Board Chair – CEO Relationship

Board Chair CEO Relationship
Board Chair CEO Relationship

Imagine that you are having a quick lunch by yourself in a crowded café.  Seated at a table next to yours are two men in heated debate that is animated to put it mildly.  You can’t avoid being distracted by their conversation, particularly when you hear the words “board chair” in the conversation.  At that point you actually start listening.  One says to the other, “I don’t report to you. I report to the board.”

“Yes,” the other replies, “but you report to the board through the chair.”  “I will continue to report directly to the board,” comes the reply.  They are actually debating the flow of authority from the board to the CEO and the accountability back to the board.  Imagine that.  It doesn’t sound like a happy relationship.

At that point you begin to think of your own situation.  You are the chair of a not-for-profit organisation or NGO, and you begin to wonder, “To whom does the CEO report?”

To solve this debate we must first understand the relationship between the chair and the board.  The chair is the chief servant of the board, not the most powerful member of the board.  The chair’s primary role is to lead the process of governance, not to supervise management.  Stated another way, the chair’s focus is on the board and its decision making process, not on the CEO and her/his leadership and management of the staff.

The delegation of authority and responsibility from the board to the CEO should be expressed in the job description of the CEO.  That job description should be part of the Board Governance Manual.  The specific direction that delegation takes is expressed in the Strategic Plan, which is also part of the Governance Manual.  It is also possible that authority from the board to the CEO may be contained in a specific motion passed by the board, although this should not normally be necessary.   In other words the authority of the board flows to the CEO in the form of written statements, not spoken directives from the chair or any other individual or committee.

All authority has limitations associated with it.  The authority that the board delegates to the CEO is no exception.  Words like “limits”, “boundaries”, “constraints”, “parameters” are used to describe these limitations to authority.   In the Relationship Model these limitations are stated in the negative, like the Ten Commandments, and serve to define the Circle of Freedom that the board gives to the CEO to fulfill his/her responsibility.

Accountability flows directly back to the board, not to the chair, not through the chair.  The accountability process should also be defined in the Board Governance Manual.  The process includes the same two components that are contained in the delegation of authority and responsibility.  First, there should be a process of annual review of the strategic results of the organization and the tactical goals of the CEO in his/her annual performance review.  Second, the Governance Manual should define the times and details of monitoring the policies that limit the authority of the CEO to ensure that the CEO stays within her/his Circle of Freedom.

When these processes are in place and practiced, there is no need for supervision or direction, authorizing or monitoring of the CEO by the Chair.

The chair and the CEO are peers.  One focuses on the governance process, the other focuses on the management process.  Each has a specific role within the organization.  Authority and responsibility do not flow from one to the other.  Nor does accountability flow from one to the other.

The Relationship Model, summarized (here), is designed to define all of the direct working relationships between the stakeholders and the board, the internal board relationships and the relationship between the board and the CEO.  Direct working relationships are defined as relationships where authority and responsibility flow from one to the other and where accountability is mutual, flowing in both directions.  The relationship between the chair and the CEO is an indirect working relationship.  It is a very important one, but one that will work smoothly only when it is defined carefully and understood in the same way by the board, the chair and the CEO.

Any comments?  Let me know what questions this raises in your mind as you think of how to apply these principles in your organization.

What is Governance?

What is Governance? How to govern a board
What is Governance?

Governance is Like Parenthood

This is addressed to the 3.3 million of you who have asked search engines, “What is governance?’” Here’s the best answer I can give you.

Imagine that you are a young child again.  School is out for the day.  You’ve been home, but now you are outside playing with your friends.  You are well aware of your limits and you respect them.  They define your freedom.  In my case I knew that I was free to play anywhere in the small town we lived in.  I also knew that I couldn’t go past the cemetery to the south, across the tracks to the west, beyond Swan Creek in the north and Bell Road to the east.  I also knew that I couldn’t stay out after dark, and I couldn’t miss supper.

Ironically, it was those limitations that gave me freedom.  It is this simple principle that makes governing more like parenting than managing.

A governing board gives its CEO freedom to pursue the strategic direction that it has defined in the strategic plan.  Instead of micro-managing by asking the CEO to come back for specific permission on a host of management decisions, the board simply states the limits of the CEO’s authority.  Within his/her circle of authority, defined by those limits, the CEO is free to be excellent and creative in reaching for the strategic goals.

This governance principle has its root in the Old and New Testament.  The basic “job description” of every human being has two components: Love God and Love your neighbor.  God gives us far more freedom in fulfilling those two responsibilities than we give Him credit for giving us.  Instead of requiring us to come back again and again for permission for all of life’s decisions, He give ten straightforward limitations: the Ten Commandments.  They are stated in the negative and they define our freedom.

