“Trust is like the air we breathe. When it’s present nobody really notices, but when it’s absent, everybody notices.”
– Warren Buffett
The responsibility of the executive director (or CEO) and the board of directors is, ultimately, to drive the business forward. Ideally, they would be focused on generating revenue and profit for private companies as well as driving donations, fundraising activities and operations for nonprofit organisations.
While the CEO and the board have shared long-term goals, sometimes they can disagree or miscommunicate and relationships can suffer. In these situations, strengthening the relationship between the board of directors and the executive director is key to keeping things on track.
When the board and the executive director aren’t aligned or there is tension between the two, this is likely to cause wider issues for the business. Executive directors need an engaged board on their side so that they can go to them with proposals, strategy ideas and plans and gain their support. Similarly, the board of directors need to trust that the CEO implements and executes their strategy. Strained relationships can often lead to poor communication and worsening of performance. Additionally, a lack of trust and transparency can often be a big distraction.
So, how can you solidify the relationship between the board and the executive director in your own organisation? Let’s explore…
What is the relationship between the executive director and the board of directors?
To start, it’s important to recognise what the relationship is between the two entities.
Responsibilities of the executive director
An executive director is a member of the board who also has responsibilities for the management of the organisation. Such positions include executive director, CEO (Chief Executive Officer) or the CFO (Chief Financial Officer). Generally speaking, these positions are full-time.
In the role of the executive director, responsibilities include:
- Overseeing day-to-day operations and activities
- Leading and coaching the Senior Leadership Team (SLT) or nonprofit management team within the business
- Creating business plans and presenting these to the board of directors
- Implementing the strategy of the organisation - which is agreed upon by the board as a whole
- Reporting on revenue, expenses, financial accounts and the annual budget
- Being the spokesperson and face of the business.
Responsibilities of the board of directors
The board of directors is there to hold the executive director accountable, support the decision-making process and offer varying perspectives. While the board of directors is crucial to the success of a business, they are rarely involved in the day-to-day operations of the organisation. Instead, they may meet monthly, quarterly or annually to review progress, make decisions and strategically plan for the next period.
As part of the role of the board of directors, responsibilities include:
- Putting effective corporate governance in place and checking in on this regularly
- Diligently reviewing the performance of the executive directors as well as appointing new recruits to fill these roles when necessary
- Sharing expertise regarding a specific function of the business – this could be finance, marketing, sales, product development, etc.
- Analysing the reports created by the CEO/CFO
- Asking the tough questions, probing and giving feedback
- Being upfront and honest about current or potential conflicts of interest.
Because the executive director and board work together towards a common goal, their responsibilities are often shared:
- Meeting fiduciary duties, sometimes defined as a duty of loyalty and a duty of care, and so on
- Always working in the best interests of the business
- Identifying risks and potential problems as well as ongoing risk management: this can include competitors, internal personnel or financial issues
- Approving major policies and decisions
- Applying reasonable care and diligence to make sure the company isn’t committing any illegal activity
- Taking part in the strategic planning process and developing the strategy for the business.
Tips for improving the Board-CEO relationship
In the end, it all boils down to communicating on a regular basis which builds trust, not only in the partnership but throughout the entire organisation – board and staff.
One of the first tips to strengthen the board relationship is to meet regularly. If the executive director is only meeting with the other board members once a year, it’s easy for the board to be completely out-the-loop. Things change so quickly in business that twelve months of progress can make a big difference. So, setting monthly or quarterly check-ins can help build a great relationship and improve board engagement.
Breed trust and respect
Trust and respect is key to creating effective relationships. The board of directors need to trust that the executive director’s information is truthful, and in times of disagreement, respect is key to healthy communication. Honesty and integrity also go both ways. The executive director needs to respect the board’s expertise and listen to their thoughts, opinions and ideas.
Build personal connections
Building personal connections can make a big difference. Perhaps a board lunch, outing or meal can help forge relationships outside of the boardroom. A friendship or familiarity between the two can help breed trust, respect and great communication. This is also something to keep in mind when the board is limited to virtual meetings. Setting aside time for chatting and bonding online is key to maintaining a good relationship between the board and the executives.
Be frank about challenges, weaknesses and concerns
It’s important that the executive director does not shy away from sharing the challenges that the business is facing. After all, an organisation’s board is there to help with conflict resolution and risk management, so keeping secrets or holding things back from them means missing out on their expert guidance, input and opportunities for resolution. Also, if the board finds out that things have been hidden from them by the CEO, CFO or other executive directors, this can cause a significant breakdown in trust.
Make sure that all members of the board, executive directors included, are clear on their responsibilities and that there is no confusion. Add an item to the end of the meeting agenda of each board meeting with a summary of who is doing what, deadlines and an opportunity to reconvene as a full board.
Resolve conflict on the spot
Situations of conflict are unavoidable but, in these cases, it’s important to find a resolution at the time. As full board discussions are often few and far between, having the board stew on an issue can cause resentment, assumptions and communication challenges in the time that the board is apart.
Keep communication open
As well as your regular meetings, create opportunities for communication in the meantime. This may include online collaboration platforms, email groups or 30-minute check-in calls.
As well as finding the courage to share your concerns, don’t forget to share your successes. Big deals, new members, customer insights, business expansion and high-revenue months should be shared with your stakeholders, trustees and with the participants of the board.
How technology can help
In 2022 and beyond, engaging with your board on a regular basis is key. Utilising technology to do this can support more frequent communications and can enable more regular collaboration. Using board management software such as iBabs can help you to organise and run your meetings, create a digital agenda and even facilitate voting on important issues. You can also upload financial documents, reports and notes, giving full visibility to your organisation’s board at all times. And, by running your meetings virtually, you can improve attendance and help you to reach a quorum.
Who should evaluate executive performance?
It is the role of the board of directors to evaluate the performance of an executive director. This forms part of their due diligence and fiduciary duties.
How should the board of directors be involved in the executive leadership of an organisation?
The board should be responsible for hiring, evaluating, disciplining and terminating the executive director’s office as required for private companies and nonprofit organisations. The board of directors works closely with the executive leadership of the organisation to plan strategically, and then they let the executive director work on the day-to-day implementation. As part of their role, the board of directors can also mentor the CEO regarding strategic implementation
To summarise, the relationship between the board of directors and the executive director can make or break a business. A strong relationship is absolutely crucial to organisational success. By building rapport, maintaining frequent communications, and establishing a culture of trust, honesty and integrity, the board and the CEO can work closely together to help meet the organisation’s mission and goals. Digital technology such as the iBabs board portal can help improve this further and make board-CEO collaboration more frequent and, therefore, more effective.