Board of Directors Oversight: Do’s & Don’ts

To find out what a seasoned CEO knows about board management, we talked with our friend and client Erik Nielsen, PhD. Erik has more than 35 years of experience in higher education. He is currently the Consulting Vice President of Kaludis Consulting and he served as president of Franklin College of Switzerland for 17 years.

In this interview, we discussed what works—and what doesn’t—when it comes to managing a Board of Directors, particularly of a non-profit corporation.

Christina Cornelius: For a CEO, what are some of the differences between a non-profit Board of Directors and a for-profit Board of Directors?

Erik Nielsen: The dynamics and motivating forces on a for-profit can be a little different when it comes to CEO performance. In many cases, trustees serve on for-profits because of the nature of their expertise in the fields of endeavor or their degree of investment in the enterprise. They may have significant personal wealth tied up in the enterprise and are strongly motivated to protect that.

Hence, they can be more critical of CEO performance and react more quickly to protect their personal investment. Tolerance for mistakes or poor choices resulting in low ROI may result in more heated debate and demand for immediate correction. In those instances, CEOs need to come prepared to strongly debate and defend their choices.

It would certainly work to their advantage to create the one-team approach but that may be more difficult when personal wealth is involved and individuals feel personally threatened. In these instances CEOs need to work much harder to gain the confidence of all members of the Board and that may require more one-on- one time out of Board meetings.

CC: Can you give us a snapshot of the approach you took as the chief executive of Franklin College in Switzerland?

EN: To begin with, I had a wonderful board whose members were extremely supportive and genuinely concerned for my well being. My experiences were extremely positive.

However, I have seen other situations where CEOs have not been as fortunate and where they may have handled things less effectively. Here are four keys to working with a board:

Honesty – Don’t try to bluff or cover up; if there is a mistake, own it, and make sure they hear it first from you and not through a back door, which only results in a breakdown of trust. Remember the buck stops with you. Don’t throw someone else under the bus.

Clarity – Boards don’t spend the time you do with the detailed issues the institution faces. When you have a problem or see an issue explain it and make sure they understand.

Respect – too many times I have seen members of Academe assume an air of superiority regarding academic matters. It can be the same with CEOs on matters where they have some expertise. Nothing could be more damaging or further from the truth. Trustees are extremely bright and usually very successful businessmen and women. They know how to solve problems. Use them to help you

Collegiality – recognize that your board hired you and want you to succeed. They want to work with you not against you. Treat them as colleagues. There is no need to be defensive. You’re all part of the same team.

CC: Describe the way you viewed your role during a board meeting.

EN: My role was to keep my board informed of all issues the institution faced by providing the big picture. I didn’t need to get down into the weeds on issues. In fact, that would have been counterproductive, as that wasn’t the board’s role. 

I wanted to promote discussion on matters where I felt I needed advice or reassurance the board was in agreement with my approach since we were a team. I wanted to make sure I was hearing the board correctly and that I understood the views of all members of the board. I wanted to make sure the board saw any issues on the horizon so we all had time to think of alternate approaches if we need to take corrective action.

Don’t be afraid to ask for advice. The board doesn’t assume you are infallible. Use the meeting as a think tank opportunity. Providing a forum that engages all trustees will make it more invigorating for them and make them want to stay on the board.

However, don’t create unnecessary issues to elicit meaningless comments so trustees will feel they are being included in decision-making. Trustees will see through that and feel they are being manipulated.

I have heard some CEOs say that they often give the trustees some small issue to chew on so they won’t focus on the more important issues at hand. That’s bad advice and creates a situation where the Board and the CEO are adversaries.

Give them genuine issues with which to grapple but always on the big picture. Don’t get down the path of looking at particular operational details unless they speak to a broader systemic issue or an operating principle.

CC: How would you define a successful board meeting?

EN: A successful meeting, for me, is one in which everyone came away feeling they understood the state of the institution, where the issues lay and that they had an opportunity to express their opinions.

The board needs to feel that honest discussion took place and everyone was heard and respected even if complete agreement was not forthcoming. There are many powerful and successful individuals on the board, and they have strong feelings about issues.