The first three Commandments relate to our responsibility to love God.  The other seven refer to the limitations placed upon us in loving our neighbor.  To see this in the form of a diagram, click on Ten Commandments.  As long as we stay within the limitations expressed in the Ten Commandments, we are free to pursue our love for God and our love for our neighbor as we wish.

Governing boards will achieve far more if they follow God’s example of delegating authority with limitations that produces freedom to fulfill responsibilities.

It is frequently the case, however, that board members bring their management experience into the board room instead of their experience of parenting or memories of being parented.  That is why boards fall naturally into the bad habit of making management decisions instead of setting governing policies that define the strategic objectives and the limitations of the authority they delegate to their CEO.

Many boards begin life as advisory boards.  They act as “cheerleaders” and in some cases don’t even make management decisions.  This is particularly true when a founder recruits his/her personal friends as a founding board.  In these cases, the boards may rubber stamp decisions that the founder has already made.  After all, he/she knows more about it anyway.

As boards mature and the organization grows, the board may take on more management responsibility.  There comes a point in this stage of an organization’s growth and development where growth cannot progress further.  The board simply can’t handle the volume of information or decisions required, given the time they have as volunteers.  It is at this point that a board is well advised to make the transition to becoming a governing board.

The board does this by creating policies to define the desired strategic results and by delegating the authority and the responsibility to the CEO to achieve them within the limitations of authority and available resources.

The Relationship Model was developed to apply God’s design of relationships to the governance of faith-based non-profit organizations.

Les Stahlke
Copyright 2013, Inc. This article “What is Governance” may be copied and distributed provided it is not edited and the author is mentioned with the distribution.

Consensus or Majority – You Decide

Consensus or Majority vote
Consensus or Majority vote

Imagine that the discussion on a motion has finished and the Board Chair calls the question.  “Who’s in favor?”  Some hands go up, some don’t.  Some seem to mumble assent.  You aren’t sure if this is a vote or if it’s an expression of consensus.  It appears to be somewhere in between, but no one seems to have objected so you guess it passed.  People did seem to agree with the motion during the discussion.  Anyway, the Chair has moved on to the next item.  The experienced board members understand what it all means.  You’re new, but you assume that you will catch on to the system with time.

Boards, management teams and other groups making decisions have two choices in how to approach the making of decisions – consensus or majority vote.  That assumes, of course, that the leader of the group (or a small faction within the group) doesn’t force a personal agenda upon the group, pretending that the group has made a decision freely.

Consensus occurs when the majority agrees on a certain course of action and everyone else in the group is willing to proceed for the sake of the group, even though some may not have chosen that course of action and would prefer another.  Consensus does not occur if even one member of the group is unwilling to proceed with a decision that he/she cannot support.

Consensus can be perfect, strong, medium or weak depending on the number of members of the group who agree personally with the course of action the majority wishes to follow.

A perfect consensus occurs when everyone in the group is unanimous in the decision.  This perfect consensus is sometimes erroneously thought to be the only form of consensus.  But consensus can occur without unanimity.

A strong consensus occurs when 75% or more of the group agrees and the rest are willing to proceed with the decision.

A medium consensus occurs when 50-75% of the group agrees and the rest are willing to proceed.

A weak consensus can occur when there is a plurality of viewpoints but where no group has more than 50% of the support.  If the group is still determined to decide by consensus, the majority may be willing to proceed with a minority who forms the one of the groups within the plurality of viewpoints.

Consensus offers several distinct advantages over deciding by majority vote.  First, there is much more involvement in and therefore ownership of the decision.

Second, it is easy to “test” the consensus with an unofficial poll or “straw vote” to see if consensus has been reached.  If not, the group continues the discussion until the poll indicates that consensus has been reached or that consensus is not possible.

Third, everyone in the group wins.  Since consensus is a matter of freedom of expression, no one is forced to proceed to against his/her will.  There are no “losers” when there is no coercion, blatant or subtle.

In one management team, the CEO, using the Relationship Model, gave the team the freedom to make all management decision within clearly defined limits.  One of the limitations was that all the team’s decisions must be made by consensus.  If consensus was not possible, the decision automatically defaulted to the CEO.  This leader reported that in four years, the team has never failed to reach consensus.  Imagine that.

Boards may also use consensus for the same benefits of involvement and ownership.  The Relationship Model would lean towards this form of decision making by any group.  The difference between management teams and boards is that if the board cannot reach consensus, the decision cannot default to a stronger authority.  In this case the Board has no alternative but to revert to a vote where the majority required for the decision will determine the outcome.  Normally, Board members are expected to support the decisions of the Board, but the sense of ownership may be lost in the process.

Consensus increases unity and commitment within a group, but the process of reaching consensus within a group must be clearly understood and agreed by the entire group before the process begins.

Les Stahlke, President Inc.