What Makes an Effective Chairman of the Board?
I was chatting recently with Dermot Hill of Intramezzo who posed this question. Given my experience as a Chairman and my love of this role, it set me thinking. Note that I’m going to use the word “Chairman” in a non-gender specific context in this article.
Companies appoint a Chairman for a variety of reasons. If they are about to float, or are seeking external investment, they may pick someone who is acceptable to the “money men” and who has contacts in that arena rather than going for someone who can add real value to the companies proposition. But I suspect the most common reason is that they think they should have one.
So why do people aspire to become Chairmen? For many, it is just another source of income along with their other directorships and consultancy – a lucrative way to fill time once they have left the comfort of the corporate world. Given the changes in company law on both sides of the Atlantic in the aftermath of Enron and Worldcom et al, I wonder how much life is left in these roles. But for others, and I believe this is a growing number, it is about getting stuck in and really helping a company (and it’s founders/shareholders) to achieve their dreams. I personally get much more satisfaction from the “Ah ha” moments now that I am a Chairman than I ever did when I was running my own companies.
To be an effective Chairman there needs to be a clearly defined role, and one which is well understood by all. It is not just about turning up once or twice a month to chair a Board Meeting, important as this task is. For me, a large part is about mentoring and getting the Executive to perform at its best. It can be really difficult for a Director or senior manager to ask for help in case this is perceived as a sign of weakness. Consequently they can get bogged down in their role trying to solve this and other problems rather than have and use their time to think and plan for the future. A skilled Chairman will recognise this situation and will offer a discreet sounding board for the Director to make use of. This is not about showing off, or demonstrating how clever/successful/brilliant the Chairman is – phrases beginning with “In my last company …” or similar must never pass their lips. It is about listening and questioning, not telling or instructing. Mentoring can also help the Chairman really understand the strengths and weaknesses of the team/Board and so help them perform to the best of their abilities if necessary by playing Devil’s Advocate and constantly challenging (constructively) all the plans and strategies being put forward. And because of this, an open style of communication is crucial.
Another important role of the Chairman is networking and putting their network at the disposal of the Company. Normally this will have a quasi-sales bias but of equal value is the trouble-shooting element – knowing the right person to bring in to solve a particular problem.
But by far the most crucial role is to be a support for the CEO/MD. It is their job to run the company not the Chairman’s so the Chairman should do everything possible to help them to do this. And without stealing the CEO’s limelight. For this reason, it is not a good idea for the Chairman to be the ex-CEO! One of the things that officer training in the military teaches you is that when praise is being handed out, always deflect it on to those under your command, but when criticism is given be a large umbrella and protect your team. As a commander, it is your fault when things go wrong even if you were not the actual culprit. So it is within a corporation. Protect your CEO and the Board at all times.
So should a Chairman be Executive or Non-Executive? I would argue that it must always be the latter otherwise the Chairman and the CEO are in direct competition. This was graphically illustrated a few years ago with BAe, the UK arms company, where the Chairman and CEO had a very public falling out to the detriment of the share price.
So what makes an effective Chairman? You will know if you have one because everyone will be aware what value they have added to the Company. Having someone who is a good listener, has a good network and does not want, or need, to take plaudits is a good start.