Governance Bites #109: how boards can make their CEOs successful with Rob Everett

In this episode, Mark Banicevich talks to Rob Everett about how boards can make their CEOs (Chief Executive Officers) successful. He asks what makes a board-CEO relationship work, and the role the board plays in the CEO’s success. They discuss CEO onboarding plans, the role of governance processes, and the tension between oversight and giving the board space to lead. Mark asks about performance reviews, and balancing performance assessment with genuine support for CEO development. They discuss how boards can unintentionally undermine the CEO, and how support for a first-time CEO differs from support for a seasoned CEO. Rob also shares advice for directors. 
Rob Everett is an experienced director and CEO, with a background in law and financial services. He is currently independent chair of fund manager Simplicity, and has been a director of the biggest credit card issuer in the UK (MBNA), the biggest bank by balance sheet in Ireland (Merrill Lynch International Bank), Merrill Lynch-owned bank and broker entities in Turkey, and a school management board. Rob is a past CEO of the Financial Markets Authority and NZ Growth Capital Partners. He spent 18 years with Merrill Lynch in London, New York and Hong Kong. He now lives with his family in Wellington. 
#governance, #leadership, #corporategovernance, #boardcraft, #decisionmaking, #makingadifference, #ceo, #governancebites, #boardroom, #director

Transcript

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Hi, I'm Rob Everett. I was until recently the CEO of NZ Growth Capital Partners, the government venture capital fund, and before that the Financial Markets Authority, and I'm just about to take over as the chair of the board of Simplicity, the KiwiSaver Fund. And today we're going to talk about how boards can make their CEOs successful. Interesting topic. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you just heard today, I had the pleasure of spending time with my old boss, Rob Everett. Rob, thank you very much for your time. Pleasure. Appreciate it. This topic is a really interesting one about the board's role in making the CEO successful, because the role of the board to act in the best interests of the company or of the entity, very much, that's about bringing the best out of the CEO. So my first question for

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what's the best board relationship you've had as a CEO, and what made it work? Well, I'll answer that slightly tangentially in that I would say as a CEO, I've had five different board chairs, and they've all been very different in terms of how they interacted with me as a CEO. The common themes that as a CEO I would be looking for would be trust first and foremost, both ways, absolutely essential. A chair and a CEO won't work together unless they each trust the other. Support, not necessarily unconditional, but support in pretty much all scenarios imaginable, and then someone to act as a sounding board to help you pick apart things that are problematic. So I think the key positive attribute of the chairs I've had – and I've been very lucky – has been I've always felt that I could trust what they wanted for me, and that they trusted that I was giving them what they needed in terms of information. So I think, I think trust, you know, it's such a critical relationship, the chair and CEO. If you don't trust each other, it's all over. Right, right. Yeah, that makes absolute sense. What role does a board play in the success of a CEO? Well, I think similar. So, you know, you hear people say sometimes the most important role of a board is to hire the CEO, which is only partially true. Or the reverse, which has been said to me. Yes, yeah. As I see it, it's an extension of that kind of analogy, which is, I think the most important thing the board can do is help the CEO and the CEO's management team be as effective as possible. And so the way they do that will depend on the type of entity, you know. Are you listed? Non-listed? Are you a Crown Entity? Are you, you know, corporate? Are you a startup? Are you a mature business? And the depth of the management team. So sometimes I think boards need to be really quite involved, and sometimes boards actually need to step back and let the CEO and the management team, you know, really run the organisation. So I think to me it's a question for the board of being good at judging, and this is where the chair comes in I think, you know, how much to be involved or how not to be involved. And sometimes it takes a board a lot of courage to step back and say, you know, we've hired Rob to do this. You know, it was never going to be simple. We need to just let him, you know, do what he's good at, you know, until we get to a point where we can either relax and say,"Great, job done," or we say, "Actually, that hasn't worked, and now we need to do"something else." Right. Okay. What makes an effective onboarding plan, and what common gaps do you see? Yeah, yeah. So onboarding is interesting, and I think it can sometimes expose for an incoming CEO how much the board knows and doesn't know about what's really going on in the organisation. So to me, as a CEO coming into a role, what you want to know is, what are the key focus areas of the board and why, and where do they see gaps? You know, where are they not getting information they'd like to get? Where do they think things maybe aren't going as well as they'd like? They might not be sure, but they may have a sense that they're not, they ought to be intervening more in a particular space. So I think as an incoming CEO, it goes back to trust. You want people to be clear with you what they think you should be focusing on, where they think the gaps, and then leave it to you to make your own decision as to whether that's correct or not. I think in theory, for a CEO that is coming from outside the business, the board is their greatest opportunity for a properly objective sense of strengths and weaknesses of the