"Boards that Lead" is a call to leadership for boards of directors. In it, authors Ram Charan (renown business adviser and former Harvard Business School teaching great), Dennis Carey (Vice-Chairman, Korn/Ferry Intl), and Michael Useem (Univ Of Penn professor and head of its Leadership and Change Management Center) claim that the time has come for boards to rebalance their responsibilities and take a more active role in the leadership of the enterprise. They point out that there is a delicate balance - board leadership does not mean micro-managing but rather, establishing a deeper relationship among directors and with executive teams by requiring directors to educate themselves on strategy, risk management, and talent development. Board members must also learn when to take charge and when to stay out of the way.
"Boards That Lead" provides the reasons for this, the principles on how to do this, and the cost of not doing this. Charan et al believe that "directors remain one of the most valuable least utilized company's assets there. Their wisdom and guidance are still too often closeted." This book provides practical and actionable advice to build on the tangible experience of directors and executives in creating enterprise value.
Charan et al begin the book outlining the importance of an enterprise's central idea - "why the company exists, whom it serves, how should be nurtured, why it will flourish, how it will make money and manage risk, where it must be going if it is to sustain a competitive presence and achieve its broader purpose. The central idea is the bedrock on which the enterprise is raised and how its resources are spent. It is easily translated into action. The board needs to be sure the central idea is clear and compelling that every board member understands it. The central idea provides a rudder that lets the board and management navigate through the choppy waters (that are most certainly) ahead."
The board must be actively involved in developing the enterprise's central idea. Every board member and executive must own it. It is the company's DNA and everything related to the enterprise flows from it.
The "central idea" concept is one that Charan has been advocating since the 1980s. When successfully done, it gets everyone on the same page and creates a laser-like focus on creating value. Unfortunately, many boards have yet to adopt this concept and for this reason, they and their enterprises are like corks on water floating off to wherever the currents take them. I can personally attest that getting board members and executives to agree on the central idea is very hard work; but with the reward of providing a big return in value.
"Boards That Lead" goes on with actionable advice and examples (including invaluable check lists) for recruiting directors, rooting out board dysfunction (at least 50% of Fortune 500 boards have1-2 dysfunctional members), establishing a board leader, managing CEO succession, managing a falling CEO, turning risk into opportunity, board governance, director evaluation, and the division of responsibilities.
The authors use plenty of case study examples throughout the book, including Apple, HP, Infosys, Ford, GlaxoSmithKline, Lenovo, Brazil's Group RBS, Delphi, and many more.
"Boards That Lead" will be a very useful and valuable guide for board members, CEOs, and potential board members worldwide. While written for larger public companies (U.S. and non-U.S.), smaller public and private (including start-ups) will find great value in this as well.
on January 15, 2014
Synopsis: Boards can make or break a company. Mr. Charan offers advice for optimal participation by boards that can catapult an organization into the next higher level of performance.
Information is offered on such topics as:
+ Hiring board directors
+ Firing ineffective or dysfunctional directors
+ Board ethics development
+ Board interactions with management
Case studies include companies such as:
My rating: 4 Stars
My opinion: This book is an absolute winner and another example of why Ram Charan is one of my favorite business writers.
Mr. Charan wrote Boards That Lead in a CONCISE case study/example format with important take-aways at the end of each chapter to stress what needs to be ingrained in the reader's head. Since this is a common format of his, he is one of the business writers that I learn most from.
One criticism that I must admit that I had of the book is that Mr. Charan mainly focused on very large, Fortune 500 companies. I would have liked to have seen some smaller/mid sized companies included in the case studies. Also, a focus on different sectors and industries would have been appreciated, such as non-profit, healthcare.
Nevertheless, this book is in my business book pile to purchase. I think that there was enough to garner from the book that a "best practices" approach would apply.
Source: Publisher for review
Would I recommend? : Definitely. Purchase the print book though. I reviewed the ebook version and was thinking about the "critical data" note-taking that I was missing out on.
