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).

How Does a Governing Board Pick Up on Lack of Operational Discipline in Its Organization?

The risk management literature includes as a significant risk, (leading to many other risks), the lack of organizational operational discipline. Operational discipline is the ability of management to see to it that organizational processes are maintained such that deadlines and milestones are met with the appropriate quality, payables are paid, financials are recorded, records kept, projects are on time, calls and inquiries responded to, etc.

The inability to do this spells not only accumulating problems, but slipping even further behind and, eventually, the failure to do something, or many things, that are critical, e.g., filing a key report, submitting a proposal, or paying a tax on time. If the lack of discipline is due to fundamental administrative ineptness in the leader, there will eventually be a meltdown. The governing board must detect this early and change leadership (quickly). This failure of operational discipline, one is tempted to think, is unusual, but when one realizes that about 50% of NP chief executives are barely competent, or frankly incompetent, (unable to successfully run the organization for a sustained period), it should not seem surprising. Consequently, a board must be vigilant.

How does a board pick up on this and diagnose it? First, a board must have written standards of performance, i.e., policies, of key operational indicators, boundary requirements, such as timely receipt of monitoring and financial reports, the paying of obligations, and filing of required reports. If it is a Policy Governance board, these will be in the policies, and if they are not, get them in! Secondly, it must monitor for assurance of compliance.

However, as things slip and don’t get done, management will always have reasons for not getting things done on time—excuses that sound like reasons, blaming being a common one. In a NP, ministry, or a church, the board always wants to be “nice,” even kind; so the board is inclined to cut management slack—and it is usually too much slack. The board will procrastinate doing anything perceived as negative. In fact, management will get good at keeping the board at arms length and, as things get worse, eventually resorting to hiding the situation—not fully divulging the true state of affairs. As the board attempts to press its questions a bit more, it will be resisted and diverted. How long will the board acquiesce? It should not at all! This behavior is a very dangerous sign.

The board must promptly discover the true state of things, and the root cause. Typically, in small to medium sized organization it will be the executive. The board must investigate, (preferably via an independent assessor), and act promptly. Boards often freeze at this point, procrastinating even more. But, the situation is fundamental and is not temporary, nor self-rectifying.

What is the Purpose of Board Governance? A Recurring Question

 I’ve noticed at academic gatherings, seminars, workshops, conferences on board governance, and articles the same question, in one form or another, is persistently asked, usually with the sonorous thoughtfulness of the professorial tone, “Of course, what is the purpose of board governance?” As though that is the real show stopper. It often is, because no one agrees! Obviously, this is an important question, because without an answer, one cannot do research on the effectiveness of boards regarding their governance! A large percentage of governance research asks, in one form another, the question, “Is the board happy.” Does it feel it is being a success? Or, does the board meet my particular criteria (that I invented)? But this is close to the blind leading the blind. In fact, in many articles governance is never defined. Governance becomes what makes the board feel good, even conviviality. Is there a consensus (or authority) on the purpose of board governance?

Most of the answers are attempts at behavioral descriptions, and the descriptions are made up of parts—behaviors—of what a board does or should do. Dr. Russell Ackoff pointed out that one will never arrive at purpose by naming parts. That is like trying to explain what a car is for by laying out the pieces and naming them—even explaining what each part does. We try the same thing with governance. The bar association manuals on nonprofit governance explain the board’s legal duties as though that description explains the purpose of the board. That is like explaining what the automobile differential should do, and then the transmission, and then the fuel injection system, and saying every car must have them, true, but those descriptions, even if exhaustive, do not give us the purpose of the car or what a car does.

Purpose is a systems concept. One must ask what the system is for. But unless one knows the large purpose of governance, how can one name the necessary components of governance? And how they must work together?

Thinking about the Dimensions of leadership

 Thinking about leadership and its multidimensionality - there are at least three dimensions to leadership, each very rich in its own attributes:

1.  The interpersonal dimension: does leadership know how to delegate, how to affirm, empower, correct, monitor, develop and encourage, etc? (The interpersonal is necessary to spark a high performance work group and…)

2.  The team dimension: Does leadership have the knowledge and competence in facilitating true optimal team dynamics for best collective thinking and decision-making (and performance) on behalf of the entity as a whole, and

3. The technical knowledge, cognitive ability, and competencies to respectably handle the technical requirements and “thinking” responsibilities of the job at the leadership level in question. (This side of the frame includes sufficient financial aptitude, strategic thinking, discernment and awareness, performance science, self-discipline, domain understanding, metrology (numbers thinking), etc.

(These are apart from, and in addition to, the vital core of values, virtues, and wisdom desired in one’s leader such as humility, integrity, caring, teachability, curiosity, goodness of spirit, tenacity, discernment, etc.)

No wonder leadership is difficult pull off and difficult to pin down. Each author/authority sees and focuses on a different part of the elephant. 

No one person possesses these to an ideal degree, but if one is missing or notably weak, it could be fatal to effective leadership.

