Note To CEO’s: Decisions Come From You, Not The Board

I had two similar experiences last week where I heard from employees of two different companies that I’m on the board of. In each case, a senior exec said something like “I heard the board wants us to do blah.”

I was in each board meeting and the board most definitely did not say “we want the company to do blah.” Rather, in each case there was a discussion about the topic in question. In one of the cases consensus was reached quickly; in the other there was a robust discussion since two of the board members disagreed and the CEO wasn’t sure what he wanted to do. Ultimately in that case as well there was consensus.

In each case I asked the executive what he’d heard back from the CEO. I got two versions of “the board had a discussion, there was a lot of disagreement, but the board wanted us to do blah.” I then asked, as non-politically as I could, “Do you think CEO wants to do that?” In both cases, the answer was “I’m not sure, but he knows the board wants that.”

I think this is a brutal communication mistake on the part of each of the CEOs. I’ve seen this many times over the past sixteen years since I stopped being a CEO and started being a board member. In each case the CEO is abdicating some responsibility for the decision. In the worst situation, the CEO is blaming the board for a decision and ultimately setting up a very negative context if the decision is an incorrect one – as in “see – I didn’t want to do this but the board did – so it’s not my fault.”

I’ve come to believe that the only real operating decision that a board makes is to fire the CEO. Sure, the board – and individual board members – are often involved in many operational decisions, but the ultimate decision is (and should be) the CEO’s. If the CEO is not in a position to be the ultimate decision maker, he shouldn’t be the CEO. And if board members don’t trust the CEO to make the decision, they should take one of two actions available to them – leave the board or replace the CEO.

In one of the cases, I asked the executive “if I told you the CEO was strongly in favor of the decision, would that impact you.” The response was a simple one: “yes – I’d be much more motivated to make sure we did it right.” I smiled and reinforced that the CEO was in fact supportive, which I think was a relief (and motivator) to this particular executive.

In my leadership experience, people really value when a leader takes responsibility for a decision, even if it turns out to be an incorrect one. CEO’s – don’t be the guy who says “the board made me do it.”

  • James Mitchell

    Some times it does help to be able to blame some else.

    I used to do leveraged buyouts. Sellers would ask for things that I did not want to give. Like a robot, I would reply, “Gee, I would really like to do that, that sounds really reasonable. As you know, I am borrowing some of the purchase price from a lender. These lenders, they are really uncreative people, not that smart frankly, and I doubt I would be able to convince them of that.” I was always waiting for the seller’s counsel to call me on this: “I’ve been practicing for 25 years and I’ve represented dozens or lenders and borrowers, and I think you are wrong, I think most lenders will agree to my client’s request.” Not once did this happen. I am still amazed how effective this approach is.

    So I think a CEO can make something look less unappealing. “John, I would really like to agree to your request for a 500 percent raise, I really would, but that damm Board of ours, they are so cheap, they simply will not agree.”

    And we all know what parents do all of the time with their kids: “Son, I would really like to agree to your request, but your mom would never agree with that.” I had that used against me as a kid so I would usually talk with the other parent first, and then I could out negotiate my dad. Eventually he learned to just set his foot down and say no without blaming my mom.

    • James Mitchell

      And I am willing to be there might be a VC or two who has said something like, “Tom, your deal is really good, I would really love to invest in it, but my partnership, they have their silly rules, which they will not modify” when in fact he is really thinking, “John, you’re a totally incompetent manager and your idea is really dumb, but I don’t want to hurt your feelings, particularly since you’re the son in law of our largest investor.”

      • http://www.feld.com bfeld

        Again, you are giving an example of negotiation, not leadership and management.

        That said, personally, I think VCs who talk this way are lame. If a partnership has a consensus driven decision approach, then the whole partnership has to take ownership of the decision, including any of the partners interacting with the entrepreneur.

    • http://www.feld.com bfeld

      In a negotiation context, this “blame someone else approach” is often effective.

      However, in a leadership context, I think it is extremely weak. The example you give above is an especially important one. The CEO in question is being faced with a completely absurd request from an employee (500% raise). The CEO should own his response – “John – that’s absurd. If you really think you need a 500% raise, we have a much bigger issue to discuss. Do you want to discuss that?”

      I think leadership, management, and negotiation are very different things and require different approaches.

  • http://www.justanentrrepreneur.com Philip Sugar

    I think this is a critical point and one that will pervade the organization.  The CEO sets the style: Own decisions.

    If you come back and say “the board said….”   Your marketing manager is going to say: “It wasn’t my fault I was told to do”,  Your CTO is going to say: “What could I do I was told to”

    One of the biggest strengths of an entrepreneurial company is that you can say: “wow I fucked up that decision”  I do all the time.

