Whilst having an effective CEO is undoubtedly the ideal for every organisation, the Board must remember that it, not the CEO, is ultimately responsible for the organisation and is accountable for all decisions taken by it.
Here are a few simple guidelines to help Boards avoid overdependence on the CEO.
The Engaged Board
The way in which a Board engages with the CEO can vary drastically from organisation to organisation. On one end of the spectrum you could have a passive Board. In this scenario, the CEO has disproportionate decision-making power whilst the Board makes limited contribution only ratifying management preferences. The other end of the spectrum is equally dysfunctional. We refer to it as the operating Board, whereby the Board has stepped far across the management threshold and is too involved in the operational aspects of the organisation.
The ideal here is the engaged Board. In this capacity, the Board is neither sitting idly by nor has it encroached into management territory. An engaged Board will understand the Management/Governance divide and its responsibility to oversee management, it will provide the appropriate level of guidance and oversight to the CEO and will give insight, advice and support to management.
The CEO and Chair relationship represents the Management/Governance interface of the organisation so building a strong relationship premised on honesty and clarity should be the main objective for both CEO and Chair.
Getting the balance right between support and challenge is also key. Whilst it is important to be supportive of the CEO, it is also essential that he or she is challenged where necessary. A useful phrase coined by Governance expert Dorothy Dalton, is to act as a ‘Critical Friend.’
Strong System of Delegation
Having a clear delegation of authority is an essential governance procedure for every organisation big or small. This system of delegation will ensure that the CEO’s level of authority is clearly defined and will formalise the Board’s duty to actively participate on the decision making process.
Delegated authority must be subject to oversight however, and there are number of requirements that Boards should adhere to when delegating authority. It must be:
· In writing;
· Individuals and committees need to report back and be held to account and;
· It should be reviewed regularly.
In addition to these requirements, the Board, CEO and staff should also keep a document which details how authority is dispersed throughout the organisation so that there is absolute clarity on who is responsible for what.
Investing in CEO
Lastly, the Board should consider investing time in training and developing the CEO. Training opportunities which assist the CEO to develop his or her delegation skills for their executive management team will play a huge role in staving off a CEO-centric organisation allowing for the development of a strong management team.