Category: 11. Paradoxical Yet Key Support: The Board of Directors

ON BEING A BETTER CHAIR OF THE BOARD

~ ricardolevy ~ 2 Comments

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:

  1. Each member of my Boards has been a superb professional.
  2. Members have joined my Boards because they believed in the company mission and trusted the executives.
  3. They did not do it for money, yet felt respectfully compensated for their efforts.
  4. 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:

  1. 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
  2. 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.

 

THE BOARD MEMBER’S VOYAGE: A SAILOR’S CHALLENGE

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“On a bright, sunny day you can set your course on a landfall five miles away from you and sail right to it. But in the fog, you make your way by paying close attention to all the things immediately around you: the deep roll of the sea swells as you enter open ocean, the pungent scent of spruce boughs, or the livelier tempos of the waves as you approach land. You find your way by being sensitively and sensuously connected to exactly where you are, by letting ‘here’ reach out and lead you. You will not learn that in the navigation courses, of course. But it is part of the local knowledge that all the fishermen and natives use to steer by. You know you belong to a place when you can find your way home by feel.”

A friend recently shared this passage from Episcopal priest Cynthia Bourgeault’s book Mystical Hope. It is a lovely analogy describing the duality of consciousness that we can employ to chart a course to the same destination, yet experience the journey in entirely different manners. As Ms. Bourgeault further tells us,

“While egoic thinking is like sailing by reference to where you are not – by what is out there and up ahead – spiritual awareness is like navigating by reference to where you are. It is a way of “thinking” at a much more visceral level of yourself – responding to subtle intimations of presence too delicate to pick up at your normal level of awareness.”

It is navigating by reference to where you are in the moment, using less obvious cues to find your way, cues that, as she points out elsewhere, “emerge like a sea swell from the ground of your being once you relax and allow yourself to belong deeply to the picture.”

Applicable to so many aspects of my life, and such a good a metaphor for a sailor…

I have been thinking about this duality of approach in the context of my Board work. As a director, my key responsibility is to focus on the sight five miles out, which is natural for me as I am always seeking the “big picture,” and believe I can help pilot us toward our objective. Yet I also have this inclination to respond to what I believe I am sensing as the more detailed and subtle currents and patterns of the moment. When this happens, I need to remind myself that I am only sensing a small fraction of the real churning of the waters and the sudden shifts in the wind patterns. There is only one person that feels the fullness of the moment, and that is the real navigator — the CEO. When it comes to these “realities and intimations of the moment,” I have to remind myself that I am not the pilot now. I was once, and loved it. Now I am the coach; I am the teacher; I am the mentor. Not the captain. What I see is only a part of the canvas, maybe only the echoes of land we are about to touch rather than the full force of the trials and tribulations of the running of a business. This puts my “action orientation” to the test, requiring me to have faith that much good is happening and there is a very competent captain on board. It forces me to step fully into the “unknown.” And even though I dedicated a full chapter to this practice in my book, I am still learning to be comfortable there. It teaches me to be humble, remaining present even in the fog. Hopefully I will also add at times some of my wisdom to seeing subtleties in the fog that may be missed by others.

The Bourgeault passages that my friend shared inspired me to read the entire book, and in it I discovered a depth that is only hinted at in the sailing metaphor. Here is a sampling:

“…I saw how time – all our times – are contained in something bigger: a space that is none other than Mercy itself. The fullness (or ‘end’) of time becomes this space: a vast, gentle wilderness in which all possible outcomes – all our little histories, past, present, and future; all our hopes and dreams – are already contained and, mysteriously, already fulfilled.”

“If only we could understand this more deeply! If only we could see and trust that all our ways of getting there, all our courses over time – our good deeds, our evil deeds, our regrets, our compulsive choosings and the fallout from those choosings, our things left undone and paths never actualized – are quietly held in an exquisite fullness that simply poises in itself, then pours itself out in a single glance of the heart. If we could only glimpse that, even for an instant, then perhaps we would be able to sense the immensity of love that seeks to meet us at the crossroads of the Now, when we yield ourselves entirely to it.”

