Exploring best practices for a first-time CEO building and effectively partnering

with a board of directors

Kieran Moynihan ( kieran.moynihan@cit.ie )

Entrepreneur-in-residence,

Cork Institute of Technology, Cork, Ireland

November, 2012

Used effectively, a board of directors is a critical asset to a first time CEO in driving a successful company

Used in-effectively or built poorly, a board of directors can vary from a huge waste of time, money and focus to an absolute nightmare for a first-time CEO

What should a first-time CEO look for in an effective board ?

•  Strong chairman

•  Pragmatic balance of management, shareholder and NED members

•  Small number of experienced NEDs bringing industry & management expertise

Critical role of chairman

•  A strong chairman – Sets the tone & formality of the board – Drives the effectiveness of the board – Balances effectively between management &

shareholders/investors – Resolves conflicts – Puts the arm around and kicks the CEO’s ass

as needed in private !

Composition of the board

•  Once investors come on board, there is a natural tendency by CEOs to want to pack the board with “supporters” !

•  In addition to the fact that most VCs will insist on a balanced board, – smaller boards are generally more effective – usually CEO and CFO ( or other key CxO )

sufficient from management side – CEO needs to resist tendency for defensive

mindset

Role of experienced non-execs •  Strong effective boards benefit from a small number of

experienced non-execs who bring significant •  Sector expertise •  Management expertise

•  Chairmen also use non-execs to help provide a balanced focus to strategy, key decisions and importantly conflicts between management and shareholders

•  You need non-execs who are –  strong –  strategic –  ask the tough questions –  will roll up the sleeves in a crisis –  Have a cool head in a crisis or conflict situation

7 golden rules for a CEO in a board

Formal & well-organised

Absolute honesty, openness & transparency

Focus : 20% on positives, 80% on challenges & areas where you need board’s help and creative suggestions

Inspire the board members to want to proactively help

Listen, listen and listen

Continually build confidence in you as CEO

Under-promise & over-deliver !!

•  Formal & well-organised – Comprehensive CEO and CFO report package – Detailed minutes, progress of actions – Regular scheduled board meetings

•  Demand very high attendance levels

•  Absolute honesty, openness & transparency – There is no other way – Holding back and spinning difficult news

inevitably leads to trouble and getting replaced –  If in doubt, ask the chairman for guidance

•  Listen, listen and listen ! – You need to build your own understanding of

each board member’s style, concerns ….. – Board meetings are your opportunity to

maximise the collective wisdom of the board – You need to spot warning signs of concerns

•  Focus : 20% success, 80% challenges – You need to give board members the

opportunity to contribute by helping in the areas you need most

– They are well capable of understanding the good news from the board pack !

•  Inspire the board members to want to proactively help ! –  An inspired board member will be thinking about ways

to help you outside of the board meeting –  This could make the difference on selecting a key

strategy, helping win a deal or deal with a crisis

•  Continually build confidence in you as CEO •  Every board meeting represents an opportunity for

the board to recognise your growth and performance as the CEO

•  With each passing board meeting, your maturity and confidence growing builds their confidence

•  This will be critical to deal with the eventual storms that come to every business

Under-promise and over-deliver !

Value of boards in a crisis

•  Usually board members have been in similar crises and have navigated out of them

•  Board helps put a structured discipline of responding to a crisis

•  Built-up goodwill is returned to you by a quality board in times of crisis