For the effective operation of any organization, a board of directors needs to work cohesively with the management team toward its common goals. Dawn Zier sat down with three business leaders who, like her, have experience as both a CEO and a board member, to discuss how to measure and strengthen that alignment.
Carter Pate, former CEO of Modivcare and MV Transportation; director at Option
Care Health, GlobalStep and Purple Innovation
Mark Schiller, former CEO and board director of Hain Celestial Group; director at Kontoor Brands
Mike Spanos, executive vice president and COO of Delta Air Lines; former CEO of
Six Flags; director at Casey’s
Moderator: Dawn Zier, former CEO of Nutrisystem; director at Hain Celestial Group, Spirit Airlines and Acorns
DAWN ZIER: All of you have sat in both the CEO and the director seat. What are the areas you feel are most important for the board and CEO to have clear alignment around?
MIKE SPANOS: The first area of alignment has to be financial transparency. Second is clarity around board governance and ensuring that the CEO and board chair have a mutual understanding of what this entails. The level of board engagement is different for every company and is situation dependent. Third is the importance for the board to be aligned with the CEO when it comes to talent, especially with respect to succession planning. This requires the board to have adequate exposure to the team. Along a similar vein, there must be alignment around an executive compensation program that supports the CEO, sets the right behavior for the team, rewards for performance and drives sustained results for shareholders. Fourth, alignment on the strategy and associated capital allocation is a key process for the CEO and board. Finally, there must be alignment on corporate risk. With emerging megatrends, boards are really punching up their focus on risk oversight and holding the management teams accountable for putting the right processes and monitoring mechanisms in place.
MARK SCHILLER: There are four primary areas where alignment is critical. First and foremost is the strategic direction of the company. If you don’t do the hard work upfront to debate and align, it impedes progress down the road, which leads to frustration. Second is role clarity. Agree on the role of the board, the role of management, and understand the “unofficial” role each director plays on the board. Third is an understanding of how the board and management will engage with each other, especially when off cycle. Rule of thumb for CEOs: If something important happens or changes, communicate with your chair immediately. Directors, like most people, don’t like surprises. And finally, alignment around risk management: Are we keeping up-to-date? Are we adequately monitoring? Do we have the right escalation protocols in place? Risk management is much more than a once-a-year management topic for the board. It needs to be embedded into every meeting and constantly challenged.
CARTER PATE: Right off the top, I think the one thing every director is obligated to fully understand and be aligned on as a full board is “What are your CEO’s weaknesses?” The board always needs to keep that in the back of its mind. Every CEO gets into the seat because they bring an incredible amount of talent in certain areas to the table. The board is often impressed, but they often don’t have a full appreciation of the CEO’s weaknesses.
For example, a CEO who came up through finance probably doesn’t have deep sales and marketing expertise. A CEO who is a marketing guru likely doesn’t fully understand capital markets and leveraged finance. Boards need to ensure that the CEO has the support they need to succeed, especially when dealing with issues that might not naturally be in their wheelhouse.
I have observed that many boards that have had a major misstep—resulting in them losing confidence in the CEO—forgot what their CEO’s weaknesses were. Directors have an obligation to do a much deeper dive and challenge management in areas where the CEO has an acknowledged skill gap. In these cases, in addition to holding the CEO accountable, the board needs to also reflect back on its own failure.
ZIER: What can impede board and CEO alignment?
PATE: Failure of the board, and specifically the chair, to adequately coach and provide input to the CEO, or failure of the CEO to be receptive to feedback and embrace some of the directors as trusted advisors, can impede alignment. Being a good mentor to the CEO is a board obligation. Being able to have open conversations that do not make the CEO become defensive requires gravitas.
The chair needs to have gentle one-on-one pushes with the CEO, like, “Look, it’s just you and me talking. Have you considered getting a second set of eyes on this issue? We’ve talked about this kind of thing before, and it may be a little bit outside of your swim lane. How can we help? Are you surrounding yourself with the support you need?”
SCHILLER: Lack of understanding around what the board wants to be involved in and wants to see can rightly or wrongly lead to a board questioning management’s transparency and openness. Conversely, management not anticipating and providing the board with the information it expects can result in the board becoming overly prescriptive in its information requests, which may lead to the management team feeling a perceived lack of trust. Without transparency and trust, it is near impossible to have alignment.
My bias has always been to over-index on engagement. However, if it gets to a point where it feels as if the board is being intrusive or overly involved in day-to-day decisions, the CEO needs to be able to push back. As a CEO, I always appreciated the different perspectives of the board, the backgrounds they had and the experiences they shared, which led to my being a better decision-maker. Active board engagement served the company well, particularly during a time of transformation where we were changing strategic direction.
SPANOS: The top impediment to alignment is lack of trust. Relationships matter at every level, and both the board and the CEO need to work hard to build mutual trust. The board-management dynamic is naturally full of friendly tension. You want to enable respectful, good debate, and that circles back to trust. Also, if clear processes are not in place at the board, committee and C-suite level, there can be a breakdown in alignment.