The Board’s Role In The Evolution Of A Company

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Directors need to recognize the natural business evolution of the companies they steward, the impact of new market forces and when the current CEO’s skill set no longer matches its growth trajectory.
Thomas Harrison is the Chairman Emeritus of Diversified Agency Services (DAS) and former CEO of DAS, a division of Omnicom, writes about the board's role in the evolution of a company
Thomas Harrison is the Chairman Emeritus of Diversified Agency Services (DAS) and former CEO of DAS, a division of Omnicom.

All too often we hear accounts of CEO leaders falling out of favor with their boards and shareholders because of some wrongdoing, some transgression or poor personal or financial performance. Similarly, and all too often, these same CEOs tend to step fully into PR, crisis management mode to retain their positions as leader. They just don’t know when to go!

This article is about “knowing when to go,” but has absolutely nothing to do with wrongdoing, with transgression or with failure. It does, however, have everything to do with knowing one’s leadership skills limits. This is not about leadership style, but about leadership skills.

When I published INSTINCT, Tapping Your Entrepreneurial DNA to Achieve Your Business Goals, it was a work about and for entrepreneurs. In it, I briefly addressed the concept of the synchronized and natural evolution of corporations and their leaders. It is probably as eye opening and controversial today as it was then.

The concept falls under the banner “know when to go.” You see, as a cell biologist and physiologist by training who evolved to the CEO leadership role of the largest holding company of marketing services companies in its industry, I feel corporations—companies—have an evolutionary life cycle. They are born. They grow. They mature. They plateau. They may become irrelevant.  At this point, they risk disappearing or dying, unless they are redefined, re-envisioned or re-imagined.

Let’s look at this a bit more closely. A company is born generally when an entrepreneur has a vision so large that nothing except an entirely new company can take that vision to market. David Ogilvy had an advertising vision. Steve Jobs had a technology with design vision. Mark Zuckerberg had a worldwide community platform vision. Thomas Edison had a vision that became General Electric. Sara Blakley had a vision that became Spanx. Jeff Bezos had a vision that became Amazon; his vision of dominance and immediate gratification continues to expand across markets.

Companies can often flourish under the visionary’s leadership for a long time. When entrepreneurs marry visionary skills with agility, they tend to last.  But some don’t and perhaps at some point in the business cycle of the new company, the natural span of leadership of the visionary entrepreneur may no longer be sufficient to continue to lead the company’s growth.

That company needs a new leader to take it to and through its “next level.” A new phase of growth usually follows until that CEO’s span of leadership is exhausted and another leader is needed to innovate, to grow, or to re-imagine the company altogether. No one has failed along the leadership continuum here; each has successfully delivered the company to its next foundation for natural and continuous growth.

Companies evolve. Market forces evolve. We leaders lead, well, the way we lead! CEOs tend to either be entrepreneurs, turn around CEOs, change agent CEOs, maintenance CEOs or innovative CEOs. The skill set for one model of leadership generally does not reside in another. So, for example, you probably will not find the skills of a change agent CEO and the skills of a visionary entrepreneur CEO residing in the same person. The span of our innate, genetically inherited and developed leadership skills are a perfect fit for a company at a given, particular period in its cycle of evolution and growth. Beyond that period, the CEO might become a less effective leader. Said another way, companies tend to flourish when their specific growth and performance needs are tightly aligned with a complementary CEO’s leadership skills.

Two synchronized forces need to be at work here if you embrace this concept of leadership. First, CEO leaders who are tuned in to their personal skill zone of leadership know instinctively when they are operating solidly in control of the company for which they have been given stewardship. Skills and company needs are aligned perfectly. They also sense when the company might be evolving, getting away from their natural span of control. There is an external or internal force changing the company.

For the continued growth of the company, this is when they need to ‘know when to go’ and proactively turn the company over to a CEO embodying the skill set needed to more effectively lead the company through its next natural cycle of growth. Easy to say. Very hard to do. Sometimes we might just add a person or two around us and that fix might just work for a while. But very few leaders have remained at the helm over extended periods of time. There are some notable exceptions, among them is Jeff Bezos whose formula is more about precisely executing on vision than consistently delivering on Wall Street expectations.

Secondly, directors need to recognize the natural business evolution of the companies they steward, the impact of new market forces and when the current CEO’s skill set, his natural span of leadership, might be de-synchronized with the growth demands of the company. Directors of public and private companies are generally close enough to the business they steward to know when the CEO is the perfect fit, skills perfectly aligned with the growth needs of the business he is leading and when they are not.

Recognizing and acting on personal leadership limitations takes incredible courage. Because the board of directors and the CEO should want the absolute best for the organization they are charged with leading through the many cycles of business challenges and opportunities, leadership skills and performance needs must be aligned. Yet, a change out decision is never easy or taken lightly by the CEO or by the board of directors.

Whether or not you embrace this paradigm of natural span of skills leadership and of corporate evolution, it is safe to say that companies’ fortunes rise and they fall along with their leaders. If we can recognize the need for change before company performance is stalled, we can create continuous cycles of growth for the company by being mindful of the innate leadership spans of the CEOs leading successfully, successively and naturally through the cycles of the organization’s evolution.

Read more: American Water Co.’s Susan Story On Balancing CEO And Director Duties

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