INTRODUCTION
The role of the chair is to provide leadership. Traditionally in the past the CEO often did the work and provided the organization’s sense of direction, and the chair simply made sure that the CEO’s ideas went through the board meetings unamended. Additionally, too often the honour of being chair went on the basis of seniority (years of service in the organization) rather than skill and experience.
Now much more is expected of a chair. There is much more to chairing an organization than just being a ringmaster enabling discussions at meetings. The chair therefore needs to have a clear idea of what they intend to do with their role. There is more to it than is immediately obvious, not least to the other directors. It is also a role for which there is little formal preparation – a person learns to become an effective chair by being a chair and noting their lessons and experiences. They need an element of self-reflection to monitor where they think they are going right and wrong.
It then deals with telling the organization’s story. In the old era of corporate governance (certainly in the for-profit sector), this work was done by the CEO and management; hence the efforts of recent corporate governance writers to emphasize the role of directors. The board – especially the chair – should tell the story and not just leave it to the senior staff. It concludes with chairing the board and then retiring from it.
RECRUITMENT
From Within the Organization
Often the chair has been on the board for some years and so has a clear idea of what is required. This person will very likely have a detailed knowledge of the organization and so be familiar with its values, mission, finances etc.
However, it is necessary to appoint on merit, rather than out of a sense of it is now “my turn”. Equally care has to be taken with grooming a person for that role only to find that perhaps they would not make a good chair after all. It is not unknown for some people to make a very good board member and even deputy chair but somehow lack the skills required to be an equally fine chair.
Only a chair truly knows what is involved with being a chair – and then that experience only applies to that particular organization. Each organization is different and although there are some generic skills, the art of corporate governance entails understanding one’s own organization thoroughly.
A good chair encourages leadership aspirations in the other board members as part of their personal development. The dilemma for such a chair is that on the one hand the person (or persons) is (or are) encouraged to have leadership ambitions, while on the other hand tempering their ambition so that there is not a premature move for power.
The smoothest transition comes when there is an “inevitable” candidate. This is a person who is so obviously talented and skilled, with enough time to do the role properly, that they virtually seem to glide into the role. For a person to have such an “inevitable” transition, they need to think clearly about how they will make that “inevitability” seem obvious to their colleagues and potential competitors. What are the qualities and skills that the person could demonstrate in that context to make their rise seem “inevitable”? What are the signals they should give out? How can they create the right profile? They could put themselves through additional courses and have a mentor. They could undertake additional projects that benefit the organization to show their commitment to the organization. They could also chair a board committee both to prove their commitment and to gain even more knowledge about the organization.
Being ambitious for the role is not enough; there has to be underlying substance. Seeking the chair’s role simply for the purpose of status is wrong. Nor should it be seen as a stepping stone to something else (say, an Australian honour or an appointment to a major for-profit board).
The worst transition comes when the board (or whoever constitutes the voters) are divided fairly equally over two candidates. Sometimes a chair accidentally or deliberately can contribute to this problem by encouraging two potential candidates to compete neck and neck with ambiguous signals of encouragement; care therefore has to be taken while grooming the next person for the chair’s role. Hopefully the losing candidate stays on peacefully to try for a later election or leaves the organization gracefully.
It is even worse if the competition is not merely between two individuals but also between two competing views of the organization’s way of currently operating or dealing with its future challenges. This is virtually a battle for the organization’s soul and it never ends well. A chair and board should be well aware beforehand that there is such a looming battle and the competition will have been waged in discussions within the board (and management) rather than letting it drag on until it become a brawl at election time.
A way of resolving this problem – it maintains the peace but does not deal with the underlying questions – is to opt for a third candidate whom both sides can grudgingly accept. That new chair (if elected) then needs to address the underlying questions, find a way of reframing them and then find some creative answers.
The chair should not be the previous CEO of that same organization. CEOs cannot let go. Such a chair would be tempted to use their new role simply to preserve their past achievements in the organization (and continue to hide their errors), rather than provide a fresh vision and look for the faint signals of change. Additionally, such a chair would then be in a position to appoint their own successor, thereby solidifying their legacy for the next generation of management.
