In a perfect scenario, a CEO and board of directors work together to guide a company in the right direction. But in practice, there’s often some confusion — on everyone’s part — about what each is responsible for.
Here’s a look at how to set clear, effective boundaries between your board of directors and your CEO.
The CEO vs. the Board: Responsibilities in a Nutshell
If you’re working on setting boundaries between your CEO and board of directors, the first step is ensuring everyone has a clear understanding of the typical duties of both.
Generally, the board has the following responsibilities:
- Meet periodically (usually a few times a year) to assess company performance
- Make major decisions impacting the company
- Choose (and fire, if necessary) the CEO
- Oversee the performance of the CEO and the company as a whole
The CEO usually has the following responsibilities:
- Communicate transparently with the board
- Ensure the company is following the board’s direction
- Make day-to-day decisions affecting the company
- Set company policy
That said, some companies blur the lines between board and CEO by the very nature of the company’s structure. The CEO may be a member of the board, and in some cases, they serve as the board’s chair.
6 Tips for Setting Clear Boundaries
Setting appropriate boundaries can be more challenging than it sounds — after all, the duties of the board and CEO often overlap. But if you’re looking to further distinguish both roles, the following are a few suggestions:
1. Write a Clear Job Description for the CEO.
Ultimately, the board of directors is responsible for hiring a CEO. So it makes sense that the board would write a detailed job description outlining the specific duties of the CEO. If you’re in the process of hiring a CEO, writing a job description is pretty straightforward.
But if you have an existing CEO, it’s best to have the CEO and the board draft the description together. Through this process, everyone will gain a clearer idea of their roles within the organization.
2. Form Collaborative Relationships.
Company leadership is a collaborative endeavor. And while the board and the CEO technically collaborate, the board usually only meets a few times each year.
A good board of directors guides the CEO without micromanagement. This kind of guidance becomes a lot easier with frequent meetings.
One of the most effective ways to draw the line (while also working for the good of the company) is to establish collaborative relationships between members of the board and their corresponding C-suite executives.
For instance, the treasurer and CFO could regularly meet to discuss financial strategy. The chair of the board and the CEO could meet frequently to discuss the company’s general direction.
3. Make Sure the Company Has Key Protocols in Place.
It’s not the board’s place to put each of the CEO’s decisions under a microscope.
However, when someone joins the board of a company, they’re creating a kind of endorsement.
And before you lend your name to something (especially something as major as a company), you probably should make sure it has basic policies in place.
Generally, a conscientious board of directors will make sure a company has safety protocols, clear rules against discrimination and harassment, and procedures for financial safety. However, the specifics of the company are often set by the CEO.
4. Understand Steering vs. Managing.
The exact roles of board members and the CEO may vary slightly by company. But broadly speaking, boards “steer” the company. In practice, this might look like giving the CEO certain objectives to reach.
CEOs manage the company — meaning they’re responsible for creating and implementing the strategies needed to meet those goals and objectives. If the board is determined to manage every company decision and the CEO decides they want to shape the company’s broader strategy, there may be leadership clashes ahead.
5. Consider the Experience Levels of Each Role.
There’s room to adjust the roles of the CEO and the board as needed. And in many cases, roles and duties shift if either the CEO is inexperienced or the board is.
For instance, let’s say a company’s board is made up of experienced industry professionals, but the CEO is relatively new to corporate leadership. In this case, the board might decide they need to be more hands-on in order to help the CEO achieve company goals.
This arrangement can sometimes be a beneficial one, and it might even help the CEO develop as a leader. However, it’s critically important that in an arrangement like this, both the CEO and the board are aware of what’s going on. Otherwise, the CEO might start to feel smothered or unsure of their role within the organization.
6. Make Sure the Board Has Meaningful Work.
From day to day, the CEO will have their hands full managing the organization. But what about the board? To make sure board members are contributing without stepping on the toes of the CEO, it’s a good idea to make sure each has something to do.
For instance, the board might take a close look at the company’s values and mission and strategize ways to help the company better embody those values. Boards are also generally responsible for making sure the company is following all legal guidelines, although the CEO is typically part of this process as well.
In some companies, the CEO may be vastly more experienced than the board members. In this situation, it might be appropriate for the CEO to offer some guidance to the board — they might even draft a list of responsibilities for board members to fulfill.
Of course, just as an experienced board would do with an inexperienced CEO, it’s important for the CEO to clarify that they’re not trying to overstep — they’re just trying to help new board members better understand their new roles in the company.
Better Boundaries, Better Business
You might have heard that “good fences make good neighbors.” The same can be said for a company’s CEO and board of directors. When each party fully understands what they are (and aren’t) responsible for, it fosters an environment of transparent communication and collaborative leadership.
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