This book is targeted for those of you who sit on boards, might yet sit on boards, or have an interest in how boards can and should function in the post Sarbanes-Oxley world. After the high profile implosions of several major firms and the revelations of executive criminality, board negligence, and accounting failures, the relevant parties have put pressure on firms to do a better job of functioning in the best interests of the owners of the firm; the shareholders. Among other steps, this included making the boards more independent of the CEO (who was too often also the Chair of the board) and the executive management of the firm.
Ram Charan explains how firms can `evolve' from being an old style Ceremonial Board to become a Liberated Board and then grow into an active and effective Progressive Board. He emphasizes that Progressive Boards have to emphasize the Group Dynamics of the board (how the team works together and how synergistically their talents combine), the Information Systems they use (relevant information they can get outside what is packaged for them by the CEO), and that the board focus on meaningful and relevant issues rather than getting distracted by the minutiae of board processes.
The author explains each of these three qualities in detail and deals with issues of CEO selection, management, and succession. He also talks about how the board should function when it has fully `evolved'. Charan also provides a few helpful questionnaires you can use to determine how your company is doing in certain key areas.
An interesting and helpful book for the target audience.
Reviewed by Craig Matteson, Ann Arbor, MI
Charan is one of the leading experts in board governance and best practices. In this easy to read and thought provoking look at board dynamics, Charan takes the reader through the evolution of a board from ceremonial to progressive. Along the way, he provides a road map of pitfalls to avoid, questions to ask, structures to recommend and best practices to follow to ensure that the board takes the right steps to govern effectively.
Having both served on and worked for boards that covered the gamut of ineffective to progressive, I cannot recommend this book enough. I have read, and reviewed, more than a few books on corporate governance and board dynamics, and this one ranks at or near the top of the most useful, relevant and specific resources out there. It is a must read for any board member or CEO.
Board rooms are one of the last bastions of secrecy in today's increasingly transparent world. Talking with the board often causes people to talk in hushed tones and reverence. However, Charan's book reminds us that Boards consist of people with responsibilities to discharge and tools to use. This book is a must read for every executive to remind them of the foundational elements that run the company: customers, cash flow, leverage, etc. Too often we lose sight of these things as we work day to day.
The book is written in a highly accessible style with just enough tools to help executives understand board dynamics, information and success factors. This makes it an ideal book to pick up for a long plane flight or a weekend to upgrade your knowledge and skills.
Sarbanes Oxley and board oversight concerns were the genesis for this book as boards move from what Charan calls Ceremonial to Progressive. However, Charan writes about practices for effective boards helping this book stand the test of time.
In a world where there are fads, changing strategies and constant pressure, executives need to take some time out to reinforce what matters and get back to basics. This is one of those books that everyone should pick up and read.
on October 24, 2009
Every so often you meet someone who has the ability to state things with such clarity that they appear instantly obvious and simple. Ram Charan is one of those people. His lucid descriptions evoke real situations with all their rich complexity of detail but without any of the clutter that prevents directors from decisive value adding action.
Don't be fooled; this is not a simple book. The writing is terse but the insight is deep and the suggestions for improvement are well founded in practical experience. The book discusses the evolution in board dynamics, information architecture and focus on substantive issues that will allow boards to move from a `ceremonial' role, through a process of liberation to a state that Charan refers to as `progressive'.
In my work advising boards I have encountered many that struggle with the symptoms of `liberated' boards. The frequent digressions from what is really important, the time wasted on trivia, the personal interests, the revisiting of old arguments and the rewriting of former agreements that frustrate so many boards are exposed in all their hideous familiarity. Charan's descriptions of this state arouse sympathy without descending into excuse-making, patronising or blaming the board. He just accurately states what is wrong and what that can cost the organisation before going on to describe how to correct practices and make a quantum leap in board effectiveness.
I meet few `ceremonial' boards in my line of work; it could be that those boards would never invite me into their midst or just that there are less of them now that individual directors are becoming more professional and diligent in their roles. However, the descriptions do hold true and the process for moving from a passive board to a liberated one is well and clearly set out in the book.