organisation. Yeah, right. Okay, thank you. What governance processes help align the board with the CEO on strategy, risk, values, those sorts of things? I think processes that drive constructive debate. So, and there's a balance there, right. You don't want the board deliberately challenging everything you put on the table because that's what they think they should be doing. But you, as a CEO, if you have a good relationship with your board, you want the comfort of knowing that when you lay out your philosophy and your strategy, you know, you're going to get constructive debate and challenge and alternative views about how you might do it, as long as it's left to you ultimately, you know, to make the call. Someone helping you make, get a degree of confidence that you've got it right by offering you alternative ways of doing things, those are key. So for me, the way I'm built, the key processes the board can do are those opportunities for, you're not just reading out your reams of board paper materials, you're not going through, you know, data and charts and all of that really dull stuff. You're actually saying, "I think we should be doing more in this space, and if we were going to do"that, you know, here's how I would do it, and here are the things I would worry about." You know, "I haven't got a fully formed view. I'm not bringing a 22-page paper. Can I have"some immediate reactions?" Keeping space on your board agenda for those sorts of slightly blue-sky interactions is so critical because so many board meetings, by the time you've done all the kind of necessary papers, you've all run out of energy and inspiration to do anything that requires everyone to take a step back and really think very hard. Yeah, a lot of people that I've spoken to have suggested doing that stuff first. Yeah. Allocating time to it. Yeah, a couple of boards I've worked with, you know, have done exactly that. You have it at the end of the meeting, but, you know, quite honestly, people are looking at their watches, they're tired, they're wondering where the food is. If you do it reasonably early on, people are fresh, you know, they're kind of motivated. If there's a paper, hopefully they've read it, and you can actually open it up and, and frankly, from my perspective, if that takes 90% of the meeting and you have to condense the rest of it into 10 minutes as a CEO, you know, job done. Happy days. That may not always be the board's view, but as a CEO, job done.

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how long or how many pages do you tend to find is a good size for a board pack? Yeah, honestly as few as possible. Yeah. So I kind of operate on a kind of 150-page kind of mindset. Cap. If it's more than that, you know, really, did the board really need that information? And I think there's a difference between making materials available to the board, you know, management dashboards and management information, that if they want to go and read to make them better informed for the board meetings, knock yourselves out, that's great. In the board meetings, my view, both as a board member and as a CEO, you should be relentlessly clear on what you want to focus on and why. And too many board packs sort of grow over time. You know, at some point someone said, "I'd love some data on," I don't know, "staff retention." The next thing you know, every month you have a paper on staff retention, and it hasn't changed since the last month, and you can't help yourselves but spend 10, 15 minutes on a piece of information that tells you nothing. And so, you know, I'm a — when I see a 350-page board pack, you know, as a CEO, I'm kind of, "No, no, this is all wrong." You know, the board doesn't have the bandwidth to go through that sort of paper, and at some point you're going to spend a lot of time focusing on detail that is not moving the business forward. That belongs in the management team, it doesn't belong at the board. Yes. So, you know, I'm a bullet point guy because I've got a little brain. So I would rather people say, "Here are the"things I want to discuss," bullet point, bullet point, bullet point, "and by the way,"to inform that conversation, you know, you might want to look at some of these"documents." But really, board packs specifically, if it's over 150 pages, it makes me anxious. Absolutely. Well, I like that as an element, and hopefully a lot of those are title pages for papers. Yeah. How should boards handle the tension between providing oversight and allowing the CEO the space to lead? Yeah, well, it's not a one-size-fits-all answer to that because it will depend. Have you got a new CEO? You know, are you going through a particularly challenging time for the business? Has something sort of gone wrong? But I think if a board, and this is the board chair's role really, is always asking itself, "Are we strategically focused in this conversation?" You know, "Is this a conversation about direction and strategy for the"organisation?" And if it isn't, "Are we now into management?" And I think if you ask that question all the time, that's a good test for the board to question whether they're really spending their time in the right place. And I think the massive expansion of information that boards get given, you know, with a kind of risk of compliance kind of lens, often pulls the board into what I would consider to be management matters. And so it's a very difficult balance, actually, that, you know, the health and safety legislation, if you're a regulated business, you know, what the regulators expect, you know, it pulls you into an absolute morass of data, data, data. And I think a lot of boards, you know, need a periodic reset every six months or so to say, "Are we looking at the right things at these meetings? Are we now into"management of the organisation, or are we still focused on strategic oversight?" Right. What does a constructive performance review look like from the CEO's perspective? Yeah, yeah. Well, it's interesting, in my CEO roles, again, that's ebbed and flowed. At times it felt