The jump from CEO to chairman is huge. Suddenly, the old instincts and skills needed to run a successful business must be complemented by an ability to see the bigger picture, weighing up the interests of not just the executive team, but stakeholders too. It demands a radical change of mindset and absolute clarity of purpose.
Those embarking on the journey from chief executive to chairman need to be very clear about the differences of each role – fundamentally, you can’t have two CEOs. “It sounds obvious but, above all, you must always remind yourself that as chairman your job is to run the board, not the business,” says Debbie Hewitt, Chairman of menswear retail group Moss Bros.
Rather than focusing solely on driving growth in the business and leading the management team, the chairman will be expected to:
- set the agenda for board meetings
- orchestrate the board and the discussion
- mediate the requirements of shareholders with those of the board of directors
- understand and enforce UK Corporate Governance
“Why do you really want to become a chairman?” asks Mike McTighe, Chairman of Pace and cable manufacturer Volex Group plc. “I would only choose a role where I know I can be a good mentor and sounding board, and where the CEO respects me and the value I can add. As chairman you become an interventionist, so consider how in that context you are going to be motivated and excited. You must adjust your view from that of CEO where you are subliminally linked-in to the business.”
Gain NED experience
To really understand what’s required executives should get plenty of NED experience before taking on the role. Kelvin Harrison, Chairman of IT services business Maxima Holdings plc, says: “Take a non-executive role at the first sensible opportunity, which is commonly when you feel you have sufficient experience to be able to add real value. I took my first NED role at the age of 41, which, perhaps unusually, happened to be the role of chairman. With the benefit of hindsight, and considerably more experience, I’d be the first to admit that I make a much better chairman now.”
Mike says: “You need some context for the types of questions you’ll be expected to ask and answer, and the reason behind why some of the processes and corporate governance models exist. With experience as a non-executive in another company you can observe how a board functions and, if you’re lucky enough, you can learn from a good chairman. If you don’t have this experience, it’s very dangerous because there’s nothing to challenge your normal approach, which would be to continue to behave as you have as a CEO.”
In order to obtain the necessary mental toughness, Rick Haythornthwaite, Chairman of Network Rail and credit card business MasterCard, suggests: “Learn from the traits of the best and worst of the chairmen under whom you have served. What makes for a good chair from a CEO’s standpoint? Next, go and speak to the key shareholders and other stakeholders. What makes a good chair from their standpoint?”
Set the rules for engagement
As Group Company Secretary at insurers AXA UK plc, Jeremy Small provides a key link between the boardroom and the operations of the company. He says: “Many executives take a while to adjust to not being embedded in the operational side of the business. Often, they can succumb to the temptation to advise the executives on how to run the business. It’s critical for the chairman to remember what their role actually is.”
In order to achieve this there has to be a clear mandate for the chairman’s role when he/she is initially hired. Debbie says: “This will vary depending on the business and sometimes members of the board will have different perspectives on what a successful chairman should be focusing on. The board might want you to be more hands-on in specific areas, for example, in managing the City or the banks, which is fine as long as this is stated from the outset. You are more likely to be successful as chairman if you have explicitly set out the board’s expectations for the role and then review your own performance against it.”
The route to becoming chairman is not solely the preserve of the CEO. Sometimes very confident and able COOs can skip the CEO position and become a chairman; others believe that CFOs make the best chairmen due to the negotiation and diplomacy involved in the role. Whichever executive position they make the transition from, the best chairs have an abundance of experience and know when and where to exert pressure to get things done properly.
Ishbel MacPherson, Chairman of construction equipment provider Speedy Hire plc, took on several NED roles following her 20-year executive career in investment banking. She says: “It takes quite a special person to achieve the transition successfully, but it can be done. If you are an executive on a plc board you will have frequent interaction with the NEDs, so you should observe, learn and try and emulate. It’s important for executives to take on a NED role in another company so that they can empathise with the challenges they face.”
The thrill of being CEO lies in calling the shots on a daily basis. Certainly, the role of chair has a different pitch but the challenges are just as intense. The full range of business skills will be called upon to bring together the various elements of an organisation so that the overall focus is on delivering the right results.
Please get in touch if you have any comments about the issues raised here.
I hope to see you soon
Matthew
www.twitter.com/criticaleyeuk
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