    Seriously biggest judo strength you have against BigCo.  As long as you are putting holes above the waterline, make two bad decisions learn, and make the right decision before BigCo, even makes a decision to have a meeting about how to make the decision.

  • DaveJ

    I do this occasionally when I’m just tired of arguing with people or having to explain myself. It’s a vice, not very good practice, but sometimes helps CEO sanity.  I will say that when I do this I present it as “we agreed as a board …” rather than “the board told me to …”  The point of this being that I’m bought into the decision, and there was consensus, and don’t bother arguing because it will be a hard decision to change.

    • http://www.feld.com bfeld

      “We agreed as a board” is an ok backstop. It’s very different than “the
      board made me do this”.

  • http://www.southeastvc.com Jason Caplain

    Brad, this is a really good post and I shared it with some of our CEOs at our own porfolio companies. Like you, we have heard this too. While the board can help guide, our trust is always with the CEO. Thanks for taking the time and hope you’re well.

  • Anonymous

    Any CEO who says that should be subject to the “only real operating decision that a board makes.”

  • http://one.valeski.org Jud Valeski

    I’m disturbed by cultures that talk about “what the board wants.” the board isn’t in the trenches. while interesting at times, I couldn’t agree more that what the board wants doesn’t matter in the end. what matters is what the CEO wants. if the CEO and the board diverge enough, and pistons aren’t firing, then what the board wants starts to have more influence of course (perhaps even firing the CEO). boards are there to provide a wealth of experience and pattern matching for the leadership team; they are not the leadership team. “board of advisors/directors” not “board of executers” or “board of leaders.”

    conversations around “will the board be ok w/ that?” or “will that have support from the board?” are good conversations, but what’s key as they imply the board isn’t in day-to-day control; which is right.

    if the board is the controller for a company, then the CEO should be renamed to something else… maybe COO-for-the-board. one of my bigger concerns for some incubators is that the CEO is not actually the ceo, but just an operator at the day-to-day mercy of “the board.”

  • Ben Heywood

    Brad,

    Couldn’t agree more… It can feel like an easier short cut to eliminate debate or increase confidence, but as you astutely pointed out, it really begins to erode confidence in the CEO.

    Ben
    CEO and  Co-founder, PatientsLikeMe

  • Tom Godin

    Is it normal in your world for there to be such an open conduit between non-board execs and members of the board?  What does it say, if anything, about the state of management if someone feels like they need to get clarity on a decision from you?  And do you ever get concerned that engaging with these execs – even non-politically – diminishes the CEO’s leadership of the company?

    • http://www.feld.com bfeld

      I have a very simple policy that anyone in a company I invest in should feel
      comfortable talking to me about anything. I won’t invest in a company if the
      entrepreneurs / CEO aren’t comfortable with this. That said, a corollary to
      this policy is that anything anyone tells me will get cycled back from me to
      the CEO. There is one case where I’m careful about confidentiality and
      that’s when an allegation of fraud or wrongdoing is involved. Fundamentally
      I believe MORE and OPEN communication is better in a startup.

      I never feel that this undermines the CEO because I won’t make any decisions
      in these conversations unless the CEO is in the room and asks me to be
      involved in the decision cycle. I’m very clear about this in every
      conversation.

  • http://www.linkedin.com/in/rickcoplin RickCoplin

    Brad – I completely agree CEOs (and other leaders within a company) must own decisions and lead the company through changes those decisions create.  The Board exists to counsel, guide and at times direct the CEO in the interests of company prosperity.  A CEO should never shirk responsibility for direction to the Board, even when there is disagreement with Board direction.  Heated discussions may occur behind closed doors, but in public a unified position is key to leading.

    I worked with a weak Board a few years ago that had allowed their CEO to publicly disagree and work in opposition to the Board.  As a result, an “us verses them” mentality became ingrained in the company’s leadership and employees (encouraged by the CEO), and the Board was openly viewed as evil.  For well over a year, the Board was reluctant (and incapable) to take action; when their hand was forced, ensuing events were exceptionally ugly.  A new CEO was brought in who had experience turning around a similar situation and a few Board members and employees have been replaced.  The result is a company still in recovery, a strong CEO and a Board who understands its role as never before. The company is poised for success, but is playing catch up rather than industry leader.

    I’ve shared your post with a couple of other CEOs today & hope it makes a difference.

    • http://www.theequitykicker.com brisbourne

      Reading Brad’s post I was thinking about the situation where the CEO and the board don’t agree, but you nailed it with 

      *A CEO should never shirk responsibility for direction to the Board, even when there is disagreement with Board direction.  Heated discussions may occur behind closed doors, but in public a unified position is key to leading.*

      In situations where the board or CEO is weak then this approach will bring the issue to a head and force any changes to happen sooner.  Probably not a bad thing.