There is nothing inherently wrong with CEOs becoming chairs of other organizations in due course. They may have a great deal to contribute – providing they recognize that the role of the chair is different from that of being a CEO. The risk is that as chair they will start to behave like a CEO in the new organization because that is how they are accustomed to behaving. They need to recognize the need for a new mindset as chair.
From Outside
A chair could also be appointed direct from the outside the organization. This person would certainly bring a fresh vision to the organization and also fresh insights drawn from their previous experiences in other organizations and companies.
At the very least, it does no harm to see what other potential candidates there are outside the organization. If nothing else, it helps with internal benchmarking, checking to see how the existing team are doing when compared with others.
One risk with an outside chair is that the chair could be captured by the CEO and other key staff because they would have a great deal of background knowledge. Ideally the incoming chair (given their own past governance experience) would be well aware of that risk and so seek their own counsel.
Second, the existing board would need to know what the incoming chair intended to do in terms of existing staff. A new chair might well feel more comfortable with senior staff they have themselves recruited and so in effect a condition of the new chair’s appointment would be senior staff changes. If the board are happy with the current management, do they want to lose the current management in the interests of acquiring an outside chair? Of course, if the organization is in crisis, a change of senior management may well be part of the rescue effort. But if the organization is proceeding well, then such an abrupt change would be too disruptive.
A third risk is that the outside person sees the role as more of reward for their high public standing and past record of service elsewhere, and so do not expect to have to contribute very much in this new role as chair. Such a person would probably make a good ambassador for the organization in providing outside representation, making the right contacts, and keeping on good terms with major donors. But such a person would not necessarily give much leadership within the organization. They would preside over the meetings rather than chair them.
This would not necessarily be inherently harmful if the situation were recognized by the board from the outset, and an active deputy chair appointed to handle much of the day to day board work. (The board would want to make sure there is no power vacuum that could be filled by the CEO). The chair and deputy would need to have a clear demarcation of tasks.
The board would need to accept this rather unusual arrangement and make sure that the chair did indeed produce the anticipated results. If the experiment does not work, then a graceful face-saving exit needs to be devised. The chair at the outset would need to know of this possibility, and accept that this arrangement is an experiment and acknowledge that it may not work out.
TELLING THE ORGANIZATION’S STORY
The chair’s main role is to tell the organization’s story. An interesting test of corporate governance is to ask who tells the organization’s story. If it is the CEO then the CEO is running the organization (irrespective of the claims to be following modern corporate governance).
Leaders tell stories.[1] Leadership is essentially persuasion. In a previous, more brutal era, leadership could be more direct and violent: “Do as I say, or I will kill you”, in warfare. ”Do as I say, or I will fire you”, in business. Now more subtlety is required.
Not-for-profit organizations in particular run on passion. Leaders need to connect emotionally. They have to inspire. It is about getting people to change. They have to win hearts and minds. After all, they have little other leverage over the volunteers, donors and staff.
Story-telling occurs in a number of contexts. First, there is the history of the organization: why it came into being and who created it. Second, there is the story of what is the organization is today and what it seeks to do. Third, there is the organization’s promise – branding – how and why it is meeting people’s needs. Fourth, there is the story of the organization’s future: the vision that draws it on.
Undergirding these larger narratives are the (often anonymous) case stories of the people (or animals or other objects, such as rivers, forests and buildings) being assisted by the organization. Case studies help bring the larger narratives alive.
In the quest for donations, for example, organizations get what they earn and not necessarily what they deserve. They may well be doing wonderful work but if this is not conveyed well, then alas they will not earn their donations.
People give from the heart – and then rationalize the donation from the head. The stories have to appeal to the heart. There has to be of course the appropriate paperwork to show that the money is being well spent etc. But the initial spark has to be lodged in the heart.
The organization’s stories need to be repeated over and over. A person may only “hear” (grasp) the story after listening to it on several occasions. The chair needs the communication ability to repeat stories without their sounding boring. (This is sometimes why an outside person is appointed chair: they have superior communication skills).
CHAIRING THE BOARD
Captain of the Team
The chair is the “first among equals”. At all times, the chair has to command the respect of the board. The chair has to be the role model for the others. The chair must always be well-prepared and expect the other directors to follow that example. The other directors may not always agree with everything being said by the chair but there has to be a basic underlying respect for the chair.
