This level of thinking reminded us of the issues traversed over 20 years ago in Roger Martin’s excellent book, The Responsibility Virus. [1] Martin described the conditions and behaviours standing in the way of the kind of two-way partnerships and shared responsibility arrangements there must be between board and chief executive.

In the chapter ‘The Challenge for Boards of Directors’, Martin described a case study in which, in brief, the following occurred. [2]

Four years previously the board of a once proud firm whose fortunes had progressively declined ousted an underperforming chief executive. Since then, the replacement hired to turn the company around had pursued an aggressive diversification strategy. Once the replacement chief executive had been hired the board had stepped completely into the background. They had ratified his strategy and approved every acquisition he had proposed since. In his mind, though, the chief executive felt the board had done very little to help him.

Then the core business softened more than expected and several of the acquisitions didn’t turn out as expected. Without warning, the board began to assert itself, setting up a special strategy committee to review the chief executive’s plan to correct the underperformance. They also required the chief executive to engage an independent consultancy to review the plan.  

Stridently opposed to the board's unexpected intervention and seething at the board’s ignorance and its affront to his authority, the chief executive began behaving badly towards the board. He continued to make decisions without board review and aggressively proposed actions that the board did not wish to consider before the conclusions of the consultancy’s review. This aggressive stance alienated the board and undermined any remaining faith it had in his ability to complete the turnaround. Even before it had an opportunity to review the consultancy’s work the chief executive was dismissed.

The board recruited a new chief executive who (this time) would take care of things for them. Amid the appointment fanfare directors settled back confident in the knowledge that now all their problems had been solved. They had acted decisively to ensure success for their shareholders. The strategy committee was disbanded, and the external consultancy was terminated.

The new chief executive’s recovery plan was passed without alteration or even much discussion, but profits continued to trend down and the stock value with it. Within 18 months the stock had dropped to less than half of its level at the time at the latest chief executive arrived. Shareholders were furious and calling for the new man’s head. To the board their latest saviour seemed increasingly like his predecessor. How could that be?

Unfortunately, we have seen this scenario, and variations on it, played out in many different organisational settings. Coasting along, seemingly content to take their cue from their chief executive, a board has suddenly taken charge. The chief executive, usually taken by surprise, has responded inappropriately or ineffectively. The board then loses confidence in the chief executive and takes steps to replace them, or the chief executive resigns out of frustration.

In this article we share Martin’s explanation of why—due to the responsibility virus—it is so common for governing boards to flip flop dramatically from under-control to over-control like this. Then how both parties—board and chief executive—can collaborate to avoid it.

Boardroom conditions make them vulnerable to the responsibility virus

Boards are highly prone to the responsibility virus when it comes to their chief executives. The relationship can be problematic for one important reason: too many chief executives feel that their board is just another constituency to be managed so that it doesn’t prevent them functioning as autonomously as they would like.

As the chief executive’s employer, the board is in a strong position of authority. But the chief executive is also in a very strong position, mainly because they have considerable control over the information the board needs to do its job. So, if a board is being ‘managed’ by its chief executive, directors are seriously constrained in their ability to fulfil their governance role. When something goes badly wrong, stakeholders and commentators typically ask (reflecting an expectation that the board is in charge): “Where were the directors?” Well, they were there, just not in a productive relationship with management.

Any authority a chief executive has is delegated by their board. In the first instance, therefore, it is up to the board to ensure that its responsibilities and those of management are aligned and their respective working modes in synch.

In the case study, the company had historically been a stable performer and the board had long operated in a hands-off fashion. When, under the previous chief executive, the board was criticised for declining company performance, it was for the first time. Embarrassed, the board aggressively took charge. In replacing the chief executive, who in their minds had caused their embarrassment and pain, the directors were delighted to place a high level of faith and responsibility on his successor.

The new chief executive was then able to make most decisions on his own and only inform the board afterwards. While the board reserved some decision-making rights to itself, its standard operating procedure was to approve the chief executive’s requests for approval with little, if any, scrutiny. As the board/ chief executive relationship evolved further, it reached a point where the chief executive would never consider involving the board earlier in the decision-making process.

He could have done this by, for example, testing options with the board. Steadily—and inevitably—the board became little more than a passive ratifier of top management decisions. The more the situation developed, the more difficult it became to test the chief executive’s thinking and even criticise his decisions.

This phenomenon is likely to occur for two reasons. The fear of failure—which, for many people, is to be avoided at all costs—is closely bound up in both.

