By Louise Green

It’s tough at the top. And failure is more prevalent than you think. According to Harvard Business Review, two out of five new CEOs fail within their first 18 months. 

In our experience, more often than not CEO’s don’t fail due to a lack of skills and an inability to manage down. We find most CEO’s fail because they can’t manage up as they’re not on the same page as the board.  They often don’t have a shared understanding of the key issues and challenges facing the organisation, of what’s important and how to execute and lead this.

Long term success is reliant on the board and CEO being on the same page and the CEO needs to have a clear understanding of ‘True North’. They need an agreement that provides the glue between the overall strategy and what needs to be done now.

This is often described as an annual performance agreement. Most effectively it’s a 1-pager that has 6-8 key objectives or ‘big rocks’, that provide the connection between the effort required today to achieve the strategy required tomorrow.

This is essentially the ‘WHAT’ of the CEOs job. But knowing what to do is only half the job. HOW the CEO goes about this is critical. 

The ‘HOW’ refers to the behaviours that the CEO should be modelling – setting the tone and culture for the organisation. And it’s important to realise that most CEOs fail, not because of the ‘WHAT’, rather because of the ‘HOW’. ie how they’re behaving as a leader. This is where 360s can be very insightful.
Again it all comes back to the annual performance agreement. The CEO reports against this document to the board. It’s also important for the CEO to share their performance agreement (or parts of it) with their direct reports. That way there’s a line of sight

 throughout the organisation. Remarkably, less than half of the organisations we deal with have a performance agreement in place for their CEO.

Developing a performance agreement keeps the board, the chair and the CEO safe. It’s about agreeing a line of sight and focusing the compass on true north so that the strategy can be executed effectively and efficiently. Typically this document is agreed between the chair and the CEO. If the chair is not going to facilitate this, it requires a highly experienced third party to lead the process.

We consider this to be an important governance discipline. Think of it this way: if hiring a CEO is the most important job a board can do, then enabling, empowering and managing your CEO is probably the 2nd most important thing. And a performance agreement will enable you to do exactly that.

 


More information on Organisational Development can be found here. Louise's original article on LinkedIn can be found here.
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