  • http://roachpost.com/ Eric

    The first time I ever heard someone mention (Vinod Khosla) that the role of a board as it relates to the CEO was to either support fully or fire, I thought it came out as a little harsh.  In practice, I now think it is brilliant.  

    From a CEO’s perspective – why would you want to drive a company with no board support? On the positive side, having a board that fully has your back and who is as fully focused on your vision and success, is the most powerful situation one can imagine. 

    BTW – funning from a tough decision or not standing tall when confronted tells your company, board down to the employees, exactly what you are going to do when the going gets rough… and it will.

    • http://www.facebook.com/hfjohnson Hassan F. Johnson

       Hi Eric, innocent bystander here just looking for discussion, but I will say I disagree with those two highly polarizing positions for a board.  Yes you do need your board’s support, but it doesn’t have to be whole and certainly not whole all the time, just enough so that you can execute without problems and not be fired.  If I had a board, and they didn’t beat me up about ideas, challenge my perspective (not position) then I’d need a new board. 

      From the little I know, a good board should be filled with talented people who are experienced in some way that they can add value to the direction of your corporation.  If that’s the case, there is no way that a group like that would fully support every decision I would have.  The greatest professor I ever had (John Doggett) only openly liked 3-7 things that I’ve said to him, he’s only called one thing genius and the rest I was intellectually abused for. And I assert my opinions a lot :-)  (I received A’s in both classes I took with him so I’m not counting grades)

      Just my thought and I hope you have even more to add to the pool of discussion as I love this stuff.

      Thanks,
      HFJ

      • http://roachpost.com/ Eric

        Hey Hassan,

        I fundamentally agree with what you are saying. A premise I strongly believe in is that of not hiring yourself.  The same would of course apply to a board.

        I am in no way suggesting that you bring in a bunch of yes people, quite the contrary. One function I have loved having great boards, are mixed and even challenging perspectives.  

        For me, at the end of the day, we agree to a course of action and then we are all 100% on board and moving forward.

        BTW – I too would have loved the fact that you are banging in ideas.  I’m a huge proponent of “fail-forward.”  

        Eric

  • http://hansoolee.com hansoo

    I love stories like this: a mistake is turned into a learning moment with some great lessons (transparency, owning your decisions). I noticed this is the first post that you tagged with “communication”. Such an important topic! Thanks for sharing.

  • http://diesellaws.com Diesel Laws

    Superb write up Brad. Completely agree with your view point about responsibility. Thank you for the post!

    – Diesel

  • Pingback: CEO and board must be united « « The Equity KickerThe Equity Kicker

  • http://www.duncalfe.me Lucinda

    I think that good CEOs use boards in all sorts of ways, and although I agree with you in this specific case Brad, the comments and to a lesser degree your post are painting with far too wide a brush. Sometimes a CEO uses the board to keep you and your team honest; the simple discipline of preparing for a a board meeting is useful. Sometimes you might do something that an investor director wants even though you don’t agree, because it’s worth it to get the chit or just to shut them up. Sometimes you blame the board for the need to do something that will feel off-course to your team – it’s a way to try something without confusing people. You can blame the board for not doing things because you’re not ready to but the team is chomping at the bit – it’s a gentle way to stall for a month. The entire area of board-management interaction in venture-backed business is very complex and not well understood. Let’s not oversimplify, it doesn’t help.

    • http://www.feld.com bfeld

      As someone who has sat on many boards and been a CEO, I don’t agree with
      your perspective. I think a CEO that punts on dealing with an issue he
      disagrees with the board on is making a mistake – he should confront it and
      deal with it. “Getting a chit” or “shutting up a director” is a
      dysfunctional dynamic that won’t work over the long term. More importantly,
      if you want the team to do something that is “off course for them”, but
      presumably something that you as CEO want to do, then there’s another layer
      of dysfunction, which is that your team doesn’t support what you want to do.
      Hiding behind “the board told me to do this” is also not sustainable,
      especially if things go badly.

      I’ve been on many boards where the interaction between the VCs and the CEO
      were ineffective. Most of the boards I’m on have at least one board member
      (often a VC) who is either non-effective or counter-productive. This is
      tiresome for me; I can only imagine how tiresome this is for the CEO.

      I’m trying to shine a bright light on some of this stuff, partly because
      after 10,000 of so board meetings I realize that many of them are
      inefficient, ineffective, or just plain useless. As investors we should do
      better by the entrepreneurs and CEOs we support.

      • http://www.facebook.com/hfjohnson Hassan F. Johnson

        Sir, your response to this was again stellar.  The most I know about Boards is my experience working in Corporate America and the little legal work I did in my younger days.  The most I know about company dynamics is from running my company and team of 10 (only 4 of which I can afford to pay and I’m the last one to get a check, says my bank acct). 

