August 2010 Issue 4
BoardWorks International
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Is It Time to Rethink the Chief Executive’s Report to the Board?

Boardworks InternationalMany chief executives complain about their boards. They use terms like ‘meddling’ and ‘crossing the line’. They also lament that their boards spend too much time in the detail and are not strategic enough. While boards are susceptible to these behaviours, a quick look in the mirror is likely to help these chief executives find the principal source of their problem. The answer will frequently lie in taking a fresh look at how they are reporting to the board. In particular, they should focus on the type of report that they make personally to the board. The potential to engage in a powerful dialogue with the board is seldom realised.

Common shortcomings in chief executive reports

Traditions have developed in many organisations around chief executive reports and a pattern has been set that often falls short of the ideal. The following types of reporting are seldom questioned but are examples of how a great opportunity for the chief executive to engage with the board in a more effective manner is lost.

  1. What is called the Chief Executive’s Report is often really the monthly progress report against organisational plans, policies or budgets. This is an important report and the chief executive is accountable to the board for progress against those. However, it doesn’t need the Chief Executive to prepare that report and in many cases it is put together by, for example, the finance staff. Let’s call it an organisational or operational performance report or something of that ilk but not the Chief Executive’s Report. The type of Chief Executive’s Report that will be advocated later in this article should be of an entirely different order.

    (Incidentally, the operational performance report should be an ‘exception report’ (i.e. only matters off-target are referred to) and should be placed well down the order of the agenda because: (a) it is primarily operational, (b) it is historical (the matters it describes have already occurred), and (c) it can be taken as read if time is short.)

  2. Another type of Chief Executive’s Report is little more than a recitation of the last month’s diary (“On 27 August, I met with Joe Blow from the Acme Corporation.” “On 30 August I travelled interstate to visit some of our suppliers.”).  These types of chief executive reports could easily be produced by chief executives’ personal assistants (and perhaps they are). A board should not be concerned that much with what their chief executive does on a day to day basis. The board should be far more concerned with what the organisation is achieving, not what the chief executive is doing.

  3. It is also common to see Chief Executive’s Reports that are loose assemblages of other managers’ reports.  At best, there is a relatively aimless frontispiece nominally penned by the chief executive. The content of such compilations may be vaguely interesting to board members but tend to burden them with additional volumes of material (and meeting preparation time) that add little value. Worse, these reports are invariably written from an operational focus and, consequently, drag the board’s attention down into ‘the engine room’. To the extent that these reports might contain some useful ‘nice to know’ (as opposed to ‘need to know’) material, they can be sent out between meetings rather than as part of the board meeting pack.

  4. Another common shortcoming is the type of Chief Executive’s Report that is a collection of ‘apples and oranges’ which do not easily fit elsewhere on the agenda. It is arguable that any matter of substance for the board’s consideration should warrant its own agenda item. It should not be the case that the Chief Executive’s Report is a ‘bitser’, full of odd pieces of information and/or recommendations for which no better handling seems to have been found.

A better approach

So what is the nature and content of the Chief Executive’s Report that would make it a more useful document?

Firstly, it should be a high level and relatively brief document (1-2 pages). If a longer report is needed it is probable that some of the content deserves a separate report. Think of it as the principal opportunity a chief executive has to summarise the ‘state of the nation’ and to tell the board, succinctly, what is on her mind. Always respecting that it is the board’s meeting not the chief executive’s it should address the types of matters that the chief executive wants the board to be aware of and to be thinking about. In this sense it should be a ‘scene setter’ for the board meeting, highlighting, for example, important decisions required from the board.

The report should encourage and contribute to an ongoing dialogue between the board and chief executive about what is really important in relation to the ‘thrival’ and survival of the business. It might allude to current performance issues but the substance of these should be contained in specific, performance-related reports elsewhere in the board meeting pack. Because the Chief Executive’s Report should be forward looking it is likely to be more focused on emerging solutions than an analysis of problems.

The report’s content should also be a reflection of the chief executive’s commitment to the ‘no surprises’ principle.  It should, therefore, be a ‘heads-up’ from the chief executive giving advance notice about emerging opportunities or concerns. It should embody and advance the type of open and progressive interrelationship that characterises effective board/chief executive partnerships. In that sense it is also an opportunity for the chief executive to flag and seek advice and input from the board on matters that she still has under consideration. Used in this way, both board and chief executive can be more confident that when, for example, a proposal finally becomes concrete and arrives on the board agenda, it will be more ‘approvable’.

A test of a good chief executive’s report is that, if all other reports for the meeting were ‘lost in the mail’, it would provide the framework for a dynamic and productive board meeting. That does not mean it is a summary of other reports contained in the board pack but it should, to a significant degree, enable those to be mostly taken as read.

There is one final test of the Chief Executive’s Report. The type of report advocated here is, by its very nature a highly personal view. That means it is capable of being produced only by the chief executive. If it could have been written by someone else on the executive team it is unlikely to be hitting the mark.

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