Don’t expect there to always be unanimity if there is honest discussion. Sometimes you will find open disagreement and that is healthy. It prevents the trustees from running off the cliff like lemmings, simply following each other. However, it is important that once a decision is made everyone gets behind it to the degree they can with honesty.

CC: Can you comment on board member term limits and how that relates to board makeup and longevity?

EN: There is a reason for term limits in academia. Some institutions allow for a return after a hiatus of one year. In general, I favor the principle of fixed term limits. Six is reasonable.

Many not- for-profit boards resist asking a member to step away for two reasons. They find it difficult to do so to someone who, through longevity, has become a friend. Secondly, they worry about losing the financial support.

A board’s first responsibility is to the institution. If the institution is being administered well then the financial support will continue. Trustees need to take a break as well, despite the desire of some to stay on.

New ideas and energy are essential for the lifeblood of every institution. In my opinion, a hiatus of three years would be appropriate before returning to a board. If the former trustee is still willing to be engaged after three years, then it is a healthy situation for all. If interest faded after three years, the institution is best served looking elsewhere.

CC: What experiences influenced you to manage your board the way you did?

EN: Many things in my life helped shape the way I work in a team. I played team sports in high school and college. I also had a formative experience in the navy as a midshipman.

I worked on and directed an archaeological excavation where, by its nature, teamwork was essential for a successful season.

In my professional life, I have found that most things are accomplished through successful interactions with other individuals, and they involve working together, often with some compromises.

I have seen CEOs work successfully with their boards, where there was mutual respect and trust; however, other situations were less successful and those often revolved around a sense of suspicion and lack of respect of one party for the other.

CC: Who were your mentors along the way?

EN: For me, the term “mentor” assumes a formal relationship between a master and student. I didn’t have too many of those, though one of my professors in graduate school was very helpful and took me under his wing. He was open about his successes and was willing to share his insights on numerous topics. He supported my efforts greatly and in doing so gave me confidence.

In many ways, I think I had many informal mentors as I learned from others in leadership roles with whom I worked by observing their successes and failures. I think I learned something from every trustee on my board, either how to do it successfully or how not to do it.

In administration at Franklin, I learned much from my first chairman, Otto Kaletsch. It was easy because he was so open and honest about his own shortcomings and he was able to accept criticism dispassionately. We communicated weekly and he was not afraid to tell me when he felt I may have strayed, though he always did so kindly.

I admired him tremendously. He was a great listener and he was open to differing opinions. He was a very humble man yet he could also act decisively. He had an enormous sense of responsibility to the institution and to his role as Chairman of the Board.

During the early years of my presidency, when the school was in a fragile state financially, he kept the board together by his strength and conviction. He was able to command the respect of his colleagues. That is difficult to define but some people have that ability. Some call it gravitas but it’s more than that.

I also learned much from my second chairman, Paul Lowerre, who was very different in personality. He was younger than me and so it might seem odd that he was a mentor but I learned that his calm approach was also very effective. Like Kaletsch, he took time to reflect before acting. He was a very fair individual in dealing with others and, like Kaletsch, he was a generous and open person. He remains a good friend.

CC: When you were at Franklin College of Switzerland, how many board meetings were there each year? Where were they held?

EN: We had three meetings a year, two in NYC and one in Lugano, Switzerland. The difficulty in some ways was that the board in general was far removed from the operational location and couldn’t get to campus often.

They were at a distance from the heart of the operation. Some have observed that as a good thing. Perhaps it might have been better to have four meetings, as the results of the meetings when everyone could get together both socially and operationally was very effective in fostering collegiality and bonding.

The board worked as a very cohesive unit in the early years. We were also smaller, which made a difference. Sometimes a board can be too large for the size of the institution and its operation. It affects the atmosphere of trust, respect and a commonality of vision that comes with close relationships.

When a board is separated in location and even time zones, it requires more effective and frequent communication so everyone is on the same page and engaged. It’s much easier to keep up momentum and energy sparking off one another when everyone is in the same city.

