Articles & Publications

Executive Coaching:
An Innovative Tool to Improve CEO and Board Performance

Coaching can bring out the best in a company's leaders, including the CEO.

Profitability. Growth. Collaboration. When the board and CEO create a partnership to achieve these goals, they build a powerful, intelligent organization that can respond to changing market conditions, overcome internal obstacles, and move forward. When a corporation is having difficulty, however, the board has a responsibility to discover how to improve performance.

Yet, so often, the board and CEO merely manage to avoid discussing the "undiscussible" issues of leadership and organization performance that may be at the heart of the company's problems. They work around the issues because they lack common information or a context in which the discussions can occur. Instead of the board's oversight producing synergy, it causes adversity or perpetuates collusion.

Executive coaching offers an innovative way to address this problem by working both with the CEO on an individual basis and jointly with the board and the CEO to guide an ongoing dialog. Whether or not a board has begun the process of formal CEO evaluations, it can take action by bringing in a coach. This article explores the role of executive coaching and the CEO: What it is, how it can be most effective, when to use it, and what results to expect.

As the governing body for the company, the board of directors is in a unique position to recognize and become proactive in moving the CEO toward a higher performance level. While many of the board members are not involved in a company's day-to-day activities, they are responsible for overseeing the successful implementation of strategic planning. The directors help to realize the CEO's strategic vision and need to address issues that influence the plan.

The board needs to discover what stumbling blocks exist within the organization that thwart the CEO's vision-whether it is leadership ability, the strength and collaboration of the management team, or internal synergy-and then the board must try to correct what is going wrong. Their unique position, however, does not give directors the systematic exposure to the corporation's internal functioning that would help them identify blind spots. That is where a coach can be particularly helpful.

The Coach's Role

The coach's role is to work with the CEO—in a way the board cannot—to understand the business issues and uncover the reasons for subpar performance, collaborating with the CEO to overcome the identified obstacles. The coach bridges the communication gap between the board and the CEO.

One of the most powerful results of coaching I have seen is the development of a partnership between the CEO and the board. This partnership encourages focus, allows discussion of previously off-limits topics, and establishes a common language for measurement and reporting. Key to this process is the coach's involvement as an impartial third party. As significant, is the coach's capacity to work with the CEO, understand the organizational issues, and create a common ground from which both board and CEO can move ahead.

An important outcome of this process is the development of performance measures for the corporation, the CEO, the top management team, and individuals. With these measures, coaches can help the board design and implement an evaluation process. As a recent CarverGuide on board assessment of the CEO stated, an important purpose of evaluation is to make the future better, not just produce a report card. The guide also noted that another goal of the process is to clarify values on an ongoing basis.

Importantly, boards and CEOs do not need to wait until problems occur to use coaching as way to improve performance, establish evaluation criteria, or enhance communication. Good can become better. Better can become best. Some of the most successful and profitable organizations are those who have taken a proactive stance on coaching at the CEO level. It can forestall problems and position the corporation to respond quickly when needed.

When to Use a Coach

Executive coaching has been used to improve the performance of middle- and senior-level managers for the last several years, but only recently has coaching moved into the ranks of CEOs. This is partly because the results have shown that one-on-one coaching can have an immediate, positive impact on an executive's performance and partly because coaching—once reserved for problem employees—is now considered a perk.

Companies can face four different stages: startup, turnaround, growth, and steady-state/decline. The board's task is to determine if the CEO's actions directly contribute to problems in the business. Coaching at its highest level addresses the leadership competencies for each particular stage the CEO must learn.

I have worked with CEOs who were energized by the growth stage yet have difficulty moving their leadership style into the steady state stage. Classic, of course, is the entrepreneur who led the company on a wild ride from inception through the IPO and now must answer to a very different set of constituents and measurements. Some CEOs might be great visionaries but are unable to convert that vision into action. Others may avoid making difficult decisions.

Any of the following might also trigger the hiring of a coach:

• financial results that do not fit, given a sound strategy and open marketplace
• erratic financials with quarterly results up and down
• focus on creating a "media image" for the analysts, or
• "Rambo-like" risk-taking or "analysis paralysis" on the part of the CEO.

Whenever there appear to be obstacles to moving forward, the board needs to determine who or what is responsible and then decide how to handle it.

The board is generally the primary decision-maker when seeking an executive coach for the CEO, but the CEO must agree with and become the driver behind the decision. Coercion and coaching do not mix well.

Because this is such an important position, the board—and CEO—need to choose a coach thoughtfully. The coach should be someone who:

• has experience at the CEO/board level—the issues are strategic and encompass the entire organization
• knows how to work with multiple constituencies—the CEO and board are not the only "clients"
• focuses on the highest good for the corporation—which means not necessarily serving the personal needs of the CEO, and
• gains the trust of and has credibility with the board and the CEO.

Perhaps, most important, the coach needs to be someone who can, with toughness and compassion, help the CEO learn how to lead differently. Ultimately, however, only the CEO and coach can make the final decision about whether it is the right partnership to effect change.

The Results

In general, coaching takes place in three phases: assessment, coaching, and follow up.

In the assessment phase, the coach seeks feedback from a variety of sources and may use selected assessment tools. During this phase the board may have significant input for background information and also future direction.