The real value in this book is its practical assistance in making that step change from a group of great and well-intentioned individuals to a board with a collective viewpoint and will. It allows for efficiency and focus that take the company into forward-looking strategic issues without over-stressing the hard-working executive team.
The final jewel in this book is the section on contributions that count. It is a great resource for any director and should be legislated as required reading for all Chairmen.
This is a practical and succinct book that I return to often. It has something of value for every board that I have worked with. On a scale of one to five this is definitely a ten!
* Julie Garland McLellan is a professional non-executive director, board and governance consultant and mentor. She is the author of "The Director's Dilemma", "All Above Board: Great Governance for the Government Sector" and numerous articles on corporate strategy and governance. You can find out more at [...]
on August 14, 2014
The old ceremonial type of passive board that rubber-stamped CEO’s decisions are gone in most parts of the world. Boards nowadays have a real say in how a company will conduct its business. At the same time institutional investors, NGOs and other parties have increased their focus on corporate governance. However, these – in the author’s words – board watchers look too much to the inputs, i.e. the processes and structures used by the board. The result is that the new freedom and energy of boards is used to focus on compliance and ticking boxes. Ram Charan, a renowned corporate advisor, means that we should look more to the output; that is to the value a board adds to a corporation. The book aims to provide a road map for a board to become a true competitive advantage and also a guidebook for CEOs on how to get the most out of their boards.
Although the book is divided into four sections it might be more conductive to view the text as a matrix. The author puts forward three functional areas important for boards to better governance: a) improved group dynamics, b) a useful and practical information architecture and c) the ability and process to focus on substantial issues. Then there are five areas on which the author thinks the board should target its newfound efficiency: 1) having the right CEO and handling succession issues, 2) getting the CEO compensation right, 3) helping the company get the best possible strategy, 4) monitoring the talent pool of the company and 5) monitoring the “health, performance and risk” of the company, i.e. the compliance part.
The chapters of the book are basically all devoted to one of the above topics. The language is very legible. The solutions described almost seam obvious which is a sign of an author with deep domain knowledge. With an extensive history as a CEO and board advisor Charan has a vast library of concrete real life examples to use to clarify his points. In reality much of the advice is quite elementary group psychology and common sense in information handling and in setting the agenda for the board’s work. But as they say, the problem with common sense is that it is not so common. It is all too easy to let the board’s work to be governed by old habits, outside pressures and reluctance to deal with - perhaps uncomfortable - group dynamics. To take a step back and review the processes with the help of the practical advice in this book can make a real impact. Being a consultant the author brings plenty of tools to do the work, “The Ten Questions Every Investor Should Ask” and such. The book fulfills it purpose.
As a good consultant Charan has also adopted the prevailing view of most of his employers – that is the view of the shareholders as one among several stakeholders to an otherwise self-sufficient company. In my view this makes his employers and himself to some extent miss the point that the board consists of the trustees of the owners of the company. As trustees of the shareholders a board should decide on a strategy, see to that there is a good CEO to execute the strategy, monitor that the work is done well and together with the auditors report back to the owners through the annual reporting. The viewpoint now becomes a bit internal looking. For example, when Charan goes in opposition against the board watchers insistence on separating the role of the CEO and the chairman of the board he focuses on the lack of proof that this will bring better efficiency and misses the more principled aspects of keeping the role of the owners trustees separate from executive management. The boundaries of authority and evaluation for the separate roles should be kept clear. That said, I fully agree that the board watchers and the corporate governance officials at institutions not always have the competitive advantage of the company first in mind.
I very much appreciate the book’s viewpoint that the focus of boards should be on competitiveness instead of compliance. How nice it would be with a board that truly is a competitive advantage!