There must, of course, be a balance. You don’t want trustees meeting every weekend over drinks without the CEO to discuss the inner workings and problems of the institution. That leads to a confrontational relationship of us-them and I have seen that before.

CC: How did you prepare for each board meeting?

EN: The agendas were set by me in discussion with the Chairman and Vice Chair, when we had one in later years. I think some of this was answered above. In general, I tried to give everyone an overview of the state of the institution at that point in time.

Prime interest was on the financial situation, which was driven by the revenue stream generated from enrollment so that would attract most attention and discussion. Then there was discussion of issues of importance on campus, usually personnel matters since they were key to the operation, and finally, any considerations of potential threats on the horizon.

In all of this we took time in at least one meeting a year to look at our progress toward longer-term goals and our success relevant to our mission.

I usually spent considerable time preparing for each meeting. I tend to be data-driven and I like to illustrate visually and to corroborate my thinking with supportive data. I also like to establish benchmarks and mark progress by fixed points of reference.

Hence I would use Power Point presentations with charts (some would say too many). I found it useful and it also kept me honest since everyone could see the data from which my observations were drawn.

Given that the board met so infrequently and the members were at such a distance from one another, it was important to put the time to greatest use. It was important for me to spend the time to prepare carefully so that meetings were effective and everyone came away feeling the time was well spent and the sacrifice of a weekend in their busy calendar was worthwhile. Remember this was a volunteer board of a non-profit.

CC: How did you frame the way the board would define and measure success?

EN: I did not set our criteria for success in isolation. It was generally understood and agreed upon by all trustees that several factors were benchmarks by which we could view progress and determine whether a year was successful.

Also, in my weekly conversations with the Chair, it was clear which issues he hoped to see progress forward. We did not have a formal set of goals laid out at the beginning of each AY and by which we evaluated performance and success.

As a relatively young institution, our goals were pretty straightforward and immutable.

As a not-for-profit and an institution without endowments, we were tuition driven. Hence, success took several forms, some of which were quantifiable while were others more subjective.

• How were we doing financially? Were we in the black or red? Were we trending up or down?
• How were we doing with respect to our Mission Statement? Were we meeting our educational objectives as well as our social ones?
• How were we doing with respect to treatment of our employees (morale)? Was the workplace environment healthy?
• How were we doing with our relationships within the community? As a foreign institution in Switzerland, were we becoming accepted as a resource for the city and point of pride? Were we gaining their support?
• Were we making progress toward recognition by the Swiss as a Swiss institution on a national level?

CC: Many CEOs grapple with imbalances between board members’ power relative to their experience with the day-to-day reality of the organization or industry. Would you offer some advice to a CEO hoping to maximize success?

EN: It is an issue every CEO faces. There are trustees who, not through malevolence but often through a genuine desire to help and be useful, get involved in the daily operational issues of the institution.

That is problematic, as it sends out wrong signals to employees and it gives more power to individuals who are usually not in full knowledge of the nuances of the situation. It can result in decision making and action taking based on inadequate information and through incorrect lines of administration.

Trustees must know their role; they are responsible for general oversight of the institution and the management of the CEO, who in turn handles the operational issues. If the trustees are not happy with the CEO’s results, they should deal with him/her through the board as a collective or through the appropriate committee of the board responsible for CEO evaluation.

When those situations arise, it is usually a strong Chair who can step in and keep the lines of authority straight. When the CEO tries to take that on, it can appear defensive and self-serving.

The Chair needs to exert a leadership role. If the Chair is unhappy with the CEO, then you have a communication issue to be resolved, quickly. It is sometimes useful for a CEO, especially if there are some new trustees, to hold a workshop, facilitated by an outside individual in order to instruct new members on best practices and the specific role of trustees in governance.

This is also useful when there are issues that have developed on the Board regarding CEO and trustees management perceptions.

CC: Give us your best advice on using data effectively in a board meeting.

Data can be overwhelming and too much can numb trustees’ minds or put them to sleep. It is a talent to be able to use data judiciously and effectively to make your point.

