Board & CEO Agility

When the Board-CEO partnership thrives, so does the entire organization. But when it falters, the repercussions can be swift and severe.

In today's complex and rapidly changing world, boards face the challenging task of providing proper oversight while allowing management the autonomy needed to be effective. This delicate balance is crucial for organizational success. It requires a flexible decision-making partnership between the Board and the CEO.

By understanding and managing the inherent tensions in their relationship, boards and CEOs can build trust and mutual understanding. That’s what this week’s edition of The Savvy Director is all about.

In their recent Harvard Business Review article, “How the Best Boards Engage with Management”, governance experts Timothy J. Rowley and Laurence Capron argue that effective boards adapt the way they engage with management based on the context of the decisions they’re faced with.

With this kind of adaptable approach, boards can provide the right level of oversight and insight, empower management, enhance board effectiveness, foster collaboration, and drive better outcomes.

This Rowley-Capron article struck me as familiar, like something I’ve read before. While enjoying it, I was reminded of the book “Boards That Lead”, written ten years ago by Ram Charan and his colleagues Dennis Carey and Michael Useem. Their work had a similar focus on the need for boards to be flexible when collaborating with their CEOs, depending on the situation at hand.

Curious directors may ask, “How can we be more flexible or agile in how we make decisions?”

Rowley and Capron found that many of the more than 400 boards in their research are still struggling with when to lean in and when to pull back when they're making decisions that range from day-to-day to crisis mode. In fact, many boards don’t see any need for flexibility, so they end up using the same passive or control mode for every decision.

For directors, the Board-CEO relationship feels different depending on where the knowledge, expertise, and decision-making authority resides. When does your board lean in and when does it pull back? Is the bright line of ‘Noses in, Fingers out’ still relevant to you and your board?

What caught my interest is how similar the two frameworks are, even though their publication is ten years apart and the research was conducted with boards in different parts of the world. The bottom line is that both teams of scholars advocate for a flexible approach when engaging with the CEO to make organizational decisions.

Let’s see what we can pull out of this work for our own boards and CEOs. We’ll try to synthesize the two frameworks and then supplement them with helpful insights from Watson Board Advisors about navigating the built-in tension in the board-CEO relationship. Hopefully, we can make this discussion real for you, your board, and your executive team.

The Agile Board   

     —  Timothy J. Rowley and Laurence Capron 

Modes of Engagement

Boards can be more effective by adopting a different mode of engagement with the CEO based on the context of the decision being made. This framework proposes four modes:

1. Passive: The board is only minimally involved in decision-making. Their primary role is observation. The passive mode allows management full autonomy. This tends to foster innovation and quick decisions, but in the wrong circumstances it can lead to oversight failures and lack of accountability.
2. Mentor: The board provides guidance and advice but doesn’t intervene directly. The mentor mode supports management development and encourages strategic thinking. On the other hand it can lead to blurred lines of authority and potential conflicts.
3. Partner: The board and the CEO collaborate in decision-making and share responsibilities. The partner mode enhances trust, mutual understanding, and strategic alignment, but it can slow the decision-making process and create power struggles.
4. Control: The board provides direct oversight and intervenes in decision-making. The control mode ensures accountability and alignment with the board’s strategic vision, but it can stifle management autonomy and innovation, leading to frustration and disengagement.

Rowley and Capron found that the mentor and partner modes tend to be underutilized, even when management could benefit from practical advice from directors. These modes help cultivate an environment where CEOs feel comfortable sharing their concerns — unlike the passive and control modes which discourage CEOs from revealing any weakness.

“Properly deployed, a mentor or partner board can be a source of great value … It acts as a sounding board for new ideas and helps stress-test plans for any major strategic decision, and in doing so, it more completely fulfills its fiduciary duty.” — Rowley and Capron

Factors Influencing the Engagement Mode

Instead of being stuck in only one mode of engagement, agile boards are able to adapt their level of oversight to the context of each decision. With this kind of flexibility, the board enhances its effectiveness by responding more appropriately to the situation they’re faced with. They also build a more collaborative and productive relationship with management and drive improved outcomes for their organization and its stakeholders.

To choose the engagement mode that reflects the degree of risk associated with each decision, an agile board considers factors such as these:

• Impact on Value: Decisions with significant financial implications require more direct oversight.
• Conflicts of Interest: Situations with potential conflicts need a more controlled approach.
• Implications for the Mission: Decisions critical to the organization’s mission will benefit from a collaborative or controlled mode.
• Talent and Capabilities: The skills and experience of management can influence the level of board involvement needed.

Boards that Lead   

     — Ram Charan, Dennis Carey, and Michael Useem 

While the “Boards that Lead” framework aligns well with that of The Agile Board, additional insights from the book reinforce the importance of a flexible decision-making partnership between the board and the CEO, emphasizing the importance of knowing when to lead, when to partner, and when to stay out of the way.

• Shared leadership model: Emphasizes the need for boards to adapt their engagement mode based on the context of each decision, enhancing collaboration and trust.
• Defining the central idea: Supports the strategy of aligning actions with the organization’s purpose, ensuring that decisions are mission driven.
• Selecting the right CEO: Ensuring that the right CEO is in place and identifying potential successors is crucial. This aligns with the importance of mutual expectations and understanding what each party needs to drive value.
• Recruiting directors who add value: Reinforces the benefit of diverse expertise in enriching strategic decisions and improving governance.
• Rooting out board dysfunction: Aligns with the strategy of building trust and fostering a collaborative environment to address and resolve issues.
• Setting a high bar on ethics and risk: Supports the implementation of structured processes to build trust and clarity in the Board-CEO relationship.

