We have recently been discussing good guidelines efficient and effective meetings. For more information on the topics we have tackled please go to our series ‘Effective Meeting Procedures’.
This final BLOG is aimed at answering the broader questions about the relationship between an organisation’s executive(s) and the board. For instance: How does the CEO and Chair communicate and interact with one another? How do the functions of leadership and governance combine to create a cohesive relationship which produces effective organisational performance? And, who should be in each of these positions to allow the most valuable working team?
The Executive and Chair Relationship
The relationship between the Chair and the CEO (or Principal or Pastor) “the Executive Member” is the foundation on which good organisational governance as well as leadership and performance is built. There must be trust and respect as well as effective and deliberate communication between the two parties. If there is a fundamental break down at this level then the organisation as a whole will usually be dysfunctional. Which leads to our first question;
Should the Executive Member be the Chair of the Board?
Often within the rules of a body there are statutes which require a certain person to be in a specific position, for example; that the Principal will be the Chair.
In our experience, combining the Executive Member role with that of the Chair might be convenient but it isn’t good practice.
It is important to understand that the role of The Chair and the Executive Member are fundamentally different.
The role of the Chair, is to lead the board on issues pertaining to the governance of the organisation whilst the role of the Executive Member is to inform the board on issues relating to organisation’s operational outcomes as the operational leader.
‘Governance’ is primarily focused on ensuring conformance and compliance with organisational rules, policies and other external authorities. An organisation’s governance also has input into the big picture strategy and objectives along with keeping the executive accountable, thereby protecting the organisation’s interests and promoting its longevity.
‘Operational Outcomes’ are primarily focused on the day to day running of the organisation, practices and processes that enable the organisation to reach its goals and the ongoing development and implementation of plans and strategy.
Since the roles of Governance and Operational Outcomes fundamentally differ in focus, activity and application, an organisation will function more effectively if the Executive Member and the Chair of the Board each complete their own roles, whilst supporting and empowering the other.
This does not mean that the Chair and the Executive Member are at odds with each other. Indeed it is preferable that The Chair and the Executive Member function as leaders in their respective spheres and have a mutuality of support for each other framed by the best interests of the entity and its stakeholders. A highly functioning relationship between the Chair and the Executive Member is the key to increasing overall organisational performance and is the critical link between the governance and the organisational operations. A link which works both ways.
If however an organisation is required to have the Executive Member hold the position of Chair there are 2 main areas to be aware of which can decrease the effectiveness of both positions:
1. An inability for the governance entity to hold the Executive Member accountable.
As said earlier, the primary concern of the governing body of an entity is the well-being of the entity itself and how best to protect it from any possible threats, even if those threats come by way of the Executive Member. If one person holds both the Chair and the Executive Member role, then the Chair will be unable to provide the required accountability or objectivity to both protect the organisation and enhance performance.
2. It is often the Board’s responsibility to evaluate the performance of key organisational staff including the Executive Member.
If this is the case there is an inherent conflict of interest for an Executive director to participate in Board decisions about employee performance and compensation, especially their own. Along with this it may be difficult for the Executive Member to make impartial decisions relating to issues such as staff cuts, changes in programming or budget allocations.
For these reasons it is our belief that the Chair and the Executive member of an organisation must be different people. Although this also raises the question of whether the Executive member, should be general member on the board at all?
Should the Executive Member be a Member of the Board?
It is a slightly different issue where the Executive Member is an ordinary member on the board. Although some organisations have an absolute separation between the Executive Member and the Board there are some advantages in the Executive Member being a Board member.
To conclusively say yes or no would be to ignore the facts that will differ depending on the organisation and the personalities involved. For this reason we think it is most helpful to present a case for both sides highlighting the fact that this is a two sided coin and an advantage, if handled incorrectly, may become a disadvantage.
1. Source of information
Advantage: An Executive Member may be on a board, because they are an engaged member of the organisation who may be able to bring valuable knowledge and expertise to the board. The Executive member is often able to provide a great deal of information to the board about the operational activities of the organisation, helping the board to make informed decisions.
Disadvantage: An Executive member in this position, if they so choose has the opportunity to manipulate the flow of information to the board.
[Keep in mind that this source of information should be achieved through the relationship that they have with the Chair.]
2. A Charismatic Leader
Advantage: Properly engaged Executive Members are often charismatic in nature and may succeed at drawing others to contribute to the leadership of the organisation, particularly where there is a high dependence on volunteers.
Disadvantage: Depending on the other personalities on the board a charismatic Executive Member may also be able to sway opinions toward decisions which lessen or diminish the accountability of the Executive to the board.
Furthermore depending on the motives of the Executive member they may try to use their position on the board to gain greater influence or control of the organisation. This said, the Executive Member may be a valuable board member although it is advised that the possible pitfalls are recognized as well as there being a strict conflict of interest policy which is adhered to.
In summary, a strong supportive relationship between the Executive and the Chair is vital for successful leadership and governance. The two separate functions should ideally be embodied by two separate people, and whether the Executive is on the board or not there needs to be a harmonious working relationship and effective communication between the two.
For further information, please contact the author.
This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.