Then the coach and CEO work together for six months to a year to identify goals, develop action plans, and implement the plan. How much interaction occurs during this phase depends on the relationship between the board and chief executive. One of my clients felt the board was not involved enough in advising him. In this particular instance, it became clear that the composition of the board needed to change. By adding new members with particular expertise and experience, the board was able to advise the executive team as well as the CEO and the entire corporation benefited.

During this coaching phase a coach is more likely to become involved in mediating the relationship between the CEO and board. The CEO may not always be the only one contributing to the discord. In my experience, problems can arise from the following sources:

• members who are on boards because of long-past affiliations with the company
• members who are too closely aligned with the CEO, and
• past CEOs whose influence on the board stifles input from others.

In any of these situations, coaching can help to define and solve the problem constructively by bridging knowledge of what has worked in other companies with the realities of the current situation.

Follow up is usually on a quarterly basis to ensure that any positive changes remain in effect. Some boards may request a resumption of the active coaching phase if results start to fall off.

The coach serves the needs of the corporation and stockholders first. The board, as the organization's governing body, is an important constituency too. Integral to the process of working with the CEO is assessing performance and areas for continued improvement. If a conflict arises between or among the constituencies, then the coach's responsibility is to seek alignment among them.

There may be times that a CEO—for whatever reason-cannot become aligned to the organization's needs and comes to the realization that s/he could better serve in a different company. A coach can help immeasurably as the chief executive comes to terms with this reality. By recognizing what needs to be done and planning an orderly transition, coach and CEO can maintain the direction and focus of the company as it moves to a new management team.

Once a board sees the power of coaching, it can also see the value of retaining a coach for itself. Because it is a collective body, the board is not always as effective as it could be. Depending on the length of tenure and former positions, internal dynamics may be discouraging important input from other, newer members. A coach can improve the effectiveness of board meetings by coaching the chairman in ways to balance input.

Conclusion

CEO turnover is somewhere between 35 to 50 percent over a 5 year period. A search at that level can take years to complete. In that time, corporations can lose direction and strength in core competencies. Even without the immediate threat of a CEO's leaving, succession raises the thorny issue of who the new CEO should be: someone who is hand-picked to conform to the present CEO's image or someone who will meet the organization's needs. The right CEO may not necessarily be someone the incumbent and board are most comfortable with. A coach can help everyone look at the business needs to make the best choice and then can build the alignment between board and chief executive so important to the corporation's success.

The governance of a corporation has many challenges and many rewards. Executive coaching can be an invaluable tool to improve CEO performance by helping to make the vision become reality. A coach can enhance board/CEO communication by bridging the gap from day-to-day to strategic. Finally, everyone—CEO, board, and coach—benefit from achieving goals jointly set.

Nancy L. Yahanda, Ed.D., is president of YAHANDA group, Inc. a Boston-based consulting firm providing executive coaching, organizational effectiveness consulting, and team facilitation to corporations in high technology, manufacturing, financial services, and healthcare.

Case Studies: Coaching In The Family-Owned Business

Family firms comprise over 80 percent of business enterprises in North America and nearly 35 percent of Fortune 500 companies, according to the Family Firm Institute. This large number of family-owned businesses accounts for 78 percent of all new job creation, 60 percent of the nation's employment, and 50 percent of the Gross Domestic Product. The ability to balance and honor both business and family needs is key to a successful coaching intervention in these companies. Family dynamics often blur the lines between the CEO's vision and that of the rest of the family. Issues which might not be discussed at the family level must be resolved in order for the business to continue and grow. Following are some examples of how coaching has helped in family businesses.

Case 1

The CEO was tormented by having to choose his successor—a choice between his two sons. He did not want to indicate that he favored one son over the other. The board, on the other hand, could easily see how one son had the attributes of a CEO while the other was ill-suited. The board and the CEO together decided to bring me in to help them resolve the succession issues. In the end, it became clear that neither son was entirely qualified nor would be prepared in the time frame needed for succession, so an interim candidate from the outside, approved by all, was chosen and groomed for the role.

Case 2

In the third generation of a business, the only family member able and willing to take over management was a woman. With both her father's and grandfather's approval, she became the CEO. The father and grandfather, however, also continued to maintain offices at the company and were reluctant to give her the authority and responsibility she needed to assume the CEO role fully. I coached her to recognize that these dynamics were not helping the business or the family. We established a clear understanding of what her parameters for success would be. In the best interests of the company, the board—realizing that her hands were tied—became her partner. Through this process, she successfully took on the leadership role while her father and grandfather stepped down.

Case 3

A husband, the founder and CEO, and his wife, the COO, ran a large professional services firm. In their early 50s they decided that they wanted to position the business so that they could retire in their early 60s. Since none of the children were interested in taking over the business, they needed to plan how best to make the transition. During the planning stage, while working with financial planners and lawyers, it became clear that the husband's and wife's strengths were not being put to use in the best way for the company's future success. Although the wife was functioning as the COO, her strengths were in building, developing, and retaining clients. The husband was excellent at initial sales and setting up accounts. As a result of the coaching, the wife became CEO and the husband chairman. From this new organization they were able to expand the business internationally and choose the right management team to succeed them.

Nancy L. Yahanda

Reprinted with permission of the publisher,
the National Association of Corporate Directors (NACD),
1707 L Street, NW, Suite 560, Washington, D.C. 20036,
tel. 202-775-0509, www.nacdonline.org