The incumbents’ view

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By Stanislav Shekshnia – INSEAD and Ward Howell International

 

 

 

Since the work of the chair is done behind closed doors, little is known about the people who preside over what is the most powerful body in any organisation – the board of directors.

To shed light on the workings of board chairs in different countries, a team of researchers put together by the INSEAD Corporate Governance Initiative and Ward Howell Talent Equity Institute conducted 74 face-to-face interviews with experienced professional chairs (not doubling as CEOs) in nine countries – Belgium, Denmark, Italy, Netherlands, Russia, Singapore, Switzerland, Turkey and the UK. Among the main issues explored were what makes an effective chair and what key factors contribute to the chair’s performance.

What do effective board chairs do?

To our surprise, across countries, respondents had a similar view of what it means to be an effective chair. Cultural differences appeared in detail, such as the length of board meetings, communication formats or the meals a chair invites other directors to. But our respondents believe that a good chair, first and foremost, provides effective leadership to the board, enabling the latter to function as the highest decision-making body in the organisation. Good boards make decisions that allow executives to run the business efficiently. A good chair works for the board, while the board works for the company and its long-term development and success. As one respondent put it: “The chair is responsible for and represents the board, while the CEO is responsible for and is the public face of the company.”

Effective chairs lead directors by engaging them in a collective effort, creating an environment for collaboration, encouraging productive behaviour (and discouraging non-productive behaviour) by facilitating group reflection, giving feedback, and creating opportunities for learning and development. A chair from the UK defined his approach as follows: “I try to take as little room as possible. My task is to help others to speak their minds.”

Good chairs don’t give orders or issue directives; instead they steer or nudge followers by setting agendas, framing discussion items, soliciting opinions, selecting a format and order of deliberation, reframing, re-stating and synthesising information. A Dutch chair explained: “I need to think very clearly about whom I ask to talk first and who talks last about the specific topics. Who is irritated by who or what? Who is brooding about what? I need to be very alert about recognising body language.”

Effective chairs set clear expectations and establish rules, but the latter serve as guidelines rather than set-in-stone laws. Good chairs provide exemplary leadership by consistently displaying the attitudes and behaviour they expect others to follow. Providing ‘indirect leadership’ is probably the most accurate way to describe it. As a chair from Russia put it: “I rarely express my position. If I do – I speak last.”

Chairs also represent the board in relationships with key stakeholders. These may vary from company to company and country to country, but, in all cases, include shareholders and CEO/management.

“The chair’s presence should be felt as little and as much as necessary. A good chair gives other directors room to speak and yet is there to direct the conversation”

In working with shareholders, effective chairs strive for a balance between proactivity, equality and fairness. They want to be seen as available, listening and attentive, but independent and non-partisan, always putting the interests of the company before those of individual shareholders, no matter how big or important the latter may be. They protect the board’s independence and shield it from shareholders’ interference. A respondent from the UK described how: “We operate under the two meetings principle: one is for directors (the board), another for shareholders. If you happen to be both, learn to behave yourself.” Our research also demonstrated that board chairs of companies with reference shareholders are more proactive and performance-oriented than those of widely held public companies, who tend to be more reactive and compliance-oriented. As one of the latter noted: “I make sure shareholders know that I am available, and I also make sure none of them gets more than others from me.”

Effective chairs build productive relationships with the CEO, albeit in different ways, as three of them explained: “We fix annual objectives for his development and have a formal coaching session every quarter”, ““[We have] one-to-one informal meetings every two weeks”, “We SMS each other every day”. But the outcome is the same: effective collaboration between the board and management, filling the information gap between non-executive directors and management, and reinforcing the CEO’s commitment to the company. Good chairs interact with the CEO as representatives of the board rather than independent players, and ensure the whole board is involved in issues such as CEO compensation, evaluation and development.

What makes an effective board chair?

From the research we were able to distill a number of personal characteristics that incumbent chairs considered as enablers of effective work. Although most respondents came to the chair position via the CEO job, all agreed that the work of a chair required a very different type of leadership, and that some CEO habits reduce the chair’s effectiveness. As a chair from Russia put it: “My advice to novice board chairs is: ‘What got you here will not make you successful. Unlearn your CEO activism and become a hands-off, reflective leader’.”

Collectively, the respondents identified four personal attributes and two sets of skills as enablers of the chair’s effectiveness, as follows:

Passion A good chair not only does the job professionally, but also cares about the company, the board and the people. In the words of one respondent: “It’s like any other profession – you can only reach the top when you are passionate about what you do. In this case it’s the board  and the company it governs.”

Humility and ego management One of the most experienced participants from the Netherlands described it this way: “If you intend to use your chair position as a platform for self-aggrandisement, you are in for trouble.” Words, such as ‘restrain’, ‘non-domineering’ and ‘leaving room for others’, were often used to refer to fostering productive board discussions which lead to effective decisions.

Patience and reflectivity Passion creates energy, enthusiasm and a focus on achieving results. But in leading the work of a group of professionals it must be tempered by patience and the ability to pause and reflect. The chair should not rush to get things done quickly but focus on getting things done properly. Among the questions respondents ask after every meeting was, ‘What will you take home to reflect about?’

Availability and presence The chair’s presence should be felt as little and as much as necessary. A good chair gives other directors room to speak and yet is there to direct the conversation. In the words of one respondent from Denmark: “It may be called a non-executive and part-time job, but I have no illusions: I have to be ready to mobilise and commit all my time to this board if the need arises. And I stay in  permanent contact with the company to make sure I don’t miss this need.”

‘Soft’ and ‘hard’ skills While to an outsider it may look highly technical or even purely ceremonial, the work of a chair is almost exclusively about human relations – often with specific types of people: senior, successful, action-oriented, performance-driven, sophisticated individuals from different backgrounds and countries. Managing these relations requires exceptional behavioural skills. Among them, respondents most often mentioned the ability to listen, ask questions, frame issues, and provide feedback. As one put it: “It is important to listen to someone who is labelled a trouble-maker with a non-judgemental attitude. When you listen to them genuinely, you deserve the right to say something.” In the ‘hard skills’ category they referred to business acumen and systemic thinking.

Interestingly, many incumbent chairs do not consider industry knowledge a must. As one of them put it: “For a chair to enable the board to make decisions it’s better to have ‘an empty head’ – to have no opinion on the subject matter. When you are an industry expert, it’s hard to achieve.”

 

About the Author:

Professor Stanislav Shekshnia is Senior Affliliate Professor of Entrepreneurship and Family Business and co-director of the “Leading from the Chair” programme. Senior Partner at Ward Howell International Talent Equity

The full report can be found on the website of INSEAD’s Corporate Governance Initiative at https://centres.insead.edu/corporate-governance-initiative/meeting-reports/index.cfm