Now, as a Founder CEO, you can have invisible support!

Or, what to expect when a Founder/CEO has to let go, and create a new relationship, as a CEO, with a Non Executive Chairperson.

In a recent meeting with a group of entrepreneurs we talked about the transition from an early stage company, where the team was primarily the Founders with few staff, to the maturing organisation where it becomes desirable to appoint a Board and run the company in a more formal manner.  

This transition has many steps, in this article we will deal with one aspect that founders often do not understand.

I didn't realise!

It’s often a surprise to Founders that shareholders see a necessary distinction between an executive management board and the formal legal Board of (non executive and independent) Directors.

As shareholdings become more diverse as a result of new investment, and a larger contingent of share holders are to be represented, the role of non management, independent directors becomes paramount.

In this context, I was asked about my views on the role of the Non Executive Board of Directors, and more particularly the role of the Non Executive Chairperson. 

I would like to share my views here for the benefit of a wider audience. 

What the non Executive Chair is, and is not.

The Chair has, primarily, three roles:

• to lead the Board in the execution of the Board’s responsibilities
• to be a Mentor to the CEO (note the Chair is not the manager of the CEO)
• to be an advocate for the business in the wider business and financial community

In these roles, it is clear that the Chair does not have an executive or any other capacity in the day to day conduct of the affairs of the business (an unfounded concern expressed by some founders, entrepreneurs and CEOs).

Let’s look at these responsibilities in more depth.

Board Leadership

In all companies, this role is of paramount importance. But is early stage and growth companies the role takes on a nuance which relates to the growth of capability and contribution of the Board to the business. Remembering that as it transitions from a entrepreneur led business to a more formal structure the Board may be small and capabilities need to be developed at the Board level, as well as in the company.

As a general rule, the Chair should:

• Provide leadership to the Board, be responsible for its composition and development, conduct meetings efficiently and effectively, and ensure good governance is maintained across the business. The Chair ensures that the Board acts independently and performs effectively,
• Be responsible for ensuring the company determines and maintains an agreed strategic trajectory, while at the same time keeping externalities under review. This is an arms length perspective to “see further than day to day executive perspectives”, 
• Ensure the Board and the Executive team are clear with regard to the information that must be presented to allow the effective monitoring and guidance of the business, and
• Ensure directors are engaged and contributing to the overall governance and direction of the business.

Being a Mentor for the CEO

The role of CEO is one of the most demanding yet lonely roles in any business enterprise and it is essential that an effective, close, and confident relationship is formed between the Chair and the CEO.

• It is not the Chair’s role to run the business, nor is it the Chair’s role to direct and instruct the CEO,
• The CEO has executive responsibility to the Board to run the business, and this role cannot be usurped. A Chair that believes they are “the Admiral to the Captain CEO” is in danger of creating serious disruptions for the board and creating confusion in the senior management ranks as to who is in charge,
• The Chair serves as a mentor and sounding board for the CEO on issues to be presented to the board, on feedback from independent directors, and on issues facing the enterprise,
• The CEO should look to the Chairperson for feedback and counsel on the board’s concerns, on strategic issues, or risk mitigation, and
• At times, the Chair is a supportive and friendly ear in the darkest of hours.

The relationship is more Mentor to CEO than supervisor to manager, it can’t work any other way. 

As a side note, if a company faces an unexpected CEO transition (due to death or resignation), a board with an non Executive Chair who has been closely involved but not in an executive capacity, might be better positioned to act swiftly and deftly in the period of continuity.

To be an advocate for the business in the wider business and financial community

Non Executive chairs should always ensure that they continually develop, maintain a diverse, and influential network beyond the confines of any business.  

In the context of a business where they are Chair, they should

• Continually and constantly present the company’s aims and policies to the outside world. This is not an exclusive responsibility, and it is executed with, and as a complement to, the CEO’s external persona 
• In joint planning with the CEO, doors need to be opened and sometimes influence needs to be exerted. This activity is often better initiated in an informal non Executive capacity which the Chair can execute. 

Summary 

 As companies evolve from a startup to a growth company, and then mature, the management and governance mode adapts to the new requirements. In the growing company there are more complex stakeholder interests, and the company adopts a growing persona and visibility.  

Part of this transition is the move from being “Founder led” to being under the purview of a Board of Independent Directors representing investors and stakeholder interests. 

For many Founders it is a painful and traumatic transition. This transition can be helped by having a capable Chairperson, with broad business perspectives and experience, who has also walked the walk of the Founder, and understands the growing pains as the child grows to adulthood. 

END