By Anthony Sgammato, New Jersey Metropark Office Managing Partner, Americas EY Private Assurance Leader, Ernst & Young LLP
“Let’s not wait until a problem is a huge problem before it’s brought to light. Let’s communicate that problem and build trust.”
— Kathryn Swintek, 2020 NACD Private Company Director of the Year
As a business leader, it’s my job to look past the now into what’s next and beyond for my clients and for Ernst & Young LLP (EY). That’s far from simple amid a global pandemic, social unrest and with an historic presidential election on the horizon. Long-term strategy seems tough to anchor.
In times like these, disagreement and conflict about the best way forward is inevitable, but conflict doesn’t have to be a dirty word. Depending upon how it is handled, conflict can be healthy — and when it is, it’s essential to good decision-making. It helps us surface new ideas, determine if they work and make them reality when they do.
Nowhere is this more apparent than on boards. Board members and management are discussing mission-critical and future-forward issues every time they meet, and they have to find ways to do so productively.
Recently, I spoke with Kathryn Swintek, named by the National Association of Corporate Directors (NACD) as their first Private Company Director of the Year, who shared advice for CEOs and board members on how to navigate conflict while building and preserving strong, trusting relationships.
How do you foster a good relationship with the CEO and management?
Trust is built on open and honest communication. It’s easy to have a good relationship when there are good financial results — or results that reasonably track a budget — but the board and CEO need to be able to have dialogue when there are challenges as well. Boards should know in advance if there are going to be challenges in any given period.
My advice: Don’t wait until a problem is a huge problem before it’s brought to light. Let’s communicate that problem and build trust.
What would board members like CEOs to do more?
Board members are there because they can help, and they want to help, so CEOs should pick up the phone and ask for assistance between meetings. Whether it’s introductions, opinions on important decisions or help on negotiating any given important deal — those good outcomes also help to build that relationship. You must establish this pattern of open communication— make sure it stays open when there are issues.
How do you manage disagreements?
When there is a different point of view, listen to that point of view and don’t get stuck on yours. Go back to your debating society — somebody can have an objection, but they need to clearly state the objection, and then it should be considered. We all want the same thing — what’s best for the company.
Board members won’t always agree, especially on important issues. There can be conflict — healthy conflict. How do you navigate through that?
First of all, you have to make sure that all of the board members have a posture of openness to hearing other points of view. Second, when we’ve had some big, big decisions to make at companies where I’m a director, the time to have that conflict is before the board meeting. And then also doing the work — doing the committee work.
You’ve got to trust your fellow board members, right?
Right. Did they do the work within their committees? Did they come with informed opinions? And, again, are they hearing all points of view — and really hearing them, listening and debating them?
How do the committees come into play?
If you’re talking about making a big acquisition, that has implications across the board and would touch on all three key areas of oversight of a board member — risk management, talent oversight and strategic direction. Committee work becomes important there — allowing the committees to do their work, to do the due diligence that corresponds to their particular area — lots of groundwork.
How do committees gather information to do their work?
One of the ways to do that is to make sure you have a strong internal audit function. Generally, those functions report to the audit committee, so they will receive some of the information the CFO might not otherwise provide. I also think that a strong relationship with the external auditor can be critical to the board’s oversight role.
Read the complete interview The essential board Kathryn Swintek talks disruption conflict and why you need a board.
The views expressed by the author are not necessarily those of Ernst & Young LLP or other members of the global EY organization.