Directors of early-stage technology companies have two roles that are not always in harmony. A large part of their fiduciary duty to the company is to advise and mentor management teams that are often young and inexperienced. Directors need to give CEOs and other executives a lot more latitude than might be provided in more experienced companies, in order to let the CEOs make mistakes and learn from them. Identifying areas needing more work or decisions that might have been made differently are part of the mentoring process. Also importantly, directors need to be available to CEOs when they ask for help and advice. To do this, directors must earn the trust of CEOs in order to expose those areas where they need help.
However, Directors are also responsible to ensure that the CEO has the requisite set of skills and judgement to lead the company and so must constantly be sitting in judgement. If necessary, directors may need to replace a CEO who is not performing well.
From the point of view of the CEO, this is a real conundrum. On the one hand, s/he should ask for help when needed, and accept and be guided by advice from the Board when given. But on the other hand, each error or weakness might be added to a lengthening list of oversights that might ultimately get her or him fired. (It is not surprising that there are many support groups for CEOs, including AceTech, Young Presidents’ Organization, TEC and many informal mentoring arrangements where CEOs can discuss issues with their peers without exposing weakness to the Directors who sit in judgement.) While the onus may be on the CEO to seek guidance from his Board, many CEOs might not want to take the risk.
With this in mind, the onus should clearly shift to the directors. They need to develop a rapport with the CEO that inculcates a culture that provides support first, guidance second, and criticism last. Given the risks perceived by the CEO, this may take a long time and many conversations before the Directors can build sufficient trust to permit the CEOs to open up.
A few protocols may help the Board get there sooner:
- Directors should state plainly that their responsibility is to support the CEO in all decisions s/he makes, even if the Directors don’t agree with them. This should give the CEO more confidence in taking the initiative to identify needed improvements and make changes.
- Directors should also establish that the CEO will never be criticized or held to account on issues for which they ask for advice and guidance. This may help the CEO open up sooner.
- Finally, the Board should also be clear that they will not seek a change in the CEO’s position without first clearly laying out the areas of improvement needed in the incumbent, and giving him or her a fair opportunity to make those improvements. (This would not, of course, be extended to instances of malfeasance or misconduct.) This may give the CEO the confidence and trust that s/he will not be blind-sided by the Board, or replaced without a fair chance to meet clear expectations.
If the Board can establish this working protocol with the CEO, then the CEO should feel much more secure in asking for guidance where needed, and welcoming advice from the Board. Overall, the company should benefit from a greater ability to bring the experience and wisdom of all Directors into play.
This article first appeared in the Spring 2012 edition of The Hire Standard – the newsletter of Corporate Recruiters, British Columbia’s leading recruiters of high technology talent.