Advising and consulting to CEOs and Boards. (Current Practices).

Presenter: David Nadler, Chairman and CEO, Mercer Delta Consulting, LLC

The interest of the Forum participants in Dr. Nadler's presentation was palpable. The events of 2002 have given HR an unprecedented opportunity to work with CEOs and Boards of Directors on matters of extreme interest to both. Dr. Nadler's presentation was based on his recent work and fully treated in a chapter he is contributing to Advanced Management Consulting: Issues and Trends from World Experts (L. Greiner & F. Poulfelt, Editors, 2003).

If it ever was easy, it is harder today to be a CEO or a member of a board of directors. CEO firings are in the news; institutional investors have a great deal to say about how companies are run; the scandals surrounding Enron, Anderson, and WoridGom have underscored the responsibility-and liability-of Boards for the actions of the companies they supervise. CEOs are looking for support; Boards are looking for advice on their proper level of engagement. Outside consultants are being employed to advise CEOs and Boards on their responsibilities; but, as insiders, Human Resources can make a tremendous contribution to the future health of an organization, especially during this volatile period.

Consulting to CEOs

Looking first at CEOs, they are attractive clients as drivers of change and agenda-setters. At each stage of their tenure-new, mid-term, late-term--they encounter new concerns, from concerns about their success to concerns about their legacy. They need help on strategy, stakeholder relations, legal issues, investment banking, organization, and the management of human resources. As shown in Exhibit 1, "consultants" can help in a variety of roles. Each HR executive must ask: Where does HR fit? Where do I fit in consulting with my CEO?

Successful advisors to CEOs can start in any role, but usually end up combining two or more roles. Whatever the initial advisory role, success is a combination of impact and continuity--and being trusted. As described by Carucci and Pasmore (2002), the elements of relationship intelligence are all important: personal trust, personal investment (do you care?), advocacy (stand for something!), collaboration, and interpersonal agility. The last is critical: agility with different people, with different styles, with different ways of taking advice.

Success also means solving a number of dilemmas:

1. Insulation: Being too close to the CEO; losing perspective about what's going on elsewhere.

2. Ambiguous clientship: Confusion about who the client is, the exclusive client: CEO, chairman, Board, enterprise.

3. Perceived influence: Resentment about advice from others in the company.

4. Backstairs channel: "I've been used!"

5. Over-identification: Becoming the apologist for the CEO.

6. Consulting hubris: Being caught up on the position of advisor, a name-dropper.

7. Helping versus assessing: Always judging your opinion: CEO vs. Board, CEO vs. operating team.

Consulting to the Board of Directors

Turning next to consulting to Boards, the U.S. Senate report on Enron sent shockwaves through boardrooms: malfeasance, inadequate processes, and, from an HR standpoint, excessive executive compensation. These findings, the resulting publicity, and the passage of the Sarbanes/Oxley Act have made Boards much more aware of their accountability and liability, and the complex requirements of their work. As they become more independent and empowered, Board members are questioning everything, but especially their roles and responsibilities, how they work together, and how they work with the CEO and company management. As shown in Exhibit 2, independent, empowered Boards present both potential threats and opportunities. EXHIBIT 2 Possible Consequences of an Independent, Empowered Board Potential Threats Potential Opportunities * Meddle and micromanage * Provide useful, value-added the company advice and counsel * Create a power struggle at the * Bring wisdom and top on the company's direction Perspective to the table * Consume excessive amounts * Be a sounding board for the of management time CEO * Undercut CEO credibility * Provide a support system outside of the company * Help to influence critical * Inappropriately limit CEO outside constituencies compensation * Create a solid front to the * Interfere with orderly outside in times of crisis to succession planning minimize risk * Fire the CEO * Assist in effectively

managing succession

Perhaps the outcome of recent events that will require the greatest involvement of human resources is the need for the Board to work together as a team. Leadership and collaboration will be in demand, and the dynamics of the team will be as important as its mechanics. HR can assist in identifying the degree of engagement that fits the needs of each situation and to build engagement that adds value to the enterprise. By rationalizing the goals, roles and procedures of the Board, HR can set the context for building the Board as a team.

Areas for Potential Work

HR leaders can add value in a number of areas in the current environment:

1. Design and implement a strategy for constructive engagement of the Board.

2. Develop ways of implementing new and evolving Board requirements, such as external director sessions, presiding director.

3. Design and implement required assessment processes for the Board and committees.

4. Design CEO performance evaluation and feedback processes.

5. Enhance Board composition by developing approaches for identifying director requirements, assessing candidates, and involving the nominating committee.

6. Develop and implement approaches for engaging the Board in participative corporate strategy development without giving up control of the strategy.

7. Design effective succession planning processes that involve the Board appropriately.

Clearly, from the discussion at the end of Dr. Nadler's session, the HR executive walks a fine line between advising the CEO on compensation and succession matters, and advising the Board on the same issues plus the performance evaluation of the CEO and the management team. It's a job requiring the utmost in diplomacy, insight, and courage.