You want to ensure that everyone understands the nature of the issues and has enough data to offer meaningful suggestions. I may have erred on the side of providing too much data.

That is a danger for CEOs who live with the problems every day and become too familiar with the details. They can see the picture and weave through the data usually faster than trustees, who may need time to digest everything put before them.

Hence, when you are presenting data of that type, send it well in advance so everyone has time to absorb it. That said, it is a talent to present things succinctly and clearly so everyone understands the issues.

That often means taking sufficient time to prepare a lucid report for the board. It can’t be created the night before the meeting. A well-organized meeting with coherent presentations and time for discussion leaves everyone with a sense of accomplishment and a willingness to continue.

Without planning, there can be a sense of time poorly spent, and trustees will either drop out or their commitment will wane and wither.

CC: A CEO manages board members with varying levels of engagement, preparedness, commitment and power. How does a CEO prepare to handle these kinds of board dynamics?

EN: Each board operates a little differently and is the result of the personalities of its various trustees. Managing a board can be difficult and it usually falls to the effective teamwork of the Chairman and the CEO.

In my experience, CEOs also play different roles on different boards. Some have considerable power and equal voting rights and dominate board discussion. On others they play a lesser role. 

Trustees are usually on the Board because they have significant wealth, significant knowledge of the operation or they have influence within the business community within which the institution operates.

In any event, they are significant players and usually have strong personalities. The Chair and the CEO want to strive to keep things mutually respectful, collegial and yet allow for differing opinions to be voiced.

It’s a delicate balance and can be supported by some social events, workshops or retreats to promote bonding and fellowship and understanding of the roles each party plays. Boards work more effectively when there is mutual respect and friendship.

On the other hand, one has to guard against decision-making based on friendship and the desire to be a team player instead of voicing genuine concerns and objections to proposed courses of action.

Boards are composed of members with different strengths and each brings something different to the table. The effective Chair and CEO know how to draw upon each individual’s talents to make the board most effective as a team.

It is essential that every trustee feel she/he is making a meaningful contribution and is being heard. CEOs need to try to personally engage each trustee at some point in the cycle so they feel productive and remain emotionally tied to the institution. If not they will drop out. No one wants to be on a board simply to give their financial support unless they are remarkably passionate about the mission. They can do that without being on the board.

CC: How did your board management strategies change over time?

EN: As our finances improved over the years, we were less focused on immediate operational issues and could look down the road to more strategic initiatives and long term planning that addressed the mission.

We were also able to entertain ways to shape the institution to address changing priorities for quality and makeup. The discussions became broader in perspective. Having worked with the trustees for such an extended period (17 years), I came to know the personalities well and could better understand the nature of their individual interests and concerns. Hence it became easier to anticipate their questions and to answer them in a more meaningful and direct way.

CC: What was the best advice anyone ever gave you?

EN: “When you step down, get out of town.” It was good advice though given in a very different context—different school, different city. However, Lugano is a small town and my continued presence might have made the transition to new leadership more difficult.

If you stick around, you create several problems. You tend to meddle in the operations though you no longer are in control. It’s hard to step back completely from a situation where you have been in charge for so long and where you have invested so much of your time and energy.

Others will inevitably come to seek your advice on matters outside your authority. In addition your continued presence can split the board’s loyalties between you and the new CEO. 

Needless comparisons will be made. You may make the new CEO nervous and cause him to start looking over his shoulder.  The new CEO needs and probably wants the limelight. He deserves it to get the job done.

Move on. You and the institution will be better served. Given your personal situation, moving out of town may not be possible. In a large city it is easier to become unobtrusive. Try to be so.

CC: If you could give a new CEO just three tips on earning his/her board’s confidence and support, what would they be?

EN: 1) Always be honest. If you made a mistake own it and tell them first and provide a correction. 2) Engage the board as you think through issues. They are part of team and want to be engaged for their wisdom and experience. Use their talents. 3) Work with the chair to create open, transparent and frequent communication with your board. It will build trust and confidence.