This is a review by investingbythebooks.com
Charan's doctoral work at HBS focused on governance, and he has continued to study their workings in the thirty years since. Charan believes most boards are not living up to their potential - thus, the book, intended to guide them towards accomplishing that. He opposes measuring governance by inputs - the processes and structures (eg. composition of the Audit Committee, proportion of independent directors, degree of participation, splitting the CEO and Chair positions) used by the board, instead proposing measurement by outputs - the value a board adds to a corporation.
Prior to Sarbanes-Oxley, boards were often 'Ceremonial' and performed their duties perfunctorily. Scripted presentations were rehearsed to the second in a tight agenda, and the CEO communicated very little with the board between meetings. Then came scandals at Enron, WorldCom, Tyco, HealthSouth, Adelphia, etc. Many directors now have become active and 'Liberated' themselves from CEOs who had dominated the boardroom. However, liberated directors ask too many things of their CEO - some minutiae or irrelevant and diluting the CEO's time. Members can drone on too long, or return over and over to the same topic. But such boards need to progress further and gel as a team ('Progressive'). Some have already achieved this - G.E., MeadWestvaco, PSS/World Medical.
Executive sessions are held without the CEO - thus, care needs to be utilized that these not include topics where the CEO's expertise is important, nor be too frequent as to create a rift between the board and the CEO.
Progressive boards accord importance to annual board evaluations, best accomplished through interviews with individual directors conducted by an outside third-party. The process should include questions having to do with the board leadership and individual board members. Unwanted directors are identified and pushed out.
Progressive boards work with management to define in advance what information they need and when, as well as defining the issues that should command the board's attention. They also spend time outside the boardroom learning about the business from employees, analysts, and customers. Key issues include 1)ensuring the right CEO and succession, 2)CEO compensation, 3)the right strategy, 4)the leadership gene pool, and 5)monitoring health, performance, and risk.
Cash flow is among the best measures of a company's historical performance, present condition, and future capabilities. A comprehensive review of cash flows is essential to good board information. Performance driver information is also important, as well as a few external measures of where the industry is going and benchmarks against competitors. Market share information needs to be supplemented with the reasons for change. Information is also needed on how cost structure and margins are expected to shift over the next few years by product line, customer segment, or distribution channel. Different companies need to identify the unique set of measures that pertain to them. Third-party sources of information should also be reviewed.
Management should also produce thoughtful and accurate commentary, helping directors' avoid the need to closely distill hundreds of pages of financial data, as well as providing up-to-date news of importance.
One experienced director observed, 'Most boards use up their meeting time one a)listening to last quarter's results, dissected in unnecessarily minute detail with very little focus on the future, and b)watching dog and pony shows put on by operating people.' Discussions of important matters are squeezed in around the edges. A 12-month agenda that addresses compliance, operating effectiveness, strategy, people, and urgent concerns helps ensure eg. reviews of 10-Ks don't dominate meeting time.
A spate of high-profile corporate meltdowns ended the days of high-flying CEOs who also ran their companies' boards of directors. Instead, regulators, shareholders and the public now demand that corporate boards oversee CEOs and protect shareholder interests. Ram Charan lays out what your board can do to maximize its positive contributions and add value to the company. His writing is clear and to the point. This book is very helpful for board members who are trying to find their way in the post Sarbanes-Oxley world of corporate governance. Charan provides useful questionnaires to help you analyze the state of your company and its board on several crucial points. getAbstract recommends this book to board members, potential board members, and others who have an interest in modern boards and corporate governance.
on May 25, 2013
Ram Charan decribes very well the need of Boards to reinvent their contribution these days. From passive behavior to progressive and active one. Besides changing rules and norms, dealing with macro issues, Boards can be a competitive advantage to the companies
on August 28, 2006
Ram Charan makes a complex topic easy to understand. This book can be "speed read" in 45 minutes and it doesn't make you feel dizzy. Ram Charan is a true thought leader and an inspiration.
on August 30, 2014
Directors of corporate boards today are clearly not exercising their authority, otherwise why would so many corporations be getting in trouble from unsafe oil rigs to railroad crashes to banking fraud to personnel behavior. Sure, they can deliver revenue, bottom line and share price, but can they deliver what is important?