        You are humble, but if I were to simply say “I disagree” to Lucinda (who I’m sure is a highly intelligent person and I mean no disrespect), then I’d be grossly understating my sentiment to Lucinda’s comment, which seemed to allude that a board was a type of weapon to whip a team in place or try something drastically different (I may have misunderstood, but that’s what I got from it). 

        I feel passionate about this because I was told in my MBA program from Dr. Jim Fredrickson, a great strategy professor and part creator of the strategy diamond, was, as CEO, what’s most important are the things you “Do and Say”.  Not sure if that’s his quote, but I agree with it completely. As a CEO (of a very young venture) the things I “Do and Say” inspire my small team to do big things.  It drives us as a company.  We operate on the vision and execute with a goal.  The results of our work is the fuel to do more, yet still keep our eye on the goal as we eat our peanut butter and crackers for dinner :) 

        Without taking more credit than speaking to talented people with sincerity and intent, my words help our cash-strapped venture recruit good people to efficiently solve the problem plaguing our customers.  Some people use cash to drive and motivate, I’ve never had that weapon, I’ve only had me, desire and vision.  I would never allow my team to believe that decisions weren’t part of an overall plan.  If the Board comes up with a better strategy than mine or ours, then that’s what they are there for, to improve the company’s direction.  Not to implement it.  (let me say, if my board comes up with a better strategy than my team, then we picked a DAMN GOOD board!)  Granted, a strong relationship with your board is absolutely necessary, as they can remove you, but a strong relationship shouldn’t be predicated on outright compliance, but mutual respect for ideas, ones role in regard to the plan or company and execution.

        Thanks for your response to the comment, and again, your communication is highly effective and, form a person who is trying to be a better effective-communicator and from what I can tell on this blog, some entrepreneurs are fortunate to have you on their board.

        HFJ

  • http://putt1ck.blogspot.com Chris Puttick

    Interesting. I serve on a board of a charity & work with another; under UK law the board, as trustees of the charity, are legally and specifically responsible for ensuring the charity acts appropriately in its financial and charitable activities; the executive are not trustees but are empowered to make day-to-day decisions. So the board necessarily makes operational decisions  – even if only rarely and with the guidance of the CEO and executive.

    Maybe the law is different in the US, but I’d guess in the UK “we fired the guy” would not be a defence for a company director…

    • http://www.feld.com bfeld

      The rules are very different in the UK than the US. I’m sure the difference
      on the non-profit side is even greater.

  • http://putt1ck.blogspot.com Chris Puttick

    Interesting. I serve on a board of a charity & work with another; under UK law the board, as trustees of the charity, are legally and specifically responsible for ensuring the charity acts appropriately in its financial and charitable activities; the executive are not trustees but are empowered to make day-to-day decisions. So the board necessarily makes operational decisions  – even if only rarely and with the guidance of the CEO and executive.

    Maybe the law is different in the US, but I’d guess in the UK “we fired the guy” would not be a defence for a company director…

  • http://www.facebook.com/hfjohnson Hassan F. Johnson

    This was a great article  Furthermore you’re obviously a good communicator and great board member.  Thanks for the info.  We’re on the road to convert over to an Inc and I’ll be searching here for more Board advise.

  • http://twitter.com/gmwils Geoff Wilson

    This holds for any leader or manager. Regardless of the sources used to reach the decision, once the decision is reached it is yours to own. 

    I’m surprised that this mistake is being made at the CEO level, and agree that it comes across poorly to the rest of the company as blaming others for a decision that the leader has made.

  • http://twitter.com/peteryared Peter Yared

    Sometimes VCs demand idiot things from CEOs, who object to a certain point, and then finally capitulate. It is the rare VC that can sit on his hands when a company is early to market, etc. so they then want to “help”. At which point I would tell my team, the board wants XX and they are not going to back off, so even though we think it’s stupid we need to do it.

    • http://www.feld.com bfeld

      I’d encourage a more constructive response. Have a one on one with your VC
      and explain this dynamic. If your VC STILL insists that you do something,
      then you’ve got a real problem because you don’t have a respected
      relationship with your VC. At the minimum, this is important for you to
      know.

  • Kevin Goodwin

    I agree with you and have to ask— are you talking about public companies?
    my epxperience is that in private venture funded companys– BOD members– get very inlvolved and they often should not
    In public companies,, I feel it is bad idea to have board members involved,, let alone making operating decsions
    what really qualifies one to do so?
    many decsions nowadays are incresingly complex, and what board member would ever really take responsibility?
    that is indeed the CEOs job ,,at all times ,,
    and I can say from experience –that when influneced by BOD members , especially on people , it rarely works out well
    board members are often from diverse backrounds
     and it can be  the equivalent– of telling you how to raise your children 
     invasive!

    • http://www.feld.com bfeld

      I’m actually talking about private companies, which is where I spend all of
      my time.

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