If you’re on the board of directors at a community bank, keeping up with the latest research and best practices in governance is important. In most cases, that requires more reading than any sane human being has time for. Don’t worry. We’ve got your back! Continue reading
You’ve seen the headlines—“company culture” is one of the most-covered topics in business leadership over the past couple of years. You can read about why you shouldn’t just let your company culture happen.
You can explore “Why Corporate Culture Is Becoming More Important.” And, you can see how productive culture will boost your organization’s performance.
Before we launch into how company culture begins with the board, let’s define the term we’re using.
The Definition of Company Culture
According to Wikipedia, company culture (also referred to as organizational culture) “encompasses values and behaviors that contribute to the unique social and psychological environment of an organization…and includes the organization’s vision, values, norms, systems, symbols, language, assumptions, environment, location, beliefs, and habits.”
Yes, that’s a long definition! To simplify, culture is created through a blend of the practices, policies, and people that make up an organization.
Board members and CEOs may serve different purposes in an organization, but with the right working relationship, they can help take a company to new heights.
Creating a strong bond between these two entities takes time, focus, and mutual respect, but once it’s been created, the connection can be the difference between a company that just gets by and one that excels.
Make it a priority to ensure board and CEO collaboration. When it comes to getting the most out of the board to CEO relationship, here are our suggestions:
CEOs should interact with board members individually, and as a group
Outstanding board members certainly don’t grow on trees. In fact, finding the right group of business leaders to impact your organization for the better is a true challenge.
Not only must you consider individual fit and ability, but also how the group will work together. Here are some tips to help you tackle this undertaking in pursuit of exceptional corporate governance.
Think strategically about the organization of your board
Before you can expect directors to think strategically about your organization’s future, you need to think strategically about your board. First, take some time to consider what size board makes the most sense for your organization. Perhaps you’ve been operating with 7 members, but changing to 9 members makes sense for tactical reasons.
Don’t choose a number at random; be sure you can back up the decision with consideration and research. Next, update your board member job descriptions. Make sure that the expectations for directors are clear. You can’t anticipate success from anyone unless you’ve provided them with an outlook for their role.
As most corporate directors know, CEOs come and go. For that reason, boards must be adequately prepared to facilitate smooth transitions between leaders regardless of whether the current CEO is exiting due to a new opportunity, retirement, or because they’ve been asked to leave.
Although it can be a stressful time for any company, CEO succession can be a highly strategized and monitored evolution. Here are some of our CEO succession “best practice” suggestions:
- Craft a written succession plan.
This may seem like a no brainer, but it must be said. This policy can and should include emergency plans in case of sudden death or a completely unplanned vacancy.
Russell Reynolds Associates suggests, “The entire board, together with a senior human resources executive, should review the succession plan twice a year, including an examination of the relevant bylaws and succession procedures and a review of the baseline capabilities requirements for the next CEO.”
- Set and communicate clear time frames.
Nothing throws a company into turmoil quite like a period without clear leadership. Employees start to get antsy and worry whether the transition will have an adverse effect on their position. To avoid this unsettling time as much as possible, the board should establish clear succession time frames. As Ivey Business Journal shares, “CEO succession planning must begin immediately following the installment of a new CEO.
The planning must be a constant, ongoing process that is managed as closely and attentively as any of the company’s critical business issues.”
Just last week, we discussed how public company board membership comes with increasing personal risk these days, yet executives are still doing their best to secure those coveted positions.
You might be asking, “Why?” Why would a well-paid executive spend extra time “on the clock” for a company other than their own? According to a recent study, there may be a clear answer: board membership helps advance executives’ careers and enhances their earnings.
The study, which was conducted by four academic researchers, utilized a sample set of 2,140 high-level executives at S&P firms from 1996-2012.
The researchers matched the executives who were serving on boards with executives in similar positions at comparable companies who had not served on a board.
The results were definitive. In the researchers own words, “We found that serving on a board increases an executive’s likelihood of being promoted as a first-time CEO to an S&P 1500 firm by 44%–and even if they weren’t promoted, we found that serving boosts an executive’s subsequent annual pay by 13%.”