CEO/board relationships are too often fraught with conflict. These conflicts and misunderstandings are almost always rooted in poor communication, resulting in a lack of trust. As a CEO, building a strong relationship with your board of directors is one of your most critical business obligations. Some CEOs embrace this role and actively cultivate open and transparent communications with their board. Others see it as a distraction from the real work of running the company.
Good communication between the CEO and the board is vital to corporate health and successful outcomes. How a CEO and board interacts and communicates is a major driver of business performance. In contrast, the primary reason for CEOs being let go is a broken or dysfunctional relationship with their board.
We’ve identified eight areas of focus that facilitate a healthy and transparent relationship between CEOs and their board. It’s all about communication.
#1 TELL THE TRUTH
Sometimes working with a board can feel like an unnecessary bureaucracy that can frustrate and delay time-sensitive decisions. In these cases, it can be tempting for CEOs to work around the board or water down the facts to get things done. However, this can actually create more work for you and more pain down the road.
Always be forthright with the board and resist the temptation to present an incomplete story that ignores some of the complicated issues that the board would feel compelled to address. Incomplete communications erode trust and do not facilitate successful outcomes.
Your communications with the board should always be truthful, transparent and comprehensive.
#2 KEEP COMMUNICATIONS SIMPLE
CEOs sometimes make the mistake of assuming that board members know more than they do. Although they have significant influence, they typically do not have an in-depth understanding of the day-to-day workings of the company. They are busy people who balance various competing commitments to work, family, charities and other boards, and they have a finite time to devote to any one board they serve on. This does not mean they do not take their roles seriously, but it does mean that the CEO needs to have an understanding of the varying levels of expertise among the board and to cater communications accordingly.
It’s important to strike a balance between a high-level overview versus granular details. Most board members will require a high-level strategic presentation accompanied by some detail when needed, but more granularity should be reserved for answering specific questions or moving the topic to special committees. Don’t bore your members with meaningless drivel or worthless presentations. Rather, be crisp in your delivery and be specific about the issues at hand. By all means, be prepared to answer specific questions with granular details, but leave these details out until interest requires it.
It should be obvious, but board members should enjoy coming to board meetings, not dread them. Make the meeting meaningful, productive and, if possible, enjoyable. If your board members dread attending your meeting, they will most likely show up in a bad mood. These moods can bring out the worst in people, and that is probably not what you want waiting for you when you arrive at the meeting.
#3 KEEP COMMUNICATIONS TRANSPARENT
The most sure-fire way to create a dysfunctional relationship with your board is to not fully disclose the background and preparation that has preceded important decisions. This is particularly the case for decisions that are time sensitive. No one likes to be surprised, and no one wants to feel like they are being backed into a corner.
When important decisions need to be made, early and continuous communication with the board is paramount. Include them in discussions and leave time for questions and answers. Don’t assume that because one director is on board that everyone else is. Keep directors informed about key issues between meetings. Don’t make assumptions about what they know. Be transparent and share both the good news and the bad. If the board learns bad news about the project before you tell them, then you have lost their confidence.
#4 KEEP COMMUNICATIONS PROACTIVE
There’s a popular adage that the board meeting should never be held at the board meeting. This just means that the CEO should communicate with board members in advance of the meeting to seek their input and advice. This should also include sending out the presentation deck in advance, creating another opportunity for feedback and input. You should never hold a board meeting when you do not know where your board stands on key issues in advance. These proactive measures can help flesh out and achieve alignment on the problems and challenges at hand.
Also, never reserve bad news for the actual board meeting. If you have bad news, it’s better to air it out with individual board members in private rather than reserving it for the meeting where the reaction will likely be more severe. If you are going to get beat up by your board, it is better to have it happen in private rather than on center stage and where the results will be recorded in the minutes.
#5 EMPLOY A VIRTUAL DATA ROOM AS A BOARD PORTAL
Although traditionally used as secure online repositories for M&A due diligence and other collaborative processes such as partnering and licensing, virtual data rooms are increasingly being employed as board portals for managing director level communications and activities.
Using a virtual data room as a board portal offers two distinct advantages. First, an online board portal helps with compliance issues. Today’s organizations are faced with an increase in both volume and complexity of compliance standards coupled with a surge of regulatory action. This new dynamic highlights the need for an organized corporate document repository with powerful reporting tools, ensuring transparency, reducing the stress of a regulatory review, and being prepared for an audit long before it happens.
Second, because board members do not operate under a centralized model but are often scattered across the globe and multiple time zones, a board portal offers a centralized repository for board communications that can be accessed anywhere and at any time. It also allows board members to easily look back and historical information and CEOs to always have a record of what was shared with the board.
Today’s corporate board members are more technically savvy and increasingly embrace the convenience of using an online portal for board communications. An online board portal makes it easy for board members to access, review and exchange critical business data wherever they may be. It also affords the ability to grant access to specific documents to external consultants and partners when the need arises.
#6 GET PERSONAL
When you have a personal relationship with someone, you are better equipped to understand that person’s motivations, areas of concern and personal style. That level of empathy translates into trust, transparency and reduces the inclination to be defensive. It’s a good idea to spend personal time with individual board members, maybe on their turf, perhaps once or twice a year.
As you get to know board members individually, you will begin to gain an understanding of their styles and unique perspectives. Who is most interested in numbers and who is most interested in personal relationships? Who wants specifics, and who is satisfied with the big picture? Learn each board members' communication preference. Is it email, phone, or face-to-face? Customize your communications to their personal preferences.
Having an understanding of board members’ drivers and passions enables you to relate to them in a non-defensive but empowered way. When they disagree on an issue or react in doubt or anger, you can validate their perspective because you understand their unique point of view, which serves to enhance your overall effectiveness.
#7 THE BOARD MEMBER IS ALWAYS RIGHT
That is obviously NOT TRUE, but you also want to avoid responding to questions or suggestions from board members in such a way that the board member looks foolish in front of his or her peers.
Certain people have egos and will go to great lengths to help you if they perceive you respect and value their position. Likewise, they will seek to undermine your efforts by creating substantial barriers and obstacles for you if you choose to trivialize them.
CEOs should always strive to field questions from board members in an affirming way, so that the board member feels that he or she has posed a valid question, while the CEO can demonstrate that he or she is informed on the topic. You do not always have to take a board member's suggestion, but you should always internalize the suggestion and determine the best course of action.
Remember that board members have signed on for the job to perform an informed, advisory role. They want to be meaningfully engaged. Let them be just that—and recognize them for their contributions.
#8 AVOID MAKING ASSUMPTIONS
Making assumptions on topics, without doing thorough due diligence, and without communicating openly with the board, can lead to problems. You may think your decision is correct, and it may be, but if it has not been communicated to the board, then they can feel blindsided. A CEO may believe he has alignment around a particular acquisition, for example. There might be an alignment at a high level; however, making the assumption that that high-level alignment is a license for the acquisition to go forward is probably a mistake. It is important for the CEO to fully educate the board on the project before he can expect to get full buy-in to move forward. Strive to understand the views of the individual board members and address their concerns.
Following these eight principles of communication will strengthen the CEO/board relationship, improve board cohesiveness, and raise the overall effectiveness of a CEO’s leadership.
To learn more about how a virtual data room can operate as a board portal, click here.
Richard Andersen is the founder and CEO of ShareVault. He has an MBA from the University of California at Berkeley and has worked for companies such as Apple, eBay, Ernst & Young and MarketFirst. He brings an entrepreneurial mindset to everything he does and is passionate about creating strategic partnerships.