Essec Business School

If you ask a start-up leader about their key challenges, it’s likely you’ll get a response that includes raising capital, producing a minimum viable product, hiring the right people… It’s less likely that they’ll list “having a good relationship with the board” - and yet, this is a critical relationship as a new venture breaks ground. It’s also a challenge that takes new leaders off guard, and can include friction between a CEO who wants autonomy and a board who wants transparency and power. Dr. Sam Garg, Professor of Management at ESSEC Business School, and Dr. Christopher B. Bingham (UNC Chapel Hill) explored this relationship in new research published in Strategic Management Journal. 

“I have learned the hard way that one of the most important things is building the relationship with the board. If this relationship turns sour, getting anything done becomes very difficult and the firm suffers. If you have a good working relationship, it is much better.” (Venture CEO).

This quote, from a participant in their study, is revelatory. It shows that the CEO-board relationship can be positive or adversarial, since both parties have different aims. Their respective aims are often at odds: CEOs seek autonomy and want to prove their competence, while the board wants transparency and to influence the CEO. On the flipside, a positive CEO-board relationship is defined by mutual respect and goal fulfillment for both parties. Having a positive CEO-board relationship can influence strategy, resources, decision-making, and more, as boards can be a key source of advice and helpful resources. A negative relationship can mean that the board tries to remove the CEO, or does not provide key resources - which can lead to the failure of the venture. 

The current body of research focuses on the board’s side of affairs, and explores the state of an existing relationship - instead of taking a step back and looking at the beginning of the relationship. This paper explored both sides of the relationship, providing a clearer picture. Even if both parties acknowledge the importance of a positive relationship, their conflicting needs can make this complicated. The researchers explored the early stages of a relationship for first-time CEOs in new ventures. By zeroing in on how the relationship is formed, Dr. Garg and Dr. Bingham built an understanding of how to foster a positive relationship - which sets the tone for the relationships later on. 

To address this gap in the research, the researchers compiled a unique, one-of-a-kind dataset with first-time CEOs and budding board relationships. 

Looking at the information technology sector, the researchers looked at the cases of four ventures in Silicon Valley that had received funding from American venture capital firms. They conducted multiple waves of interviews with the CEOs, directors, and top management teams, observed all board meetings for six months, and gathered additional data like presentation slides, email communications, background information on personnel, and funding data. Overall, their data covers around the first three years of the CEO-board relationship, with a mix of real-time and retrospective data. The time frame was strategically chosen, as the researchers observed that the CEO-board relationship tends to settle after two years - and if it isn’t a positive one, the board will try to oust the CEO. The longitudinal data also allowed the researchers to take a dynamic process view, looking at how the relationship evolved over time since the very beginning. 

They identified key actions that CEOs in the study took to establish a positive relationship with their board:

Instead of meeting directors or sending out detailed notes ahead of time, try… Brief written previews

Contrary to popular belief, one-on-ones ahead of the meeting aren’t the most effective way to ensure the meeting goes smoothly. While CEOs who set up those preview meetings have good intentions, these one-on-ones can take up the board’s valuable time and lead to follow-up work for the CEO, which can be tricky to accomplish. 

Sending a short, one-page summary of key points to the board ahead of meetings is a better option. This saves time, avoids surprises, and gets everyone on the same page. Keeping the memo to one page also avoids information overload, ensuring that the board has time to review and process in advance. This can signal competence, preserve CEO autonomy, and create a shared knowledge base. 

Instead of having the CEO lead the meeting, try… Having meetings led by top management teams

Many CEOs want to lead meetings themselves to take control of the key message, field questions, and show their leadership skills. However, the CEO may not be the best place to offer details, since they can have a high level strategic vision instead of an eye on the day-to-day of the company. As a board member in the study noted, “We need to know if things aren't going well from someone on the team other than the CEO… I almost can linearly correlate my ability to be effective to the depth of relationships I have beyond the CEO. If they're not existent, it's pretty risky”.

Instead, coaching top management teams to lead the meetings offers the board an insight into the challenges and competency level of senior management and enables them to build relationships with these leaders. This also shows leadership skills and can boost autonomy for the CEO. Prior to letting top management take the lead, CEOs coached them on factors like presentation style and key messaging. 

Instead of forgoing or delegating debriefs, try… Personal debriefing

The work isn’t done after the meeting. While all CEOs in the study conducted a post-meeting debrief, some had their top management or another board member handle questions in the interest of focusing their time and energy. 

Instead, a personal debrief helps synchronize the directors and CEOs, and helps both sides gain insight into each other’s strategy. It can also help address any concerns privately. This aligns goals on both sides, since the board gets insight into strategic thinking and can influence the CEO, and the CEO can work on getting the board’s support. 

Through identifying these key actions, the researchers also pinpointed three concepts that proved essential to relationship-building. 

Reinforcing Cycles: How to shape the board relationship dynamic 

The first key concept is the importance of first impressions in setting up a relationship cycle. The researchers found that the CEO-board relationship is akin to a dynamic feedback loop. The CEO’s initial actions can set the stage for a positive relationship, i.e. a virtuous cycle, or a negative one, i.e. a vicious cycle. CEOS in the study who provided brief written previews, let top management lead meetings, and conducted personal debriefing set the stage for a relationship built on trust while preserving their autonomy. The CEOs who offered live previews of the meeting, didn’t allow access to their top management team, and delegated debriefing started the relationship off on the wrong foot, which led to increasing deterioration of trust and collaboration. An increasingly positive relationship was beneficial to both parties: for example, one CEO was able to preserve board support during a period where the board was performing poorly. The researchers also found that it was hard to break a cycle already in motion, since boards don’t tend to engage in difficult conversations about challenges in the relationship, leaving CEOs to flail - and fail. This means that starting the relationship off on the right note is key for success. 

More is not better and timing is everything… 

…That is, when it comes to communicating with the board.The researchers found that live, in person communications are indeed useful, but their usefulness depends on timing. Before the meeting, the brief written preview was most beneficial; during the meeting, delegated live communication (by top management) was optimal; and after the meeting, the personal debrief was helpful. In other words, timing was key. More communication didn’t improve effectiveness and too much transparency complicated affairs for the CEO.

This led the researchers to propose a temporal view of live communications, which can have different outcomes at different times. CEOs can focus their attention and time to achieve the best results. 

Getting in sync

The final key concept is board synchronization skill, meaning the CEO’s ability to align competing goals (their need for autonomy and the board’s need for influence). In the study, successful CEOs shifted their mindset to consider both their needs and those of their board - in this way, CEOs can avoid compromising their autonomy and ensure the venture’s success and longevity. This synchronization can come about through enacting the behaviors mentioned above. 

Getting the board on board: takeaways for new CEOs

Dr. Garg and Dr. Bingham identified a number of effective tactics that new CEOs can adopt to nurture a positive relationship with their board from Day 1. By sending a thoughtful one-pager to the board ahead of meetings, letting your top management team take the lead during the meetings, and conducting personal debriefs with directors, you can set off a positive relationship cycle with your board. Their study also uses a broader lens to look at the relationship-building process, since many of the previously published studies focused on relationships during specific times like mergers or strategic moves. 

Taken together, this study suggests that CEOs need to prioritize the relationship with their board of directors, and that a positive relationship can be built on the basis of the aforementioned three key actions. The success of new ventures is about more than the product, since the board relationship can shape the company’s future - and new CEOs can pave the way to success by forging a strong relationship with their board. 

Further reading 

Garg, S., & Bingham, C. B. Fostering positive CEO‐board relationships: Board synchronization skill and relationship cycles in new ventures. Strategic Management Journal.