10. The Dilemma of Changing Roles

Dear Reader:

I write my blogs sporadically. Triggered by particular events or situations with which I am deeply involved, I find myself prompted to write because of the acute nature of the matter. This post, however, is different. The subject has been lingering inside me for a long time. It rarely rises to the acute level, but rather I feel it as a dull “chronic” discomfort in situations when I sense a problem, but the stimulus is not strong enough to incite me to act. And then I bemoan the fact that I did not act in time. It’s like an ache telling me I should go and see the doctor… Yet I don’t go, figuring that trying to describe it would be too amorphous and thus embarrassing. Of course most of the time, it dissipates and life goes on just fine. But sometimes it does not.

The subject? Maximizing the effectiveness of a Board of Directors. I have been involved with Boards for almost half a century, and I attribute much of my entrepreneurial success to the extraordinary nature of the Boards I have been privileged to build and serve under as CEO. As I reflect on what worked so well, a few factors are evident:

Each member of my Boards has been a superb professional.
Members have joined my Boards because they believed in the company mission and trusted the executives.
They did not do it for money, yet felt respectfully compensated for their efforts.
They respected the other Board members, enjoyed their company, and did not hesitate to express their opinions while listening to the opinions and positions of their colleagues.

At the same time, I recognize that the Board of Directors is often comprised of strange bedfellows, which can be awkward. Meetings are few and far between, often months apart; some of these meetings are by phone; in-person meetings are even more infrequent. Members may know each other outside of the Board, but most likely do not see each other very often. They may live in different parts of the country or the world. To say they are a team is sometimes a stretch. To make them a team is possible but takes concerted effort. Yet Board members have a weighty responsibility: to monitor the company’s performance on behalf of the shareholders and ensure that execution meets expectations. To do so, one of their most important responsibilities is to hire and monitor the performance of the CEO. Yet for their deliberations and decisions, they depend on information that is provided by the CEO – who is, most likely, also a member of the Board. This places the CEO in a strange position: being a part of a group from which he or she may be excluded, when certain decisions are taken behind closed doors.

Most of the time this works very well. In addition to the caliber of the Board members, two critical factors facilitate good results:

An active effort on the part of the CEO to work with the Board, by communicating often, managing the information flow and making key executives available for complementary discussions; and
The skill, sensitivity and impact of the Board Chair.

It is the Chair on whom I want to focus in this article. I have been privileged to act as Chair on many Boards, as well as to serve as a Board member under many different Chairs. As I think back to the most critical growth periods of my companies, I attribute part of our success to my discipline in taking time to check in on all Board members frequently, to keep the information flow current, to never allow for any surprises, and to ensure that views are expressed and heard even in the most pressured moments. The times when I did not do well as Chair occurred when I fell into a few traps, which I describe below as typical “Syndromes.”

While many shortcomings can manifest themselves during the normal course of Board business, many manifest during Board meetings. The challenge is that Board meetings can be highly “charged” by the very nature of the participants, their inherent intensity and the import of their role. To work best, Board meetings require members – in particular the Chair – to be very aware of and present to emerging dynamics. When the tenor begins to crescendo, a good Chair senses this and redirects the energy before a discharge occurs. If, on the other hand, the Chair is affected, in whole or in part, by any of the Syndromes outlined below, things may rapidly take a course that is unanticipated or unintended.

The “Strongest Voice” Syndrome

A situation that appears in particular at Board meetings is something that all Chairs face: the Board member with the strong voice and the quick mind (especially financial), who can overwhelm a meeting and reduce the opportunity for considered deliberation, often by dint of his or her brilliance and eloquence. In doing so, such a strong voice may rob the Board of the great value of hearing different viewpoints and shared experiences. I learned this the hard way with some very vocal Board members in the early years of my entrepreneurial journey. But I also learned that if managed properly, such a situation can end with very positive results. One case that is strikingly vivid in my mind was when my young and small pharmaceutical company considered buying a large manufacturing plant in North Carolina. It contained a very sophisticated sterile manufacturing facility, something that was outside of our expertise. One Board member stated flat out that such a move would be crazy. His voice seemed particularly relevant because the facility had been built under his watch when he was CEO of the seller, a large drug company. You can imagine the weight of such an opinion. Fortunately, we were able to navigate the discussion to an examination of what it would take to make such an acquisition possible and prudent (in addition to the need for sizable funding which, at that point, we did not have.) In the end – and that end was 10 months later – we did make the acquisition and it catapulted our firm to be the largest outsourcing manufacturer of drugs in the Americas.

