Headlines touting a power struggle between the CEO and board of directors of a company usually garner more attention than those championing the successes of such relationships. But the partnership between a CEO and his company’s board of directors is crucial to the success of many companies.
For this reason, many in the quick-serve industry say it’s imperative for CEOs to not only establish effective relations with the board, but to also maintain and improve those relations at every opportunity.
For CEOs who have a say in board members’ selection, careful picking is one of the best ways to establish a strong relationship early on, experts say.
“Have a long-term vision of where you want to bring the brand,” says Joe Luongo, president and CEO for Peter Piper Pizza, based in Phoenix. “Who will help you bring the brand there? Identify the expertise first, and then tap into your resources.”
Bringing in members with a good breadth of experience and with different backgrounds that work well together is essential, says Robert Israel, founder and CEO of Boulder, Colorado–based Doc Popcorn. “They’ve got to bring other levels of experience to the table,” he says.
For example, the Doc Popcorn board includes a legal representative for franchising, a 10-year franchise-industry veteran, a seasoned finance and business expert, a chief marketing officer, and Israel, who brings an operational and creative mix to the board.
Israel says quick-serve companies should also seek out people with a variety of personalities for the board of directors.
“Go with personalities you’re not necessarily comfortable with but respect,” he says. “You need people you can trust and who are fundamentally honest.”
In addition, choose proactive board members, Israel says. “You want people who are active and bring value. Put your board to work.”
Once board members are in place, the next step should be communicating on a regular basis with all board members, not just the chairman, experts say.
“There should be a clear understanding that the CEO reports to the board, not to the chair,” wrote Susan Robinson and Audra August, principals with Leadership Solutions at Knightsbridge Human Capital Solutions, in their article “Creating More Productive CEO-Board Relationships.” The article was published in the March 2011 issue of Director Journal, a publication of the Institute of Corporate Directors.
“Sometimes chairs of the board or of sub-committees falsely assume that these roles give them greater authority than other board members,” the authors wrote. “Therefore, the role of the board and committee chairs should also be clarified, especially with respect to deliverables and decision-making.”
At Peter Piper Pizza, Luongo meets quarterly with the board, although he provides a weekly update to the chairman to keep him informed. Israel, too, meets quarterly with the full board, but says he frequently talks with board members, including lunch every two weeks with the board’s finance and business expert.
“I’m always conversing with one board member or another on a weekly basis,” he says.
This ongoing dialogue does not necessarily promote more say for the board in CEO decisions, experts say.
“I know what I want to do,” Israel says. “I make day-to-day decisions with my team.” However, for key issues such as major hiring, capital expenses, or brand initiatives, he does check in with the board. “I want the board’s buy-in, support, and input, but mostly as a gut check,” Israel says.
In a similar approach, Luongo works with the board to lay out business strategies for the coming months and year, though he still handles the day-to-day business. “I like to have everything ready to go before our fiscal year,” he says. “It really sets the tone for achieving performance goals.”
Of course, with a variety of personalities, occasional disagreements do pop up and must be addressed. “We do have disagreements at times, but we hammer it out,” Luongo says. “In the end, we decide how we’re going to handle it. We make decisions as a team. The board really has helped set significant strategic direction.”
Israel takes a slightly different approach: “I bug them until they agree,” he says. “They know that if I believe in it, they should just get out of my way. But I listen. They have whacked me over the head, where I have to go think about it and come back and re-present it. I do not have control of the board.”
In fact, when the Doc Popcorn board was established, there were many power struggles—surrounding staff, branding, marketing, and how to allocate resources and where to do so, Israel says.
“There have been places when it’s been uncomfortable,” he says. “There was a lot of locking horns for the first six months. We built trust over the last two years. We’re in this lifeboat together, and nobody’s jumping out. That’s a credit to the board.”
After dealing with tough situations, Israel says, both he and the board move forward without any baggage. “[I] state [my] case, the board states their case, we make a decision, and we’re done and go about our business,” he says.
When it comes to improving relations with the board, both Luongo and Israel say communication is the primary tool. “It really comes down to communications and setting up expectations early,” Luongo says. “You have to be open and honest about everything that’s going on in the business.”
Israel also recommends having patience to figure out personalities and make sure everyone is on the same page.
Finally, all parties must leave their egos at the door, Luongo says. “CEOs tend to have big egos, so we have to leave the ego outside the room, go in, and see if someone else has a better idea,” he says.
Creating and maintaining strong relations with the board can pay off in more ways than just good business. For Israel, who went from operating an individual business to running a franchise operation, establishing a good relationship with the board has taught him accountability.
“The board has held me accountable to the [profit-and-loss statement], which is good for me,” he says. “I’ve become a more disciplined entrepreneur.”