The board–executive relationship should run like a well-oiled machine. The AICD asks three of Australia’s leading directors about their top tips for fostering this successful dynamic.
A good relationship between the board and the executive is crucial in achieving governance best practice. It needs to run like a well-oiled machine.
The Australian Institute of Company Directors speaks with three leading directors and asks them to share their top tips for optimising the relationship between the board and the executive.
David Bacon FAICD
Chairman, Pacific Link Housing
1. Good communication
Unfortunately, in many organisations, a common understanding of what good communication actually means is sometimes elusive. Of crucial importance is the ability of the CEO and the chairman to communicate in an open and honest manner, building respect and trust. One of the best ways to achieve this is through the provision of complete and timely information to the board. There’s nothing worse than a data dump the size of an old-style yellow pages directory the night before a board meeting and expecting a sensible discussion and a good decision. If the board wants information, don’t expect quality with a late request the night before or on the morning of.
2. A skills-based board
Experience, respect and understanding from directors go a long way in building the relationship with management.
A highly skilled and experienced board will engender respect and an environment where management seeks and values the knowledge and views of their directors. Good directors can also be an excellent resource for counselling and mentoring young executives who are keen to learn, provided appropriate protocols are in place. This in turn contributes to a positive relationship between the board and management and a culture of trust and respect.
3. Good governance structures
Good governance and management structures lead to a positive culture which encourages and rewards openness and honesty. Clear understanding by both the directors and the management team of each other’s roles, and where the line of separation between the board’s role and operations, is needed. Of particular importance here are the organisation’s instrument of delegation and a formally adopted document articulating matters reserved for the board.
Conflict and a decline in relationships usually occur when there is a lack of clarity – whether that’s in business or personal life. In business, if everyone is clear about the organisation’s direction and who is responsible for what, then relationships between the board and management will be positive and the chances of success are enhanced.
Naseema Sparks FAICD
1. Practice mutual respect
Though the roles of the management and board differ, they must work as a cohesive team. Irrespective of the situation a company finds itself in, every board and management member has something of value to offer; their own unique perspective based on a wealth of expertise and experience. Respect and listen to everyone.
2. Communicate openly
Nothing destroys trust between a management and board more than factional and “out of school" communication. Keep communication open, honest and around the table. Appreciate differences of opinion and encourage constructive discussion and debate. A good chairman will understand how to manage diverse views for the benefit of the business, the people and for shareholders. Most importantly, “play the ball, not the person”.
3. Get to know the team
Healthy and productive relationships are not only built during working meetings. Understanding the individual behind the role is both valuable and rewarding for everyone around the table. Boards may only meet 8 to 10 times a year, whereas management meet every day - getting to know each other personally is important to working together.
Sylvia Falzon GAICD
Non-Executive Director, Regis Healthcare
1. Challenge and empathise
While board and executive teams need to challenge each other, having empathy can often yield a better outcome. Putting yourself in the other person's shoes may provide a perspective or understanding you may not have considered.
2. No surprises
Having an open and transparent relationship ensures news, both good and bad, is communicated quickly. The chair and CEO relationship sets the parameters to guide the organisation.
3. Check in
Don't wait for a board review to understand how the relationship between board and the executive is going. The board, via the chair and executive, via the CEO, can get feedback on the relationship when the chair and CEO do their regular catch ups. If actions are required, it's important to follow through.
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