The chair needs empathy. This is not the same as “sympathy” (feeling sorry for someone else). “Empathy” means being able to put oneself in the position of the other, to see the world as the other sees it. This does not necessarily means agreeing with that person but it does mean looking at the world from another angle.[2] The chair needs to be a good communicator and listener.
The chair should ensure that there is diversity on the board: gender, age and race. There are different ways of looking at the world and diversity helps provide a wide range of perception, new ideas and visions.
The chair needs to ensure that new directors receive an adequate induction. First, a private meeting beforehand (perhaps offsite) might cover some of the operational culture of the organization. Every organization has its own politics; it is what helps make one organization different from another. The chair could also alert the new director to matters that must be handled sensitively in discussion (or perhaps not even discussed openly at all at board meetings, such as current differences of opinion with the CEO which are still under negotiation).
A basic issue is explaining where people sit at the meetings. People get very territorial about seating. A new director needs to be able to stride confidently into the board room for their first meeting and sit easily in “their” place. They should be advised beforehand where it is – and not creep timidly looking around for a spare seat.
Second, there has to be a set formal induction programme for all new directors involving the chair and CEO explaining what the organization is about: its history, context, mission, financial situation etc. The new director needs to know about the organization’s style of governance (and why and how it is separate from management of the organization). There has to be a warning on the need for confidentiality, board collegiality and unity, and the various legislative requirements under which the board has to operate. The director needs to know about the measurements of performance (both financial and non-financial).
Third, the chair should be alert to the personal development of each director. The chair is both the board’s main mentor and role model. This means that the chair should be intentional about their own leadership background. They should reflect on their own evolution as a leader: who was or were their own role model or models? What characteristics are they seeking to copy in their own role as leaders? How do they consciously communicate their leadership model to others? What leadership training did they do? Is further leadership training required?
In the role of being the main mentor and model, the chair should think about whether there are areas where a particular director’s knowledge could be improved (such as via an AICD course or attendance at an AICD event)? How could the talents of the team be enhanced?
The chair also needs to be alert to a director who may be having some personal problems (such as health, unemployment or issues at home) and perhaps provide some latitude in terms of their attending meetings. Continued persistent absences from board meetings should be left unexplained; either a director is a member or the director is not.
Finally, the chair needs to monitor the conflicts of interest situation of the directors. It is possible that a particular director is having to make so many declarations of interest and abstaining from so many deliberations and votes, that perhaps the person should now leave the board. Even if the director is adamant that there is no problem in reality, there may still be a problem with the continuing perception.
Running the Board
The chair should make the main thing the main thing. In other words, the board should have a clear consistent focus, with strategies identified and reviewed regularly. The meetings should not descend into trivia, bickering, gossip and back-biting.
The board meetings should be well prepared. The chair should be involved in the creation of the agenda and the listing of items. The board’s agenda needs to deal with big, strategic items and not diverted into management issues. These items should be dealt with early on and kept separate from the more routine operational items. The agenda should be tight but flexible.
The agenda may list the times at which items will be considered so as to ensure that all items get considered and there is not a stampede at the end to complete the business. “Action” items should be followed up by the CEO.
Chairs should ensure that directors arrive on time, are tolerant of all points of views expressed, that directors have the opportunity to speak and the opportunity to be heard, maintain confidentiality of the meeting, and remain loyal to the decisions made (even if they did not vote for them). Directors have a right to complain about the preparation and conduct of meetings.
Chairs (particularly those at meetings where many of the directors are relative newcomers) need to be careful not to inhibit discussion by stating their own views too early on. Directors should be encouraged to explore matters in an open discussion before narrowing the focus. One of the board’s primary roles is in strategy and by definition this entails a broad range of matters to be considered.
Board meetings should involve all directors. The discussions should be challenging without being acrimonious. The chair should be alert to any directors who evidently feel overwhelmed by the discussions and are reluctant to contribute. Boards have to be equal opportunity activities, with all willing to listen and learn from each other. No one has a monopoly on wisdom. This means creating a consensus through the deliberations and not have the meetings stampeded by a vocal individual or faction.