The “Founder” Syndrome

Being a company Founder is one of the greatest joys of the entrepreneur, especially if the enterprise grows. As I advise many Founders, a critical part of success (as it certainly was for me) is building superb Boards. Ideally, the Board is truly a strong, independent voice that enriches the leadership, guides and mentors the entrepreneur, and ensures that the business avoids mistakes that waste time and money. For this to be the case, an active, free and candid dialogue at the Board level is paramount. We must be careful not to overwhelm the Board with our “Founder’s aura,” which can be limiting. We tend to be so focused on our passionate vision that our capacity to listen may be affected. Selective hearing is a common ailment. We Founders need to constantly remind ourselves to clear our ear canals.

The “I am Still the Boss” Syndrome

This happened to me several times, and is related to the Founder-Chair issue described above. I founded a company of which I was CEO for many years. Eventually, I transitioned to Chair when we brought in a new CEO more capable of further growing the company. My shortcoming as Chair was due to the presence, often inadvertent, of my fingerprints on the everyday running of the business. I had given up the CEO title, but never fully let go. And the new CEO could feel it, as could the employees. Without meaning to, I was exerting an influence over the company that did not allow the new CEO to fully gain the leadership needed to propel the company to new levels. And I never appreciated that because of my lingering presence the incoming CEO – who I had recruited and felt very positive about – never entered the full covenant needed for him to be an effective entrepreneurial leader. A few years later, he found “a better offer” and resigned, giving us a very “generous” three-week notice. When I asked him how he could leave the company hanging at such a critical time, he simply said, “Well, what’s the problem? You’re still here.” That told the whole story.

The “Confusion between Executive and Non-Executive Chair” Syndrome

There are circumstances when companies need to have an Executive Chair as well as a CEO. This might occur during a transition period when a President is promoted to CEO or when a new leader is transitioned into the company from outside. In general, the Executive Chair holds some of the responsibilities of the CEO, and spends much more time on the company’s business than an ordinary Chair would or should do. The responsibilities of the Executive Chair often include some operations, whereas a non-executive Chair’s do not. The problem occurs when a Chair acts as if he or she is Executive Chair – often without even noticing it. In the process, the Chair will disenfranchise the CEO, eroding some of the CEO’s initiative, and not allow the CEO to fully become the organization’s leader. This is a very inefficient situation. While I may have good intuition and the best intentions, as Chair I may suggest initiatives to the CEO. Only when such initiatives are wholly “owned” by the CEO do they stand a chance of being successfully implemented. Implementation is not our job as Chair, although our demeanor may raise expectations to the contrary.

The “Clinical” Syndrome

As Chair, we are tasked with many key activities on behalf of the Board. They include being the key interface between the Company and the CEO in negotiating the employment agreement, coordinating performance assessments, reviewing compensation, or the much more difficult task of negotiating the exit of a CEO who is being replaced. As with so many complex negotiations, personal feelings may make the task more difficult. In those situations, some of us tend to take a more clinical approach and keep it impersonal. This may work well to get the best “terms” but, in the end, is not likely to yield a win-win outcome. Hiring, performance reviews and the rare need for separation are very sensitive and personal events for all involved. Showing the warmth of our humanity in these times is essential for a good outcome. As Chair, we need to remember this. Yes, we represent the Board, which is a somewhat impersonal “body,” yet it is an entity comprised of individuals. Part of our task is to carry this humanity to the discussion, regardless of whether being “detached” might seem the more expedient approach.

