CEO and board chair: the perfect working pair

In my career I have sat on all three chairs: as owner, as CEO and as chair of the board. After three decades and dozens of companies I dare say one thing for certain. A company’s success is not decided in individual meetings or decisions. It is decided in how the CEO and the chair of the board work together.

Yet in most companies this working pair has never been defined. Cooperation rests on assumptions, personalities and tacit knowledge. In good times nobody notices the gap. In hard times it becomes the company’s most expensive problem: unclarity, duplicated work, filtered information, power games and a slower organisation.

My own thinking started in the early 2010s from Matti Lainema’s book on the balance of power. The book could just as well be called the imbalance of power, because in practice the relationship between the CEO, the board and the owners is never finished. It keeps seeking its form. That is exactly why the working pair has to be built deliberately.

A perfect working pair does not mean two leaders who think alike, or mixing the roles. On the contrary.

In the best working pair the tasks are different, the responsibilities separate and the goals shared.

The chair leads the board. The CEO leads the company through the management team. Both work for the same end: the success of the company, its owners, customers, people and partners.

Perfect cooperation does not come from blurring the roles but from carrying them out exceptionally well.

Two different tasks

Leading a limited company starts from structure.

The owners define why the company exists, what kind of owner value is pursued and what conditions attach to owning. The board is responsible for the company’s governance, the proper organisation of its operations, strategic direction and the choice of CEO. The CEO is responsible for the company’s operations and day-to-day administration in line with the board’s instructions.

I put the same in one sentence: the owner creates the opportunities, the board builds tomorrow, and management delivers the results.

The chair’s task is to organise and lead the work of the board. The CEO organises the company’s operations, leads the management team and is responsible for implementing the board’s decisions. The management team is not a statutory body of the company but the CEO’s instrument of leadership.

The division of labour is simple on paper but demanding in practice.

The chair must be close enough to understand the company but far enough to see the whole. The CEO must be independent enough to lead the company but open enough to make full use of the board.

The chair leads the board

The chair of the board is not the company’s second CEO, the CEO’s line manager in the organisation or a member of the management team. Nor may the chair be a former great who runs meetings and whose value ends when the meeting does. Chairs who imagine that everyone reports to them belong to history.

The chair leads the board, whose task is to take care of the company’s future and make sure the management system works.

It is the chair’s responsibility to make sure that the board:

• understands the owners’ will
• forms a shared view of the company’s direction
• makes decisions on the right matters at the right time
• follows the implementation of the strategy and the annual plan
• assesses risks, investments and the allocation of resources
• supports, challenges and evaluates the CEO
• uses the competence of each of its members
• looks far enough into the future.

The chair builds the connection between owners, board and management. The chair turns the owners’ goals into the board’s shared agenda and the board’s decisions into a clear mandate for the CEO.

The chair’s power is not based on deciding alone. The board decides collectively. The chair’s influence comes from preparation, the quality of questions, connecting the pieces, leading the conversation and the ability to get the board to make good decisions on time.

A good chair increases the board’s performance. An excellent chair also increases the CEO’s performance.

I assess a board’s success with one question: after meeting the board, is the CEO braver, wiser and stronger to lead the company than before? At its best the board meeting is the best day of the CEO’s month.

The board must not drain management’s energy. It must grow it.

The CEO leads the management team

The CEO is responsible for the whole company, the full 360 degrees of delivery. The CEO is not the best expert in the business, the biggest salesperson or the organisation’s chief problem-solver. The CEO’s task is to build a management system through which the whole organisation succeeds.

The CEO’s most important team is the management team.

The management team must not be a round of updates in which the CEO passes news downwards or the members report their own in turn. A good management team is the company’s instrument of leadership: each member leads their own area, takes part in leading the whole company and carries responsibility for the shared goals. The CEO makes sure the management team has a clear division of labour, a shared situational picture, a working rhythm of decision-making and the ability to carry out the annual plan.

The CEO’s responsibilities include:

• business results and cash flow
• customers, sales and market position
• putting the strategy into practice
• the work of the management team
• organisation, people and company culture
• the quality and continuous development of operations
• operational risk management
• implementing the board’s decisions
• timely and sufficient reporting to the board.

A good CEO does not try to do everything alone. They build around them a management team, an organisation and a partner network that carries out the strategy without every matter crossing their desk.

The CEO’s task is to get the whole orchestra to play, not to play every instrument.

A shared goal, different time spans

The CEO and the chair look at the same company partly over different time spans.

The CEO has to win this day, this week, this month and this financial year. Customers must be served, deals won, deliveries made, people led and cash looked after.

At the same time the board and the chair must make sure the company is competitive in three, five and ten years as well. They must consider market change, future investments, leadership structures, competence, financing, technology and the next sources of growth. That is why a company needs the owner’s will, a thousand-day strategy and a concrete annual plan broken down from it.

This does not mean that the CEO leads the present and the board alone the future. Strategy is always realised in everyday work. The pair’s task is to connect these two time spans:

How do today’s decisions build tomorrow’s company?

One situational picture, not two realities

The CEO uses power not only through decisions but also through what they tell the board and what they leave untold. Reporting is never neutral if it is created solely in the CEO’s hands. Filtering and fog easily form between the roles. Reducing that fog is one of the most important tasks of modern board work.

The solution is not for the board to build its own parallel intelligence or to start leading the organisation past the CEO. The solution is a shared situational picture that comes as directly as possible from the company’s systems.

