You know your board members well. After all, if you're the CEO, you probably chose them.
But how well do your board members know you--or the rest of your top team?
Some results in a recent study by The Conference Board, The Institute of Executive Development, and the Rock Center for Corporate Governance at Stanford University provide the impetus for asking this question.
According to the study, directors do not have an especially firm grasp on the strengths and weaknesses of the top team. Specifically:
- Slightly more than half (55.1 percent) report understanding the strengths and weaknesses of senior executives "extremely well" or "very well."
- Roughly a third (33.5 percent) understand these strengths and weaknesses only "moderately well."
- All the rest (11.4 percent) understand them "slightly well" or "not at all well."
Though the study was based on a survey of public companies, the results nonetheless provide a useful reminder to leaders at companies of all sizes to consider the question: Does your board know your top team as well as it should?
It matters for several reasons. For one thing, the board's lack of knowledge "can be a serious liability when the time comes to identify a successor to the CEO," notes study coauthor and Stanford Graduate School of Business faculty member David Larcker on the Stanford GSB site.
Moreover, you can apply Larcker's logic to top-team talent in general. If your board recognizes that your top team is weak in one area or another, its connections can better serve the company as a potential recruiting resource.
In addition, the more your board knows about your top team's strengths and weaknesses, the more your board can help the current leadership team develop--by providing mentorship and ongoing evaluation.
Here's the good news: The study also includes four recommendations that all companies (both large and small) can use to help their boards gain a stronger grasp of their top teams. Here they are:
1. Create a talent development program with board involvement. "The development of promising employees should not end with their promotion to a senior management level. As leader of the organization, the CEO has the responsibility to create and implement a development program for direct reports, and the board should ensure that this work is carried out," notes the summary on the Stanford GSB site.
2. Connect talent development with succession. "The talent development program should be formally connected to the CEO succession process, and the progress of individual executives should be reviewed in the context of their potential to assume the CEO position."
3. Play an active role. "While the CEO is ultimately responsible for the development of his or her direct reports, directors should move beyond interacting with executives 'when circumstances warrant.' They can volunteer to serve as informal mentors or advisors and, with the approval of the CEO, meet periodically with executives in the context of their everyday work environment."
4. Measure and reward progress. "Companies' succession plans and talent development programs should be benchmarked against those of industry peers. Further, the CEO should be held accountable for the development of his or her direct reports, with talent development included as a key performance indicator (KPI) for his or her executive compensation program."