Stand Alone or Part of a Series: Stand Alone
The authors contend some boards are well run, benefitting the companies/organizations they serve, and others that are not. In 2006 H-P and IBM had about the same market valuations, but by 2013 HP had a market capitalization of $52 billion and IBM was worth $192 billion. IBM had a stable board with a successful relationship with the CEO, while the board at HP was scandal-riven. The variance originates from the human dynamics, social architecture, and business leadership of the various boards. Too often, collegiality trumps independence and it becomes impolitic to challenge the CEO. A board's role is not to be reactive, passive, and accepting. The authors' first manifesto - governing boards should take an active leadership role in vital organization decisions (CEO succession, executive compensation, goal choices and urgency, merger decisions, ethics, allocation of capital, etc.), and not just monitor management. However, board involvement should not go so far as to constitute meddling and create fractured authority.
Decades ago, stockholdings were widely dispersed among thousands of investors (6% of corporate equity was held by institutional investors), none with sufficient clout to impact things, and boards were largely ceremonial. Today institutions hold 73% of equity and demand attention; in addition, activist investors have also gained clout. In addition, relatively recent legal actions have established two standards for director obligation - exercising reasonable caution and good fiduciary judgment. Sarbanes-Oxley of 2002, and Dodd-Frank of 2010 has also empowered and holds directors accountable in several areas. Meanwhile, poison pill defenses have declined from 59% to 8%, and staggered-term directors from 61% to 20%, while board attention to company strategy now occupies twice as much time as shareholder concerns.
Absent cohesiveness, liberated board members can hijack board meetings and waste valuable top management time in between meetings by eg. pursuing inappropriate requests for long-term strategy, personal goal choices, or detailed operational minutiae, as well as giving long monologues. The board needs to form a consensus, often w/o taking votes, by ensuring all voices are heard and coming to explicit consensus on key matters. Absent such risks the CEO ending up with a 50-point to-do list compiled from every director's wishes. Sometimes the Chair needs to corral an off-point member by pointing out that the group doesn't agree and it needs to move on. Sometimes the CEO also needs to be told that certain presentations are overly time-consuming. (The authors contend that about half of Fortune 500 companies have one or two directors they would regard as 'dysfunctional.') It also helps to have the Chair restate the general consensus, central issues, and action items for management before the meeting ends. Simply increasing the length of meetings or holding more meetings is not the answer. Successful boards include group dynamics in their self-evaluations, best conducted by informal interviews by a third-party interviewer who reports back to the Chair.
Another characteristic of successful boards is designing in advance what information they need, as well as how and when it is provided. Members also spend time outside meetings learning about the organization - from employees, analysts, major customers.
A board's most important job is making certain the entity has the right CEO. Charan states he has analyzed 82 CEO failures over the past 20 years, as well as successes. Many boards doom their efforts by considering CEO candidates w/o knowing what they're looking for, especially the specific (not generic) skills and relationships the company needs most. Usually it takes 1 - 2 years to fully assess whether a new CEO is the right one, and another year or so to conclude to replace a CEO. Making certain the CEO's direct reports pass muster makes future CEO selection easier as well as wide-spread effective talent. Also important is making certain top management has the right compensation package that encourages/discourage key behaviors. Get it wrong, and a CEO could go on a debt-fuelled acquisition spree that at the extreme lands the firm in bankruptcy.
Charan believes boards should focus on providing companies with strategic advice. The second area of focus - getting their relationship with the CEO right, acting as personal mentors, high-level talent scouts, giving frank advice, as well as monitors in the Sarbanes-Oxley mold.
Board members must take care to phrase questions in a way that doesn't make the CEO defensive - eg. "I'd like to better understand how pricing affects our margins," instead of "I don't think we are being very aggressive in pricing." Criticism should be constructive and fast, not sugar-coated, inordinately delayed, or unnecessarily harsh.