like there was no performance review at all, and I was pretty happy with that. And at times, you felt you were, you know, being asked to hit KPIs[key performance indicators] that to you didn't really speak to what the role required. So it is a difficult balance for boards to get that right. But, but I think, and again, I think the chair is critical here. I think a good performance review helps a CEO, you know, see things that they're not seeing themselves, whether that's because you've been talking to staff and you have to be careful with that, whether you've been talking to external stakeholders, you got to be careful with that, too. But just picking up on the things that the CEO might be blind to and just saying, "This feels like an area where maybe, you know, you"need to be a bit more conscious of how you perform." So, you know, I personally prefer a much more informal review, but, you know, a lot of boards, you know, particularly a listed company board or a Crown Entity board, you know, they have to be more formal about it. Yeah. But yeah, I think it's, I think it's finding the weak spots. Saying, you know, "You may think this is"all going especially well, but not everybody else thinks that." Right. "Should we explore what"better would look like?" But it's tough because, you know, as a CEO, quite often you want to be left alone. Yes, to get on with it. You want to just be left alone to get on with your thing. But then the board's not helping. Yes. You know, and to me, the board isn't just about governance, the board is about helping the CEO, you know, drive the business, and sometimes that does require a bit of constructive criticism. Right, absolutely. That actually leads me on to my next question. How can boards balance performance assessment of the CEO with genuine support for the CEO and the CEO's development? Yeah. Well, I think it, you know, I think it's a really tough one, and you know, some CEOs get incredibly defensive in those scenarios. But, you know, like any performance review, you know, the experts will tell you, rather than wait for one day in the year to pile on a bunch of criticism and anecdotes that someone's told you in passing that you're going to pile on to the CEO, you know, your better performance help is a constant. Right. You know, "Maybe we'd like you"to see you do a bit more of this," or "Maybe some of our stakeholders feel you could be"doing more of that." So to me, the better process, just like, you know, managers with their employees, is, you know, constant feedback. But sometimes you do have to hold up a little sign that says, "This is feedback," so that they don't get to the end of the year and say, "You've given me no feedback." So I think sometimes you have to be deliberate in when you give feedback, saying, "By the way, I'm giving you some feedback now."So, you know, kind of take it seriously." Yeah. Otherwise, the way I like to operate, you could get to the end of the year and think, "Oh, no one's given me feedback at all," and that's unfair. Yeah, yes, yeah. From your time as a director, or even as a CEO, what have you learned about how boards can unintentionally undermine the CEO? Yeah, I'm glad you put unintentionally in there. So for me, the well-meaning ways that that can happen is if the board quite rightly want to have their own dialogue with staff, they want to have their own dialogue with external stakeholders, customers, investors — depends what business you're in — all of which both as a CEO and as a board director I would encourage. But it needs to be done really thoughtfully, and what I have seen and what I have experienced myself is, you know, occasionally a well-meaning director will listen to someone venting, let's say it's external stakeholder, and sort of come across as very supportive of,"Yeah, I can see that. Yeah, yeah, Rob needs to stop doing that. Yeah, I'll talk to Rob," You know, "Rah, rah rah." And that's incredibly undermining. So I think, you know, receive the feedback, but say, "Okay, you know, I'm going to raise that with Rob." Or, "I'm going to raise that with"the management team." But avoid a scenario where that person goes away and thinks,"Yeah, the board aren't impressed. You know, I spoke to one of the board"members, and they don't think he's doing a good job, blah, blah, blah." So you want to be empathetic and listen to the person who's giving the feedback, but you don't want to accidentally let your CEO or the management team feel that you don't have their back. Yes. So, and I have seen instances where, you know, I've heard tittle-tattle where, you know, the impression that's been given is that the board is unhappy with how a certain thing is being handled when that has not been discussed at the board, the CEO is unaware of that feedback, the management team's unaware of it, and it feels like, you know, you're being picked off. So I think making sure as a board, if you're going to have conversations that are going to help you understand how good a job the CEO is doing and how good a job the management team are doing, just navigate that very carefully so it doesn't look like you're fishing for criticism and that you're necessarily going to believe everything you're told. I can see that would be particularly challenging in organisations, particularly not-for-profit organisations where the board is often comprised of members. Yeah. So they're wearing two hats. Yeah, yeah. That would be a real challenge. Now, some years ago you were a first-time CEO. Now you're not. How does support for a seasoned CEO differ from supporting a first-time CEO? Yeah, I mean, I've done 10, 11 years as a CEO now, and I still don't feel I'm seasoned because every institution you go into as a CEO, you know, feels very different and you feel very exposed. I think the thing that you, you know, and I worked as a sort of Chief of Staff for several CEOs before I became one, but you never quite realise until you're in the job, particularly as a first-time CEO, just how exposed you are and how lonely that role can become and how