• By: Adam Wire
  • May 16, 2022
Reading Time: 5 minutes
Ram Charan: Boards That Lead

Webinar Recap: Ram Charan, author of the bestselling book Boards that Lead, discusses the shared leadership of boards and executives in a fireside chat with OnBoard co-founder and CEO Paroon Chadha.

The COVID-19 pandemic introduced some significant challenges to boards of directors – especially when it comes to collaboration. However, many have overcome these challenges and settled into the “new normal” – emerging more engaged than ever before.  In fact, our 2022 Board Effectiveness Survey found that 63% of board members indicate their board was more collaborative in the past 12 months.

Of course, improved board engagement is a good thing. Engaged boards are better able to accomplish things for the organizations they serve. However, there’s no denying that increased engagement can also create friction between the board and the organization’s day-to-day operations. Boards need to understand when (and how) to lead, partner, or stay out of the way.

Last week, Ram Charan, author of the bestselling book Boards that Lead, joined OnBoard Co-Founder and CEO Paroon Chadha for a webinar exploring the shared leadership of boards and executives. The conversation spanned important topics including:

  • Succession planning
  • Recruiting directors that add value
  • Rooting out board dysfunction
  • Setting a high bar on ethics and risk
  • Taking boards from monitors to leaders

In case you weren’t able to attend (or even if you were), here are some of the key takeaways from the session.

 

“Boards can create huge value. Or they can by omission or commission destroy a company.”

– Ram Charan, corporate governance expert

The Evolving Role of the Board

Boards play a big role in the success of a company. As Charan put it, “Boards can create huge value. Or, they can (by omission or commission) destroy a company.”

No two boards are the same. While some are more ceremonial than anything else, others take charge. However, there are certain aspects all board directors must consider.

The Right CEO at the Right Time

A board cannot run a company. There needs to be a strong CEO in place who has high ethics and high integrity and is suitable for the current time at the company. With the right CEO in place, it’s easier for boards to collaborate, advise, monitor, and make decisions.

It’s important to note that a CEO who was once a good fit isn’t necessarily going to be the right fit in the future as the business evolves. If the CEO isn’t what the company needs at that given time, it must be a top priority of the board to recruit a more effective leader who meets the current needs of the company.

Board Composition

When it comes to board effectiveness, the right chemistry (both within the board and with the CEO) makes a big difference. It’s imperative to ensure the board has the right mix of skills and backgrounds.

It’s also important to determine which directors hold specific roles. Charan said it’s particularly vital to consider who is going to be the outside chairman of the board.

In addition, the typical board has just four to six meetings per year. That means a large portion of the work happens within committees. For that reason, Charan advised attendees to ensure the right chairperson is at the helm of all committees.

How the Company Does Capital Allocation

Directors should contribute to the organization’s capital allocation process. However, many don’t have the time or knowledge.

Charan recommends boards get an independent view to better understand risks. “You need an outside view,” explained Charan. “Otherwise, you’re not independent.”

Adapting in an Ever-Changing, Challenging Business World

The complexity of the business world is increasing, and there’s a lot of volatility and uncertainty. How can boards adapt to remain effective?

Charan advises boards to think about doing their work in committees. Since committees are smaller, they can devote time to specific initiatives and pivot quickly.

In addition, boards must be ready to adjust to new challenges. One that is top-of-mind today is inflation. “Boards need to get cash flow cost under various scenarios, learn about it, and evaluate risk,” said Charan. This is another instance when Charan says it makes sense to seek an independent view.

To learn more about what every CEO, board member, and executive should know about helping their company thrive in the midst of inflation, check out Leading Through Inflation, Charan’s recently published playbook for Chief Executive.

Dealing With Dysfunction 

The ultimate goal is to recruit board members who add long-term value. However, there are instances when there’s a problematic board member. How can directors deal with dysfunction on the board?

Charan recommends reworking the board’s self-evaluation every year. He also suggests bringing in a third party who can reveal what the board as a whole is thinking about a particular board member and why. Once the issue has been identified, confront the issue and determine a plan of action. “If things don’t improve, don’t nominate them in the upcoming proxy time,” said Charan.

Getting Involved (and Making an Impact) on Boards

Charan also shared some tips for getting involved on a board – and making an impact after joining.

Charan advised aspiring board members to first consider why they want to be a director. It shouldn’t be about ego or prestige. Instead, the desire to join a board should come from wanting to make a contribution, help the management, and facilitate the work of the board itself.

Aspiring board members must also consider the type of board, as private boards are different from public ones. While the population of public boards is decreasing, private boards are increasing. In addition, don’t discount nonprofit boards. They’re a great place to “build your board muscles.”

Professionals must consider which boards and companies need their background and skills. However, Charan cautioned against remaining a specialist. Instead, those with a broader viewpoint bring more to the table. As he put it, “If you remain a specialist, unless there is a dire need, you won’t be preferred. However, if you bring a broader viewpoint, then you will be most welcome.”

Charan also shared the three ways to enter a board, which are:

  • Directly
  • Through your network
  • Via search firms

Once on the board, directors must be committed to making an impact. Charan’s advice is to learn as much as you can about the business. As he put it, “Make a good effort to learn the business of the company. Master what the business is. What are its drivers? Where is it going? Where are the risks? The management will welcome this, and your contribution will increase in a major way.”

In addition, reading books and exploring credentialing through the National Association of Corporate Directors (NACD), Harvard, Northwestern, and others can help both current and prospective board members grow their skills.

Looking for more insights for improving the effectiveness of your board and ensuring it’s properly prepared to deal with the mounting challenge of cybersecurity? Check out our next Atlas Leadership Webinar, Is Cybersecurity Your Board’s Achilles’ Heel?, featuring Nick Merker and Mason Clark, Intellectual Property & Technology Practice lawyers at Baker & McKenzie LLP, and Mick Cobb, Chief Technology Officer at OnBoard.

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