Overall, Charan et al provide 18 valuable checklists to help transform board directors from monitors to leaders. The 'bad news' - this book is largely a repeat of his earlier 'Boards that Deliver.'
The latest hot-off-the-press governance book warns, “Like neutrinos and Higgs bosons, early signs of faltering chief executives are often hard to detect.”
The co-authors of “Boards That Lead” add, “Most chief executives are constitutionally optimistic, and since by definition their role is to surmount challenges, the tenor they bring into the boardroom is likely to be relentlessly upbeat. Taking executive overassurance into account will aid directors in detecting nascent troubles ahead, but it is only one piece of a very complicated puzzle.”
That’s the first paragraph of Chapter 8, “Spotting, Catching, or Exiting a Falling CEO,” in this excellent book that delivers three big take-aways for board members. They’re summarized in the arresting subtitle: “When to Take Charge, When to Partner, and When to Stay Out of the Way.”
“From our several decades of witnessing more than fourscore fumbling CEOs,” they write, “we have noted that, in virtually every case, warning signals were noticed early by at least one or two directors but were commonly not shared with directors. We learned of the indications in real time because alarmed board members privately disclosed their rising qualms about the CEO in our work with them.
“The concerned directors were nonetheless hesitant—no surprise—to get the ball rolling. After all, they had helped pick the top executive, and they realized that a forced exit could be not only a career-ender for the executive but also a reputation-killer for themselves. Perhaps most inhibiting of all, they knew that the CEO often retained avid defenders among the other directors.”
What should board members do? “…it is useful for directors to keep a weather eye on early signs of executive deficits. Assuming that the company’s central idea has been well formulated in the boardroom [Editor’s Note: You must read more on this—it’s worth the price of the book.], three embryonic indicators, if ignored too long, often mushroom into far more:
• lack of strategy
• failure to execute, and
• wrong people calls.”
Oh, my! Just when you thought you were knowledgeable in governance, along comes a 219-page poke-in-the-ribs, plus an incredible 40-page section with 18 checklists for board members, a bonus chapter on “Trends in Director Monitoring and Leading,” a director evaluation worksheet, and six golden pages on “Division of Responsibilities Between the Board Leader and the CEO.”
Boards That Lead is a timely must-read for directors of both corporate boards and nonprofit boards. In the past six months (including this week) we’ve seen three high profile Christian nonprofit organizations on the Internet front page (and wishing they were not)—all three for different reasons—but the negative news was all prompted by board actions.
Board service is not for the weak of heart.
If you’re leading a board, on a board, or considering board service, you’ll want to read Chapter 3, “Recruit Directors Who Build Value.” The co-authors, including Ram Charan, author of “Owning Up: The 14 Questions Every Board Member Needs to Ask,” are big on questions. This chapter asks eight mission-critical questions of prospective board members, including: “Will the candidate be ready to stand tall and engage constructively when vital issues are on the line, the stakes and stress are high, and leadership of the company becomes even more essential?”
“Root Out Dysfunction” is Chapter 4’s theme. “In our experience, as many as half of Fortune 500 companies have one or two dysfunctional directors.” The authors identify three types:
• “Some see themselves as the smartest person in the room.
• Others seek recognition.
• Others are frustrated would-be CEOs.”
They add, “Whatever their personal motives, they tend to micromanage or take boardroom discussions down dark alleys. We have seen a director interrupt the first five minutes of a CEO’s boardroom presentation and sour the mood of both board and management for the remainder of the day. The result is to impair, even negate, a board’s capacity to lead the firm. As in any group, a dysfunctional member can sabotage the entire team.”
The authors recommend six personal qualities to look for in a board leader (often the board chair in nonprofit circles): 1) Executive experience, 2) Respect and confidence, 3) Collaboration and restraint, 4) Personal bonding, 5) Personal comfort, and 6) Resilience.