Organisational psychologist Chris Argyris has provided many of the most powerful insights into self-defeating organisational behaviour. His research has highlighted that we are socialised to adopt a set of rules or ‘governing values’ that drive the way we interpret and deal with the world around us, and the way we conduct our interactions with others.  According to Argyris, we are inclined to adhere to the application of these rules even if the outcome is the opposite of what we intended. In the context discussed here, the crucial governing values are:

These three governing values reinforce our fear of failure because:

These governing values surfacing in the boardroom can result in an unfortunate collusion between the board and its chief executive.

Consider the following scenario in which directors feel uncomfortable about a decision for which the chief executive seeks board approval:

In keeping concerns to themselves, directors are no more than passive followers of the chief executive’s initiative. If a director (and/or colleagues) does not question the proposal or backs off after an initial expression of concern, the chief executive interprets the directors’ behaviour as passive, even weak. S/he assumes that s/he has no real choice but to take on even more responsibility.

Over time, therefore, the chief executive is increasingly likely to treat the board as an afterthought. Further, they will assume implicitly that, because they have all the ideas and have done all the work, their recommendations will be promptly approved by the board as a matter of course. As this pattern of board ‘rubber stamping’ becomes embedded, it becomes even more difficult for directors to query the chief executive.

While both the chief executive and the board have designed their actions to avoid losing, ceding control, and/ or being embarrassed, eventually the probable outcome is the exact opposite of what they intended.

Human beings respond to failure in a way that is instinctive and physiological rather than reasoned. This fight or flight response is closely linked to the operation of the governing values. It also offers further explanation for the control flip-flop phenomenon.

In the boardroom, the initiative of seizing sole responsibility is the equivalent of the fight response. In the face of failure, taking greater responsibility increases the chances of winning. The desire to maintain control also encourages the assumption of responsibility; preventing anyone else from taking control. Seizing sole responsibility occurs without any discussion. Broaching the subject more openly around the board table by, for example, raising doubts about the relative competence of others might be embarrassing.

The flight equivalent is stepping back and avoiding further responsibility. Aspirations are set lower making it easier to win and easier to keep fully in control. Withdrawing from responsibility avoids having to deal with any situation that might exceed a person's capabilities and expose them to embarrassment.

Collaboration becomes difficult, if not impossible

The progressive impact of the responsibility virus undermines the capacity for genuine and productive collaboration between the board and its chief executive. By collaboration we mean the meaningful sharing of responsibility for decision making between the board and the chief executive.

Again, this is explained by the governing values and the fear of failure in the following ways:  

So, in many situations, applying the ideal of collaboration is seen to increase rather than reduce the possibility of failure.  

Misunderstanding and mistrust contribute to a final breakdown in the relationship.

When a board is not aware of this kind of acquiescent behaviour, it becomes increasingly deeply rooted in the boardroom culture. Over time it becomes more and more embarrassing to change that pattern of behaviour by, most obviously, starting to question the chief executive more closely. So, to win not lose, maintain control, and avoid embarrassment, directors continue to ignore the concerns they might otherwise express. Their chief executive watches their passive and inactive behaviour (even though as individuals they may be considered outstanding in their fields) and, not surprisingly, becomes even more certain that the board can't add any value to his or her thinking.

The next step is also inevitable—growing mistrust and misunderstanding between the board and the chief executive. Applying the parties’ governing values means their key choices cannot be discussed. Both the board and chief executive are left to guess what motivates the other’s choice to either seize or cede responsibility. Most guesses tend to be inaccurate and are biased to conform to and uphold their governing values. This guessing then results in further misunderstanding.

As it also invites each party to accuse the other of improper motives, this misunderstanding is compounded. Checking whether their guesses and assumptions were correct would be potentially embarrassing for both the board and chief executive. So, misunderstanding escalates and each party’s perceptions of the other become increasingly negative and self-serving until a final, inevitable breakdown in the relationship. If it reaches this stage, both the board and the chief executive will have failed. The board may be accused of incompetence and the chief executive will also be seen to have failed.

Left untreated, the virus creates never-ending cycles of the board handing over and then reclaiming authority from the chief executive. The board flip flops between under and over-control. Recrimination and relationship destruction are inevitable by-products.

Treating the virus and improving the relationship

For boards to combat the responsibility virus and deliver the quality of governance expected of them, Martin recommends four tools.

The Responsibility Ladder, as constructed by Martin, sets out six levels of responsibility, each with varying degrees of input from either party [3].

