Dr. Earl R. Smith II

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

In my work with boards of directors, the issue of developing a reliable source of leadership comes up often. Boards need a combination of very high quality homegrown and off-site talent in order to meet their responsibilities to the shareholders and provide good governance. One of the most important functions of the board is to see to the succession of the current CEO. Directors must assure that the company has the right CEO and assure that there are candidates in development to take the role once the current CEO has been retired. Helping the board to organize and manage such a flow is one of the most important services that I render.

Corporations are stores of value for the stockholders investing in the company. Investors not only look at the underlying value of the company’s assets, but often buy the vision the company’s leadership promotes as their strategy for the future. The CEO is accountable for the responsibility of executing the board of director’s strategy. The board must conduct leadership assessments and succession planning to meet Sarbanes-Oxley regulations however the board is responsible to the stockholders of the company to conduct annual board leadership assessments that will address the issue of developing new leadership engaged in the business and contributing to the corporate governance enhancing shareholder value.

Strategic planning is one of the most effective tools for engaging directors in open ended, free flowing conversations about the future direction of the company. Outside advisers can often effectively facilitate meetings and ask open-ended questions to stimulate thought processes leading to new strategies. Board of directors meetings address issues requiring immediate decisions, and open conversations of issues not on the agenda are discouraged in the interest of time. Directors need time and the openness a planned strategic planning session can offer to brainstorm ideas that address new strategies and new issues regarding the future rather than the immediate needs.

Senior directors have the responsibility for clear thinking and providing continuity in strategy and policy. Senior leaders also have the responsibility for engaging new directors and encouraging new ideas in strategy discussions. New directors should add to the level of diversity and knowledge available to the collective corporate leadership. Diversity on the board of directors ensures the introduction of new ideas and perspectives. Professional governance standards are not limited to a few directors or to a few industries. Corporations interested in expanding their vision and industrial leadership should look outside their inner circle for the best practices in leading their strategic planning efforts.

Corporate boards typically meet ten to twelve times per year. To encourage new ideas and to facilitate networking opportunities, the Chairman should encourage directors to travel to the meetings early and should arrange for intimate dinners with different mixes of directors prior to each meeting. A discussion leader can introduce topics for discussion and time allowed for directors to express their opinions. An observant Chairman will know which directors tend to migrate together and split up these clicks to ensure a good mix of new ideas and personal growth opportunities. This informal approach to solving problems actually extends the time of the board meetings. It offers directors new opportunities to network with other professionals outside of the formal board meeting.

Developing visionary leaders involves mitigating risk and developing a resource pool critical to a company’s future. Leaders need to be encouraged to take a long view of where the organization’s future lies. No one knows what future technologies might allow a company to achieve. Corporate management should have the ability to work within the current strategic plan and the corporate finances, and allow the board of directors to focus their efforts on a vision of the company five to ten years in the future.

Warren Buffet, the oracle of Omaha knows the business of the companies he invests billions of his dollars into for the long term. He explains that knowing the business involves having a clear understanding of what the company will look like ten to fifteen years from the time he invests in the company. He expects the company and directors will lead in a way that will enhance the value of his investment at a higher rate than he could achieve elsewhere. Directors need to understand the shareholders of their company have the same expectation and demand visionary leadership from the board of directors to achieve the desired results.

One of the serious mistakes made by many boards – and the advisors that support them – is to overlook the critical role of the board in fostering and contributing to the process of developing good leadership – visionary leadership. The board should be committed to this development effort – the future of the company depends on its success.

© Dr. Earl R. Smith II

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• Leadership Assessment – Understanding the Process
• The Leadership Assessment Program – An Important Tool
• Can Your Company Afford Not To Have A Coaching Program? – Part I
• Seven Steps to a Successful Executive Coaching Program
• Corporate Talent – Coaching and Retaining the Best
• The Succession Committee – Selecting Leadership for the Future

Dr. Smith is Managing Partner of The Federal Circle. The Federal Circle partners with teams and existing companies. We help them up their game and win big in the Federal space. We also arrange funding for acquisitions and expansion by acquisition. Our model is based on the belief that, if you select the very best and work with them in a highly professional and focused manner, the results will be truly amazing. He is the author of Amazing Pace: Turbo-charged Business Development – a book that shows how Advisory Boards can dramatically increase revenue. Dr. Smith is also the author of Dream Walk: Parables for the Living – a book of Raven Tales and exploration.

This entry was posted on Friday, October 17th, 2008 at 9:39 AM and is filed under Governance, Leadership. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.