The concept that “all possible outcomes – all our little histories, past, present, and future; all our hopes and dreams – are already contained and, mysteriously, already fulfilled” is profound. Delving deeply into it is beyond the scope of this post – and my own depth of understanding of this topic. But I encourage you to dive in. To tease your interest, I suggest you consider Bourgeault’s words in the context of some of the newest thinking on quantum wave-particle duality and its relationship to consciousness…

“Central to the theory of quantum physics is that all matter exhibits the properties of both particles and waves. This central concept is called the wave-particle duality. It is also universally agreed that waves of quantum objects are waves of possibility.
Each measurement causes a change in the state of matter “from a wave of possibilities to a particle of actuality”. This change is called the collapse of the wave function. In simple terms, this is the reduction of all the possibilities of the wave aspect into the temporary certainty of the particle aspect.”
— God is Not Dead, Amit Goswami

Or, ponder literary references…

Time present and time past
Are both perhaps present in time future,
And time future contained in time past.
If all time is eternally present
All time is unredeemable.
What might have been is an abstraction
Remaining a perpetual possibility
Only in a world of speculation.
What might have been and what has been
Point to one end, which is always present.
— The Four Quartets, T.S. Elliot

Rich food for thought and contemplation, these concepts, and while they may be elusive, they are important to many of our actions. As Board members, they challenge us to impact the journey of others in our charge while letting the tiller be handled by those closer to the day-to-day action.

Note: A good summary of the quantum-mechanical concepts as they related to what has become known as “Quantum Consciousness” can be found in my friend James Cusumano’s book, Cosmic Consciousness (Prague: Fortuna, 2011)

ESSENTIAL CONNECTIONS: THE LEADERSHIP TOUCH

~ ricardolevy ~ 2 Comments

I do not know whether it is that I am getting old (a welcome fact) or soft (some may argue that on the human side I have always been) but I have been sensitive to touch lately. In my role as a member of the Board of Directors for several public companies and one academic center, I observe many chief executives and their senior teams. I marvel at the differences in how these accomplished individuals interact with their various constituents, particularly noticing those who are exercising leadership and those who are merely managing others. The difference can often be seen in how they connect: how they “touch.”

Two very concrete situations come to mind, involving two different organizations. In both of these cases, after reviewing presentations for an upcoming Board meeting, I shared by e-mail some brief observations with the CEO. One CEO immediately sent back a short note: “good comments, thank you.” I never heard back from the other. One touched me back; the other did not. Which case do you think made me feel better? Of course, there are many possible reasons why the second one did not respond. Too busy; never saw my e-mail; my observations not relevant. The latter was unlikely, since I did subsequently send the same comments to the Board Chair, and they were very positively received. But that is not the point. The point is that in one case there was closure of the interaction; none in the other. The first created an enrichment of the relationship; the second left a void. It was no big deal in the grand scheme of things, yet it was one of those subtle instances that to me differentiates good leadership.

Perhaps some CEOs think that we Board members do not need to be “touched.” After all, we are “accomplished individuals with extensive executive experience and a proven track record.” (This came from a Board Director job description.) Well, I have news for those CEOs: We are human too, vulnerable and uncertain at times, and with varying degrees of self-esteem, even if we all convey enormous self-confidence. We can all use – and often cherish – the feeling that we are needed and our contributions acknowledged and recognized. This is so even when (as has happened to me often) my suggestions, while not acknowledged, show up as actions later on. Yes, actions do speak louder than words, yet recognition still reinforces relationships.

The issue is, perhaps, aggravated by the prevalence of Internet communication. In my past career, I depended heavily on direct, in-person communication to fully convey meaning. I believe my colleagues felt my intentions as much as they understood them intellectually – tone of voice, body language, facial expression. And I could immediately gauge the level of understanding and connection in the exchange. Even silence in the conversation revealed enormous content. All those elements of effective dialogue are absent in e-mail communication, requiring us to be particularly mindful in the exchange. A word or two added to an e-mail can convey sentiment. The speed of the response can convey import. Cold as the electronic exchange medium may be, one can convey caring.

I believe it is essential to respond to all e-mails even with the briefest of acknowledgments. One of my favorite Board members, Ernie Mario, always impressed and touched me: he responded immediately to every communication, even if just with a short note. And one of my most treasured advisors, Larry Sonsini, always got back to me in less than 24 hours no matter where in the world he was. He made me feel that I mattered. But then Larry had this extraordinary capability to make me feel that I was the most important person in the world to him at that moment, no matter how busy he was.

We need to remember that so much of leadership is establishing and strengthening alliances. As leaders we are, after all, chartered with the task of sweeping others in our path to carry out the organization’s mission. We get others to join us, to the best of their abilities, in the pursuit of a goal. We seek ardor, not just execution. We seek added genius, not mere implementation. This requires continuous contact, acknowledgement, and appreciation of support. This touch, in the service of sustaining a vital connection, becomes even more important when the communication is largely electronic.

