Boards Should Ask Tough Questions In Good Times, Not Just In Bad Ones

Spend time with George S. Barrett, the former CEO of Cardinal Health, and you are guaranteed to walk away with new perspectives and insights. My colleague, David Reimer, the CEO of Merryck & Co. Americas, and I recently sat down with him to discuss what he had learned over his career about the dynamics of effective boards (he’s now a director at Target), and also some of his key leadership lessons.

Boards Should Ask Tough Questions In Good Times, Not Just In Bad Ones

Reimer: What have been the most important leadership lessons you’ve learned about being a director?

Barrett: One, make sure you know the line between management and the board. I began serving on boards after I became a CEO, and it was easier for me to appreciate that those were important lines to be drawn. Some board members lose that perspective on their responsibility. Directors are not there to manage.

The second is that it’s not uncommon as a director that you’re serving on a board of a company in an industry that is not the one that you grew up in. You have to resist the temptation to want to contribute right away. You need to learn and you need to listen. You have to remind yourself, why am I here, how can I add value and where am I just going to gobble up oxygen and not add value? I’ve seen it done badly and I’ve seen it done well.

Reimer: Can you talk about the extent to which it’s important that a board be an effective team, given the limited amount of time you see each other?

Barrett: An argument could be made that you don’t need the board to be a team. Technically, they’re independent voices that help provide governance and oversight. But I really don’t buy that. I think it’s important to have an effective team.

This isn’t to say that you always have to have voices in unison. If I had managed Cardinal Health without some countervailing voices or the heretics, then in some ways it wouldn’t have been a very effective team and I wouldn’t have been a very effective team leader. But I’ve also seen where literally one or two people, or changes to a board, can disturb the entire chemistry of the group.

For example, you can have a person who, every time they have a question, they ask it. And often they’re not important questions. A natural and predictable byproduct of that behavior is that it makes another board member disengage.

When I look back at things I would have liked to have done as CEO and chairman, I might have done more team-building work. I know it would have been frustrating for some of the directors because it takes time, but I do think it’s important, because a cohesive board is also very reassuring to the management team.

That doesn’t mean that, as a board member, you’re going to agree with management all the time, but when they know they’ve got a cohesive group of directors who really care about the institution and can function as a team, that’s very reassuring and healthy for an organization.

Bryant: Every company in every industry is undergoing some level of disruption. How do directors help management develop a strategy that’s simple but not simplistic?

Barrett: The need is critical. The how is harder. There’s always a tendency to enjoy the good moments and rip apart the bad ones. So you examine the heck out of things when they’re going poorly. When there are challenges, most boards don’t have difficulty engaging in the tough conversations.

The bigger challenge is when things are going well. That’s when we have a tendency to oversimplify, and that’s when you’re at your greatest risk because it’s so easy to enjoy the moment. It’s important to celebrate them, but it is important to ask tough questions.

“Do we completely understand why we’re doing well?”

Do we completely understand why we’re doing well? You can do well because you’ve got a great strategy, you’re competing and executing well or you can simply be riding a wave. So the really important questions are often not asked at the right moments. Nobody’s bringing in consultants when things are rolling well. People start bringing them in when the wheels start to come off or something’s gone wrong.

Asking really probing questions when things are going well can illuminate important insights. You might understand, look, we’re actually not doing that well, but we got lucky. That can happen.

Or now we’re onto something really important and if we don’t exploit this, our competitors are going to be right there with us in two months, so how do we accelerate this or scale this differently? It’s that burning question of “why?” Part of the board’s job is to ask that question all the time.

Bryant: From your director’s chair, do you ever find yourself pushing management to clarify its strategy?

Barrett: These are very subtle things, and sometimes companies get jumbled up in them. You’ve got to build into models the answers to some simple questions — What do we do well? For whom do we create value? Who do we compete against? How are we going to make money doing it? Who are we as an organization?

It’s about converting these broad ideas into an actionable set of activities and goals, using simple language. You can go into all the competitive stuff, threats and weaknesses and opportunities, but you have to ask yourself the basic questions.

“In today’s world, it’s enormously important to be able to articulate who you are.”

In today’s world, it’s enormously important to be able to articulate who you are. Being a CEO is just so different now. You’re mediating all these stakeholders, each of whom has a louder voice and bigger demands than they did 20 years ago.

Reimer: The ESG movement is a big part of that. How should boards be thinking about that?

Barrett: I’ll start with my view, which may not be popular to some, but I think in some ways we’re going down the wrong path with ESG. When an organization thinks of it as a separate activity, it’s not very effective. ESG needs to be integrated into the fabric of the company. It ties to what we do and who we are.

The ESG movement as a standalone movement is almost like quality was 30 years ago. Quality control departments were separate departments, but quality only became better when we integrated it into all our activities. That needs to be the same with corporate social responsibility.

Bryant: What relationship do you want as a director with members of the management team besides the CEO?

Barrett: I want to know that the CEO would be comfortable with me talking to management if I needed to. I want the CEO to trust me enough to know that I could have a conversation and not do anything that undermines them.

But I don’t think board members should just be picking up the phone. They may have the right to do that, but it really can cause mayhem. It’s important to be able to say to the CEO, “I’d love to talk to the marketing person,” and then ideally the CEO is confident enough to say, “I think that’s a great idea.” That kind of openness is really wonderful. It’s not a great sign if the CEO is gun shy about letting his or her people talk to the board.

Bryant: What’s your advice to a new CEO on how to work with their board?

Barrett: Respect them. That may sound ridiculous, but it’s not. The directors are there for a reason. They’ve earned the respect to be given a spot on the board, and they can be real thought partners.

If you treat them simply as a formal body that comes in for a certain number of hours and you get them out with minimal damage, you’re not going to get much from them. And chances are that the first time there’s a problem, you’re going to have no mutual trust to draw on. I liked having a relatively active board.

Reimer: If you were choosing among two CEO candidates, what is the X-factor for you?

Barrett: Part of it is the capacity to build follower-ship in the organization. That’s a characteristic you sort of see and feel. Every time a leader like this moves to a new position, everybody wants to stay connected to them.

Building follower-ship requires a lot of self-awareness. I’ve seen candidates with equal capabilities and great backgrounds, but one is very aware of his or her blind spots, and the other is not.

The role is evolving, and it’s going to require more intelligence and awareness. The job requires managing multiple levers. It used to be that most of the levers were behind the scenes. They were operational. There were a couple of stakeholders who had big, loud voices, and you had to manage them.

Today, everything is louder. That requires a pretty skillful hand. Very few people are ready to just jump in and succeed. You have to just bet on someone’s capacity to evolve. It’s like asking somebody to be ready to be President of the United States. Nobody’s ready to be president. Who’s capable of growing into these roles?

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