Monitoring a Newly Hired Chief Executive & in Growing Low Trust Situations

An important principle of board governance, Policy Governance included, is that when trust in the CEO's performance is low, monitoring in some form is ramped up. The Policy Governance board’s values, and hence its policies, don’t change, but frequency and immediacy of monitoring increases. This behavior occurs typically under two conditions: a newly hired chief executive (whose competence is not yet demonstrated), and secondly, where there is a growing concern about compliance concerning a specific policy.

The former situation might result in monitoring those policies indicative of the health of organizational culture and of financial performance. They tend to be more directly and immediately impacted by the executive’s behavior in the first case and his grasp of financial leadership in the second, competencies of which the board needs early reassurance.

If the board is not a Policy Governance board, a board style typically reflective of low trust will result—questioning and probing increases and becomes more intense (often coupled with advice). This dynamic does not necessarily reveal the board members’ underlying values (which may vary between them, but never expressed) nor why the particular questions are being asked, reasons which the CEO must infer.

A board’s careful, more frequent monitoring of a new CEO is appropriate, but as demonstration of competence and reliability grows, monitoring frequency can be backed off to an annual frequency (except for financial management indicators).