Granted, some of us need more touch than others, but I suggest that we all value it and, as leaders, must deliver it.

THE BOARD EXPENSE GUIDELINES PARADOX

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Unquestionably, the tone of a company is set by the top leadership. In Letter 5 “The Pull of Hubris” I talk about a company’s atmosphere, the air all employees breathe. I propose that it is made up of a special kind of oxygen, an oxygen that “comes from the very top of the organization.” When this oxygen begins to be tainted (as I believe visibly happened with a number of companies a few years ago) it can affect the whole organization – often without anyone being aware of it until it is too late.

So, how appropriate is it for top executives to receive what might be considered special treatment when the company at-large is being asked to be frugal? How does one draw the line between expenses that conserve performance capacity,– such as flying first class to ensure that an executive is rested when reaching a far away city to engage in a difficult and crucial negotiation– versus the travel and entertainment policy for the rank and file that insists on the cheapest fares? A tough balance.

It is not surprising that the question arises with the Board of Directors, as well. And here I have always found myself in a conundrum. While I was CEO, I applied the principle that if I wanted to fly first class or stay at a particularly luxurious hotel I paid the difference out of my own pocket unless it applied to all my senior management for a particular situation. But for the Board, I maintained the philosophy that I was privileged to have high powered Board members serving my company, and would do everything in my power to make their time with us as comfortable – and attractive – as possible. So I insisted that our Board members fly first class, and arranged for them to stay at the best hotels. Was I irresponsible? Did I squander shareholder money?

In Footnote 31 of the book I presented my “Rule of 3” to attract a Board member:

First, get the person excited about the vision;

Second, assure them that association with my company will never tarnish their reputation (this assurance is best done by pointing to who else has agreed to serve;) and,

Third, be super-respectful of board members’ time.

I should have added a Fourth rule:

Make the Board member as comfortable as possible so as to take away any hindrance to his or her fully focused presence and engagement in your company’s affairs while they are with you.

In the same footnote 31 I talk about the imperative of getting the best of the best on your Board. A Board offers a unique opportunity to harness enormous experience – often well beyond what you can afford to hire into your company. So when the CEO draws on a Board member’s time, principally at in-person Board meetings, you want to extract all the accumulated wisdom of the individuals’ extensive business experience.

Most Board members I have attracted do not “need the job” nor are they doing it for the payment. They do it because they enjoy sharing their experience by guiding companies whose missions they value and whose management they respect. They could be doing many other things with their time, and often we are asking them to interrupt other activities, travel many hours to be with us for only a day or two, and then “work them” hard when they arrive.

My philosophy: make it a pleasure for them to come. The price is well worth it!

Do you Agree? Disagree? Am I missing something?

How to build an excellent Board of Directors

~ ricardolevy ~ 1 Comment

From several readers of my book it has come to my attention that not everyone reads the Notes at the end of the Book. I have included in the Notes both the references to quotes as well as some additional reflections that, while important, I did not feel contributed to the flow of my Letters. One in particular (Note 31) deals with Boards of Directors and I will reproduce it here as I think it contains some interesting guidelines for Board formation.

“Lessons to keep in mind with boards: (1) Always build a board that is bigger than you need. (2) Strongly opinionated executives with a proven track record are good to have on the board—as long as you have several, and they respect one another. Their opinions will balance and optimize the outcome. The critical factor is not their individual strengths but the composite. (3) Even the board member who at times seems most difficult and “marginal” makes a contribution at the right time. (4) Management of the board requires a strong CEO and a strong chair. Good teamwork between CEO and chair is critical. (5) Follow the key “rule of 3” to attract a board member: First, get the person excited about the vision; second, assure the candidate that association with your company will never tarnish his or her reputation (this assurance is best done by pointing to who else has agreed to serve; and third, be super-respectful of board members’ time. (6) Do not shy away from internal referrals when looking for new board members. High quality attracts high quality. The power of “interlinking” is healthy.”

WELCOME TO A CONVERSATION about “Letters to a Young Entrepreneur”

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In Letters to a Young Entrepreneur, I share some of the highlights of my entrepreneurial journey. On this website, I continue to offer reflections on my leadership experiences, and very much welcome your comments, critique and suggestions. Most importantly, I invite you to share your own experiences and insights, as well.

My hope is that through this dialogue we will all benefit from our common entrepreneurial adventure, and perhaps provide some new approaches to the challenges we all face as we embody our dreams.