 To paraphrase a saying from Tolstoy, “Every happy organization is happy in the same way; unhappy organizations are unhappy in their own individual ways.”

What NBA Team Performance Can Teach Executives

Around the 18^th of Feb. our local public radio station aired a study and discussion (probably an NPR program) that had looked at various NBA team performances but with an interesting twist. The researchers studied the performance of several NBA teams when selected players were on the floor versus the team’s performance when the player was not on the floor, perhaps expecting to gauge the positive impact the player in question had on scoring. What they found on occasion was a reverse effect. The team did better when certain players, players good in their own right, were not playing!

That reminded me of a comment made several years by a representative of the Chicago Bulls about their prize player, Michael Jordon, that they paid him what they did, not because he was a great basketball athlete, which he was, but because he sparked the team and caused everyone on the team to perform better as a team. That attribute is valuable. That was worth a lot, and the Bulls recognized it! Great insight. (What should we pay players to not play?)

It’s a lesson that boards and organizational leaders need to grasp. To optimize the performance of a team, the leader must pay attention to the “chemistry”—the interpersonal behaviors between staff/team members that play off each other to spark optimum decision-making and creativity. Several scholars of team dynamics have written about it, from J. Richard Hackman to Jon Katzenbach, to Meredith Belbin, but it sometimes seems that organizational leaders have failed to read or learn. It is a vital competency leaders must acquire to create great teams. 

Thought - Have you ever asked (or sensed you should) a member of your senior staff not to attend a meeting so the meeting dynamics will be better?!

Leadership and Learning, a Catch 22

There has been an emerging line of interesting research on feedback and learning, which should be of interest to those interested in self-improvement, particularly when it comes to leadership. There is an inherent Catch 22 concerning leadership development; that is, as one becomes more successful and rises in one’s leadership role, the temptation is to develop a higher opinion of oneself - i.e., become less humble. Less humility generally blinds and causes one to be less teachable—less open to learning, especially when the information is contrary to the person’s perception of himself. But, the challenge is that the people skills in leadership become evermore important; one already has demonstrated the technical competence and mastery, and now what becomes important is the ability to lead people and groups (teams) of people. Yet, there is a diminishing return on the effort (and pain) to further improve our leadership—our ability to positively influence people. At “higher altitudes” of leadership the attributes that differentiate good leadership become more finely tuned so to speak - more subtle, yet critical for effective performance as a leader, and the effort to discover them and the pain of confronting them more difficult. One must learn some painful things about oneself, but on the other hand, one is also likely to be less open to that kind of feedback.

Research by Dr. Ayelet Fishbach (University of Chicago B. School) and Dr. Stacy Finkelstein (Columbia’s School of Public Health) supports the notion that when we are novices it is positive feedback that we need to keep learning, encouragement for what we doing right, but as we become good and more expert at what we do, it is negative feedback, correction and criticism, that is most “efficient” for our continued improvement (think of being coached in a sport). Yet, as noted above, it is the negative feedback that is most difficult for a successful upper management level person to swallow.

The lesson: to become very good and achieve mastery and expertise in leadership, the attribute of humility becomes increasingly important, enabling curiosity about our effect on others and progressive learning when it is tough to hear. The book Denial studies the Managements of well known companies that refused to hear bad news (and fell), and Marshall Goldsmith’s book, What Got You Here Won’t Get You There deals with executives that have a hard time hearing the bad news about their habits, but must to grow.

Can Leaders Learn - continued

How does an executive coach, like Marshall Goldsmith detect whether an executive is redeemable? My friends who do that work for a living say you can tell within seconds. It is based on how the executive responds to the report on the feedback (e.g., a 360 round of interviews of employees and peers) from the coach regarding what his employees (and others) say about him, even when extremely painful (and it usually is). In other words, malleability reveals itself within seconds. On the other hand, denial, blaming, excusing, etc. will begin in everyone else within 24 to 48 hours. They may appear to receive the information with equanimity, but immediately their thinking is saying, “This cannot be true about me.” “There is some mistake.” “The question weren’t asked properly,” or “people are out to get me.”

This characteristic of receptive malleability or openness, or teachability (even through pain), is an attribute of humility. The old English word is meekness. Meekness as used in Greek and in the New Testament had little to do with softness or weakness and everything to do with excellence under humble control. The Greek word in classic Greek was prautes and was used to characterize a well trained war horse that would be highly responsive to his rider, the cavalry soldier, even in the terrorizing heat of battle, a horse so big and powerful that he really didn’t need to pay attention to anyone! But was responsive when it counted. This is an attribute of a superb leader as well. The leader must be teachable, must be able to listen genuinely and effectively, must care about his employees, must be able to say, I might be wrong,” must be able to commend and give credit readily and generously. This in addition to the strategic technical skills it takes to run the organization. Patrick Lencioni is right (in his book, The Advantage), however; if a leader cannot create a healthy organization in terms of a high performance interpersonal culture, all else is for naught.