Level 1: you make a decision on your own, only informing the other party before or
after, whichever makes the most sense.
Level 2: you make a recommendation providing the information necessary for the
other party to give informed input or approval.
Level 3: you generate options for the other party to make a choice, presenting the
options so that they can be compared intelligently.
Level 4: you describe a problem to the other party and seek input on how to
structure the problem or choice, specifying what kind of help you need.
Level 5: you ask the other party to solve a problem for you, making it clear that this
is what you need and that you will transfer the learnings to the next case.
Level 6: you ask the other party to solve a problem for you or make it clear they will
have to figure it out for you.

The critical element in the board-chief executive relationship is flexibility. No single level of responsibility is right for all choices (decisions) that need to be made. When these are all treated equally, the chief executive and board are likely to drift to a Level 1 habit (the chief executive decides with no board input). Once that takes hold, it creates the risk of embarrassment for the board if there are choices in which it wants to have a greater say. The threat of embarrassment tends to cause the board to back off even when directors think they should intervene. If, as in the case study, the board delays taking on a greater and more appropriate level of responsibility, a downward spiral is difficult to avert.

The board’s challenge is to figure out how to be proactive in a way that does not result in it catching the virus. For Martin that means the board learning to move up and down the ladder in a way that does not give rise to embarrassment. For example, it needs to practice establishing issues where it explicitly asks the chief executive to take on level 3 or 4 responsibility (eg, to bring forward options to discuss with the board).That way the chief executive doesn’t feel weak when s/he comes to the board with something less definitive than usual. This should happen in good times, not just when there is a crisis, or it might signal to the chief executive that the board lacks confidence in them.

At the same time, when facing challenging issues, the chief executive needs to feel encouraged to drop down to a lower level (ie, engage with the board at levels 3 or 4). That means, in effect, asking for greater input from the board and sharing responsibility for more difficult choices.

The chief executive should be able to do this without fear of embarrassment or feeling a loss of control. Willingness to do this should be viewed as a sign of chief executive strength not weakness. But, to get to this point, the board and chief executive must have a mutual understanding of the Responsibility Ladder and commit to using it in their regular interactions. Both chief executive and directors should feel comfortable operating at any level on the ladder.

Martin suggests the parties practise at varying levels to fine tune their responsibilities to their capabilities. Neither board nor chief executive should take responsibility beyond their capability just to exert control for its own sake.

Martin emphasises that adopting the responsibility ladder in the relationship is not easy. It is best accomplished through a developmentally oriented chair who is prepared to lead the process change required. We would go further and say that the health of the board/ chief executive relationship (including applying the additional tools listed below) is a direct responsibility of the chair.

In the board/ chief executive relationship, either side could be seen as taking the lead or following the other’s lead. One has positional authority and reserved powers (the board) and the other has effective day-to-day control of the organisation (the chief executive). However, redefined leadership and followership would represent true partnership between the board and chief executive; no clear leader and no clear follower.

Redefinition, particularly for responsibility sharing, depends on more open dialogue between board and chief executive than is characteristic. The aim is to have neither side feeling comfortable seizing or abdicating responsibility. The situation is helped by both having identical objectives in this situation, to:

This can be useful if a either party attributes negative motives to the other and looks for confirming evidence. When disagreement leads to miscommunication and mistrust, it is time to reframe the situation to enable a productive conversation.

For example, an unproductive framing on the board’s part that creates the desire to bring the chief executive ‘into line’ might be that:

The board might reframe that to prompt it to engage the chief executive in the kind of dialogue that would help both sides to understand the situation and act as necessary. For example:

Decisions that must be taken at the board and chief executive level are, by definition, the most complex and difficult. Otherwise (ideally) they would be taken at lower levels. The choices facing both often embody complicated streams of logic that can easily be misunderstood. Chief executives have ample opportunity and incentive to veil their logic in a maze of professional and technical jargon. For some boards this automatically makes them suspicious.

Choice without prior discussion is consistent with the desire to maintain the governing values described earlier. Martin describes a choice structuring process with the following steps: [4]

If there are no barriers, proceed to make the choice. However, if there are barriers then:

A key element in this process is Step III. Because the chief executive’s job is sequential to (ie, follows) theirs, [5] boards out of sorts with their chief executive should first ask themselves whether they have done their job.

Here, the board should be clear what directors would have to believe for them to be confident in a proposal from the chief executive. By specifying such conditions, the chief executive can understand the standard of proof the board needs. Martin emphasises that this process is superior to the situation in which the board leaves its reasoning vague or even, in the worst cases, simply says no or yes without revealing its logic.

Applying these four tools means there will be a lower probability of flawed decisions being made or ratified. Their use will develop the choice-making skills of both boards and chief executives.

Perhaps even more importantly, understanding the nature of the responsibility virus and its potential lethal impact on board-chief executive relationships will reduce its incidence.

Notes