By the same token, directors need to be able to object without being objectionable. The chair needs to maintain an even tenor to the meeting and not let it descend into acrimonious point-scoring or the reopening of old battles. Meetings should show a sense of common purpose and a unity of spirit – even if there are differences of opinion about how the organization’s aims are to be achieved.
Finally, chairs should make sure by their own example that they are “present” at the meeting, with their concentrated focussed on the board. In today’s information technology-rich society, there is a risk of multi-tasking during a meeting: such as a director attending in person the board meeting while also conducting e-mail correspondence with others outside the meeting. The board may want to agree on a mutual ban on texting etc
Relations with the CEO
The chair and CEO need to work together. There have been some awful occasions of the two people falling out, with the divisions running down through an organization and the organization consequently running into profound problems.
The chair and CEO need to be aware of their respective roles and the boundaries that need to be respected. The chair needs to make the CEO successful or sack the CEO.
The chair is also a sounding board for the CEO, who can provide some ideas drawn their own years of experience to problems that the CEO is tackling. There needs to be an open and frank relationship. But it is a business relationship (even in a not-for-profit) and so it is not necessarily a close personal friendship. After all, there may come a time when the CEO has to be sacked; the chair should not have personal ties blinding the chair to the CEO’s faults.
The CEO should make sure that the board hears bad news in ample time – through official channels (and not via the mass media).
The chair needs to make sure that directors do not get over-enthusiastic with their contacts with staff. Strictly the CEO should be the single conduit through which all communications pass between the board and staff.
Tragically, it may be that the CEO is no longer suitable for their role. Perhaps they were never suitable for it in the first place and so there was an error in the original appointment.
Perhaps the organization and its operating environment have now changed and the CEO can no longer cope. Perhaps the CEO has been very successful in their work and enlarged the organization so that it is now too big for them. Often it is necessary to have a new CEO to take the organization to the next level or to flourish in a new operational environment.
Hiring and firing the CEO is one of the board’s main responsibilities. The chair has to show leadership here and not just leave it to a dissident group to initiate the move for the transition.
Of course, it may be that the chair is also part of the perceived problem with the CEO.
DECIDING TO LEAVE
There is now a trend for constitutions to contain a provision whereby chairs have fixed terms. The person is to be elected annually and is able to serve a set number of consecutive terms. This ensures a steady supply of fresh blood at the top. Where there is a regular rotation of chairs, there needs to be a special induction course for each new chair; never assume that the incoming chair will be across all the issues.
If there is not a set term limit (or even if there is), there are three indications of when it is time to think about leaving.
- If the chair no longer enjoys the respect of the board then they need to weigh up their options. Is this just a passing phase (due perhaps to some fleeting crisis which is on its way to settlement) or is there a basic disagreement with the way the chair is conducting the meetings and handling the organization? If it is the latter, then the chair needs to reflect on what has gone wrong and whether it can be corrected or whether it is simply time to go.
- Perhaps the chair is now running out of passion for the position or even the organization. There is always a risk that after some years, the tasks seem to get repetitive, the same old problems recur, and there are no new challenges.
- The best time to go is when people are urging the chair to stay. The chair is then at the top of their game and they will be leaving on a high note. This is so much more pleasant than having to be bundled in an undignified manner out of the door.
As a matter of courtesy to colleagues, if the chair has decided to go then the board should be alerted first – before the chair makes any approach to a potential successor.
A good legacy that the chair can leave the board is a smooth transition to the replacement.
[1] A good introduction: Stephen Denning The Leader’s Guide to Storytelling: Mastering the Art and Discipline of Business Narrative, San Francisco, CA: Jossey-Bass, 2005.
[2] Robert McNamara was US Secretary of Defence during most of the Vietnam War and was haunted for the rest of his life by how the US lost the war. He decided that the US’s basic problem (and not just his own) was an inability to see the war from the other (Vietnamese) point of view. He warned that subsequent governments should have more empathy (not sympathy) for their opponents. Robert McNamara and James Blight Wilson’s Ghost: Reducing the Risk of Conflict, Killing and Catastrophe in the 21st Century, New York: Public Affairs, 2003.