Building Trust and Mutual Understanding

    — Watson

Watson Board Advisors is a leading board governance firm whose writing about the Board-CEO relationship provides practical insight for any board that wants to become more agile in their approach to decision-making.

“At the heart of a strong Board-CEO relationship are trust and mutual understanding; with those in place, the dynamic tensions can serve their purpose, creating a healthy degree of difference. Trust and mutual understanding create the platform to embrace differences, seek clarity, give constructive feedback, and course-correct together, so that healthy tension doesn’t become polarization, power games, blocking, or ringfencing.” — Watson

Navigating Built-In Tensions

As Watson points out, the Board-CEO dynamic is designed with inherent tensions that, if managed poorly, can hinder success. These tensions include:

• Responsibility: While the board holds ultimate accountability, the CEO is the organization’s public and operational face. Clear accountability can drive decisive leadership, but mismanaged accountability can lead to blame and conflict.
• Leadership: The board’s collective governance ensures diverse perspectives, but it can sometimes lead to power struggles and misalignment.
• Information: The CEO has real-time insights into the organization, while the board relies on periodic updates. Information asymmetry can cause disconnects and power imbalances.
• Expertise: The CEO understands the specific nuances of the organization’s operations far more than any director can. Although board directors’ expertise tends to be more diverse than the CEO’s, misalignment can lead to ineffective governance.
• Tenure: Directors turn over by design, while CEOs usually stay longer. Fresh perspectives from new directors can be beneficial, but frequent turnover can lead to instability.

Building a Strong Board-CEO Relationship

At the heart of a strong Board-CEO relationship are trust and mutual understanding. Both require significant time to build but can be lost in an instant. Watson suggests the following ways to cultivate these essential elements:

1. Bring it back to purpose: Align actions and strategies with the organization’s purpose to prevent strategic drift and ensure that decisions support the organization’s mission.
2. Expectations are mutual: Understand what you need from each other to drive value. Clear expectations foster collaboration and trust, while a lack of clarity can lead to misunderstandings and conflict.
3. Build trust: Trust — the currency of collaboration and sound decision-making — can be built through transparency, consistency, and a no-surprises approach. On the other hand, it can be easily damaged, leading to dysfunction.
4. Foster Chair-CEO partnership: A strong chair-CEO relationship is crucial for collaboration while a poor relationship can lead to miscommunication and conflict.
5. Calibrate the relationship: Engage in frequent mutual feedback and dialogue to foster improvement and alignment. A lack of feedback can lead to stagnation and unresolved issues.
6. Process is your friend: Implement thoughtful processes for goal setting, evaluation, compensation, and succession planning. Structured processes build trust and clarity, while a lack of process can lead to unpredictability and conflict.

In summary:

An agile Board-CEO relationship is essential for navigating the complexities of today’s business landscape and achieving long-term success. By recognizing and managing inherent tensions, and implementing strategies to build trust and mutual understanding, boards and CEOs can build a flexible decision-making partnership. This approach not only enhances the board’s effectiveness but also fosters a collaborative environment that drives better outcomes for the organization.

Your takeaways:

• Be flexible: Understand and implement the different modes of engagement — passive, mentor, partner, and control — based on the context of each board decision. The board needs to have an explicit intention to be agile so it can provide appropriate oversight while empowering management to act.
• Align actions with organizational purpose: Ensure that the board’s actions and strategies are aligned with the organization’s mission or purpose. This prevents strategic drift and helps drive decisions that support long-term success.
• Build trust and mutual understanding: Foster a culture of transparency, consistency, and open communication. Trust is the foundation of a strong Board-CEO relationship. It’s essential for effective collaboration and sound decision-making.
• Navigate tensions constructively: Recognize and manage the inherent tensions in the Board-CEO dynamic. Address these tensions proactively to turn potential stumbling blocks into stepping-stones for collective success.
• Implement structured processes: Develop and follow thoughtful processes for goal setting, evaluation, compensation, and succession planning. Structured processes build trust, clarity, and predictability, ensuring that feedback and continuous improvement are part of the governance cycle.

Resources:

• How the Best Boards Engage with Management. Timothy J. Rowley and Laurence Capron. Harvard Business Review. January-February 2025.
• Boards That Lead. Ram Charan, Dennis Carey, and Michael Useem. © 2014 Harvard Business Review Press.
• Strengthening the Board-CEO Relationship: Practical Strategies for Success. Watson. December 2024.
• Better together: Three ways to boost board-CEO collaboration. Celia Huber and Frithjof Lund with Nina Spielman. McKinsey and Company. September 2024.
• The Board-CEO Relationship: A Thoughtfully Choreographed Dance. Boardspan Inc. LinkedIn. March 2022.
• Key Working Relationship: The Board and the CEO. William J. Farrell. © 2025 Boyden.

Thank you.

Scott

Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online membership with practical tools for board directors who choose a growth mindset to learn and figure things out.

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