The “Overbearing” Syndrome

Let’s face it: Those of us in CEO or Chair positions are, by definition, individuals with strong personalities and, often, high adrenaline levels. We are passionate about what we are doing, and approach every task with gusto and exuberance. As we grow in our leadership journey one of our most important learnings is how to “tune” this enormous energy to be appropriate for different situations. Some of us are not very aware of the “long shadow” our personas cast. Sometimes, our hugs (while meant with a genuine and caring intent) can be too tight. I have both embodied this myself and seen it in others. The challenge is how to be fully present to this dynamic, especially in the Chair-to-CEO relationship. If our inclination is to get too involved, we need to recognize when we are stealing some of the breathing space from our CEO, and pull back.

*****

The net of this post: If you are Chair, take the time to examine whether there are any aspects of these syndromes that ail you. If the answer is “Yes,” talk to fellow Board members or the CEO about your concerns, and recruit these colleagues to monitor you and help you become a better Chair. Further, I propose that neither the Chair nor the CEO are the most effective monitors of their own performance – or for that matter of the Board as a whole. These are tasks best relegated to a skilled external resource whose objectivity and professionalism inform their insights. So consider engaging an outsider for a regular 360 review of your performance as Chair and the effectiveness of your Board. While this may be time consuming and add expense, it is an extremely valuable investment that can make the difference between a good Board and an excellent Board. I have found such 360 reviews by an outside professional to offer some of my own best opportunities for personal growth. It also does wonders in “lubricating” the dialogue among Board members.

We have heard a lot in the last few days about the changes taking place at the top in two landmark Silicon Valley companies: Apple and Google. These announcements have prompted several good articles and editorials on the role of the company founder, speculating on what will happen at Apple when Steve Jobs takes medical leave and Tim Cook takes over, and what Google founder Larry Page needs to do to get ready to take over from Eric Schmidt. (See, for example, Chris O’Brien’s column in the January 23, 2011 issue of the San Jose Mercury News.) In general, the message seems to be that often the founder needs to play a critical role at the helm of an entrepreneurial organization, largely because of the founder’s visionary gifts and personal commitment. In fact, O’Brien argues that founders make the best CEOs.

One element that is not talked about much and I feel is particularly important transcends commitment or vision. It has to do with the energy that the founder’s presence injects into the whole organization. This is intangible, and is often as much about people’s perceptions as about the functional day-to-day role that the founder plays.

I fully understand that there are times when the founder needs to step in and take the top job. I have experienced this in both directions: I had to step down when the group from which I was seeking funding felt that I did not have enough experience to be the CEO; and I stepped back in when events at the company demanded that I take full charge of the helm again. Yet in my mind, what was critical for our company was not so much the role I played, but that I, as founder, was always present and fully vested in the future of the company. It infused the company with a sense of continuing creation, a sense that the organization was truly entrepreneurial.

This does not mean that professional management is not required. On the contrary, the best of founding entrepreneurs often have major gaps in their skills. If they are wise, they bring in companions as close partners to complement their shortcomings. In the early years, this is what gave HP its power: the complementary skills of Bill Hewlett and Dave Packard. It was the case at Raychem, one of the leading non-computer companies in Silicon Valley in the 80s and 90s, where founder Paul Cook relied heavily on Bob Halpern as his essential counterpart on the operations side. It seems that even at Apple this is the case: Tim Cook provides an invaluable balance on the operations side to Job’s visionary talent. It also seems to be the case at Facebook, where young founder Mark Zuckerman has Sheryl Sandberg at his side to make sure the company is well run.

So I propose that a key, defining factor in the “entrepreneurship” character of a company is how the primal energy of the founder continues to be felt by the organization.

Most of the time, this requires his or her physical presence –often as the CEO. In some cases, just as with the spiritual influence of a wise teacher who is no longer present, for some period of time the lore and aura of the founder may continue through stories and practices after the founder leaves. But this energy eventually dissipates and the entrepreneurial organization becomes a more traditional, professionally managed company. Yet here again, to the extent that the organization can keep some of the “entrepreneurial spice,” it is ahead. The challenge for “acquired” management is how to accomplish that.

Category: 10. The Dilemma of Changing Roles

ON BEING A BETTER CHAIR OF THE BOARD

IS THE FOUNDER’S ENERGY ESSENTIAL FOR AN ORGANIZATION TO REMAIN ENTREPRENEURIAL?

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