pressured it can become. So I think a board that is bringing in a first-time CEO has got to absolutely take that into account. They've got to offer, in fact, they shouldn't offer coaching and mentoring, they should insist on coaching and mentoring. They should acknowledge that that person may be hiding a significant degree of anxiety about whether they're doing the job right and whether they're meeting the expectations of staff and stakeholders and the rest of it. So I think a seasoned CEO is probably a little bit more self-aware of when they need to say, "I could do with some help here." Particularly if they've got a good board."I could do with some help here. I'm not"really quite sure what I'm doing," or,"You know, I'd love to sit down and talk"with someone about how we're doing this." A first-time CEO often thinks they have to do it all themselves. Right. They think that's the job, the hero CEO, "It's all me,"I've got to do everything." And certainly when I took over at the FMA, you know, I got a few years in and I realised, I can't keep doing this job the way I'm doing it because I feel like I have to take everything on. But actually, I'm getting in the way of my own management team. I'm getting involved in things that I really shouldn't be involved in. I'm not doing them very well. I've not got enough hours in the day to do everything I need. So first-time CEOs, there needs to be an insistent but gentle process of helping that person adjust to the transition. Because however much you've watched CEOs and thought to yourself, "I can do that," or, "I could do that better," once you're in the job, you know, everything all of a sudden is kind of laser-like on you. Yes. And it doesn't have to be. But that's the natural inclination of someone as a first-time CEO, that "I have"to do this, I have to carry this on my own." And you know what I've learned as a CEO is that that's, you know, that's understandable, but you will not get the best out of your organisation if you're just taking everything on yourself. Yeah, right. You work with your team. Yeah, yeah. And actually everything I just said applies to the team, as well. So a management team with a new CEO that's come from outside the business or even one that's stepped up, a good management team will help that person. And say, "You know, you don't really need to"do that, don't you? I know you feel you should, but really we should be doing that." And that helps a first-time CEO from over-committing themselves and then burning out, which is what I see all the time. Right, right. If you were mentoring a new director, what would you tell them about making their CEO successful? Yeah, I think I would tell them to spend time, and the CEO may not have a huge amount of time to devote to this, but spend as much time as a CEO is willing to give you understanding what drives that CEO and what their priorities are. You know, what drives them in life? You know, try and get a rounded sense of that individual because that will help you work out where you can help. And if a director isn't constantly asking themselves, "How can I help the CEO and how can I help the management team?" then they're not doing the job that they should be doing. They've got lots of other stuff they have to do, but to me, if a board, each individual on the board isn't always asking themselves, and probably talking to the rest of the board or the chair about,"How do I help Rob? You know, he doesn't look like he needs any help, but there must be"stuff he needs help on." Or if it's not Rob, maybe a couple of his lieutenants could really do with some support, some introductions, maybe I could go to a couple of difficult meetings with them just as moral support. You know, and so I think directors who just turn up, read the board pack, you know, do a great job in the board meeting, but aren't focused on that point, I think are not bringing the value that every director should be bringing to the board. Yeah, that's a great insight, thank you. Final question for you, that's broad. What's the best governance advice you've received? Yeah, honestly, I don't know. In terms of advice as a CEO from a board, probably that issue of,"Stop feeling like you have to do everything yourself. Let some other people help you." Because, you know, sometimes it's easier to do something yourself rather than ask for help, because asking for help may take longer. But actually, when you develop that muscle over time, it makes you much more effective. So, the best advice I've had as a CEO, is think hard about whether there's someone else who could help, whether that's a board director or a management team or someone external. And in terms of governance advice for a director, don't feel you have to justify your place on the board by speaking up in meetings or forcing yourself into areas where you're not really welcome. You know, no one wants you just to sit there for a year and not say anything, that's not particularly helpful. But don't, for the sake of feeling that you haven't contributed, unless you've got really involved, just, you know, throw yourself into conversations that should have taken two minutes and then take 20, and then your whole board agenda's kind of screwed. Or independently, outside of board meetings, do a bunch of stuff that you think is helpful but you've not asked anybody if it's actually helpful. So there's a kind of, "Relax." If you were good enough to go on the board in the first place, you know, you'll work out where you can add value. And each person will add value in a slightly different way. And so particularly in board meetings, if you don't have anything meaningful to say or any questions that are burning a hole in you, that's fine, that's okay. Cool, yeah. Rob, thank you very much for your time. Pleasure. It's been great to catch up, and to have a chat about this. Yeah, you, too. I'll look forward to seeing you again soon. Yes. And see you next episode. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back, and please like, subscribe, and share the videos and podcasts.