and Johnson, the gold standard for ethical conduct for decades, is now mired in lawsuits and product recalls. We suspect the J&J Credo for ethical leadership did not get inculcated into new generations of management by the board.
How does the board avoid micromanaging the CEO?
Written “roles and responsibilities” for the CEO and the board are essential, indicating where the board leads, where management leads and areas where they collaborate.
Many of the board members we interviewed visit company sites and customers to better understand how the organization really operates. On such visits, they are observers, not decision-makers. They coach the CEO on what they have learned and how to improve. Cheryl Dorsey, president of Echoing Green (a nonprofit investor in social entrepreneurs), described her board to us as a “collective executive coach” and her “strategic thought partners.” Critelli encouraged board members to have one-on-one discussions with senior managers at Pitney Bowes so the board would receive unfiltered feedback.
Excellent board members guide, govern and lead the organization without managing it.
Does your board lead?
Bob and Gregg Vanourek are authors of Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations. Visit http://triplecrownleadership.com/ for more insights. Follow them on Twitter: @TripleCrownLead