Again—not for the weak-hearted. Board leaders (or board chairs) “can anticipate at least one major crisis during their tenures.” Under the “personal comfort” commentary, they share this wisdom: “Yet another factor defining the board leader is a sense of comfort in one’s own skin and place in life, with nothing yet to prove or still to achieve, most often the product of a long and successful career as a corporate leader in one’s own right—no coveting of the chief executive’s office, no longing for operational control.”
Learning boards will discover vast insights and practical next steps:
• Boards should ask new CEOs to draft a succession plan immediately (and the annual self-assessment should measure progress).
• Caution! Leaders can change dramatically when they get the brass ring.
• Nothing can make up for the wrong choice of CEO.
• Ten principles for finding the right CEO (Warning: “Review outside consultants carefully to prevent conflicts of interest.”)
• In risk management, why quantification alone is a false crutch.
• The value of a one-pager with agenda/decision highlights sent before every meeting
• The learned art of what to feed to the board
• How to coach new board members to stay at the right “altitude” in board meetings
• How to get maximum value from an advisory council or board (They quote Roger Kenny who says advisory boards are “like the Marines: They get you on the beach.”)
And then this PowerPoint-worthy wisdom:
“Execution is where management starts
and the board stops.”
Oh, my. There is so much more I’d like to add—but I must stop. This is a 2014 Book-of-the-Year contender on my list, and it’s only March. Enjoy!
on January 6, 2014
Two things stood out for me as I read this book: real world examples and learnings from high profile companies about Board dynamics plus a comprehensive checklist for companies to review to make sure they have the best Board possible. This book was enjoyable to read and elevates your thinking as to how Boards need to work in today's world. A must read to achieve excellence in the Boardroom.
CEO and President ITT
on January 29, 2014
Well written in a typical Ram Charan style. I enjoyed reading it, and picked critical lessons as a board member. The insights on the latest challenges and skills sets for boards was helpful. This book reassures board about their fundamental mandate to lead. I have read many books of Ram, this is one of his good ones.
on October 6, 2014
An important contribution to how boards should function. Most boards don't see themselves as organizational leaders. They see themselves as monitors and guardians, except when they have to change the CEO. This book contributes to breaking that mindset. Boards lead certain functions, partner on others, and need to stay out of the "no-fly zones" reserved for management. But where, when, and how? Rich with many examples, stories, and detailed checklists, "Boards That Lead" provides the answers.
The book is light on the multi-stakerholder model, the importance of culture including ethics and integrity, and how to break the cycles of short-termism and excessive CEO compensation, otherwise I would have rated it higher. Worth your time if you are serious about creating more effective boards.
Three experts in leadership collaborated on a book titled, Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way. Consultant Ram Charan, headhunter Dennis Carey and academic Michael Useem presented me with three key takeaways from this quick-to-read book. First, their experience with many companies and boards informed their perspective in offering general guidance about leadership and corporate governance. Second, they provide examples of success (where they name names) and failures (where they disguise names). Such examples are described adequately enough for readers to understand the situation. Third, the authors present checklists that can be a quick way to organize thinking and action. While I found many examples of them missing the mark, or providing very shallow insight, most of the book will provide executives and directors with something to think about and consider applying to a particular company.
Rating: Four-star (I like it)
on February 8, 2014
Being on 4 company boards, I can relate to many of the issues and opportunities outlined in the book. The principles and practices presented both make the work of being a director more interesting and fulfilling, and give shareholders a way better " bang for the buck" from the board. It also reduces the naturally imperial tendencies of many CEO's, surrounded by their acolytes, and well paid advisors.
on August 1, 2015
As someone who does consulting on effective Board of Directors, I found this to be a very helpful book. I read a ton of books on this subject, and have also read many (if not all) of Ram Charan's books and I found this to be among the best. Clearly written, excellent information and ideas, things that I found useful and applicable – which you don't always find in every business book. If you work with a Board of Directors – or serve on one – this is a book you should read.