Finance, sales, the tender pipeline, customers, projects, production, people, development projects and forecasts must be seen as one whole. Then the board and the management team discuss the same reality and not two interpretations. Reporting is no longer the CEO’s presentation to the board but a shared view of where the company is and where it is heading.

Reporting has three permanent cores: sales and customers; people and culture; and direction, deviations and forecast. Without sales there is no future. Without people there is no delivery. Without a forecast the board leads from the rear-view mirror.

The CEO’s task is to answer six questions for the board:

1. Where are we?
2. Where are we going?
3. Where are we succeeding?
4. Where are we deviating from the plan?
5. What are we doing to correct the situation?
6. What decisions or support do we need from the board?

Openness does not mean carrying every operational detail to the board. It means that essential information is not filtered, difficult matters are not hidden, and surprises are told when they arise, not at the next meeting.

For me the most important principle of trust is simple:

No surprises.

The chair spars, the CEO decides

At their best the chair and the CEO form a zip that creates value for all parties.

One-to-one conversations are among the company’s most important leadership encounters. In them unfinished thoughts, options, people, risks and difficult decisions can be dealt with in a way that is not always possible in a board meeting.

But sparring must not turn into operational steering.

The chair can ask, challenge, suggest, connect, open doors and help form options. The CEO makes the operational decisions within their authority and answers for the consequences.

The chair does not hand out tasks to the management team or the organisation past the CEO. Board members do not build their own chains of command inside the company. All work directed at the organisation is agreed with the CEO.

Equally, the CEO must recognise the matters that belong to the board. A significant investment, an acquisition, a change of strategic direction, an exceptional risk or a material organisational change is not taken too far before the board is involved.

Good cooperation is not based on who gets their way. It is based on the company getting the best possible decision.

Constructive tension belongs

A perfect working pair does not always agree.

The chair’s task is to challenge the CEO’s thinking. The CEO’s task is to defend a well-founded view and bring the board the best possible proposal. The board’s task is not to approve management’s proposals automatically, but nor is it to prove its worth by constant opposition.

In good cooperation people can disagree strongly without trust in each other breaking.

This requires three things:

• Straight talk. Difficult matters are dealt with by their right names.
• A safe space. Unfinished thoughts can be voiced without fear of their being used against you later.
• A united front after the decision. Once a decision is made, the chair, the board and the CEO stand behind it. The debate is not continued in the organisation, and responsibility for the decision is not shifted to others.

Trust does not mean a lack of criticism. Real trust withstands challenge.

What must the pair agree on?

When I start as chair of a new company, I go through at least these six things with the CEO. I recommend the same to every pair.

1. The company’s shared goal. What are the owners aiming for? What kind of company do they want to build? How are growth, profitability, cash flow, risk and company value weighted?
2. Roles and decision rights. Which matters belong to the CEO, which to the management team and which to the board? What is the chair informed of in advance? When is a board decision needed?
3. Reporting and the situational picture. What information does the board need, in what form and at what rhythm? Which deviations are reported immediately? How do we make sure meeting material is not built only for the meeting?
4. The rhythm of cooperation. How often do the CEO and the chair talk? How are board meetings prepared? What happens between meetings? In my model the pair talks at least every two weeks, even when there is nothing special.
5. The board’s participation. In which matters is the competence of board members used? Who agrees on tasks and contact? How do we make sure participation supports and does not disturb operational leadership?
6. Difficult situations. What do we do if results fall short of targets, the cash position weakens, a key person leaves, the owners’ views differ or a disagreement arises between the CEO and the board?

These things should not be left to personalities, assumptions or tacit knowledge. Good cooperation is a built management system, not merely a good personal relationship.

The pair’s shared scoreboard

The CEO and the chair are assessed partly on different things.

The CEO’s scoreboard includes business results, customers, cash flow, the organisation’s performance and the implementation of the strategy.

The chair’s scoreboard includes how well the board works, the quality of decision-making, the clarity of strategic direction, the conditions for the CEO’s success and the achievement of the owners’ goals.

On the shared scoreboard, however, are the same things:

• Is the company stronger than a year ago?
• Does it create more value for customers?
• Has the organisation’s performance improved?
• Are the most important partners ready to build the future with us?
• Are profitability, cash flow and company value growing sustainably?
• Is the company better prepared for the future?
• Do owners, board and management trust each other?

Company value does not come only from money distributed to owners. It comes from the value customers experience, people’s ability to succeed, partners’ trust, the quality of operations and the company’s ability to renew itself.

That is why the CEO and the chair do not work only for the owners. They work for the success of the whole company.

The perfect working pair

The perfect pair of CEO and board chair is not based on friendship, similarity or constant agreement.

It is based on:

• a shared goal
• clear roles
• open information
• mutual respect
• constructive challenge
• an agreed rhythm of leadership
• shared responsibility for the company’s future.

I call this thinking We over Me. Owners, board, CEO and management team form one team. A team does not mean the roles disappear; on the contrary. A good team requires clear roles, a shared situational picture and looking in the same direction. Championships come from effective cooperation, not from the excellence of individuals.

The chair does not lead the management team. The CEO does not lead the board. Neither builds a power base of their own.

The chair makes the board better. The board makes the CEO better. The CEO makes the management team better. The management team makes the organisation better. The organisation creates value for customers, and the customers’ success builds the success of the company, its owners and its partners.

That is the real task of the perfect working pair.

Different roles. A shared situational picture. One team. The same goal.

By Ville Tolvanen. Originally published in Finnish: Toimitusjohtaja ja hallituksen puheenjohtaja – täydellinen työpari. More in English: Aura Boards — start here.