Forget the move to CEO – most FDs are better place to chair the board after they leave the finance function.

The chairman of the board needs to be numerate, fond of detail and have a working understanding of corporate governance and regulatory requirements. So says Jim Weight, former CFO of Westminster Healthcare and now of HIT Entertainment. “That’s check, check and check for most FDs,” he told us in June 2005, arguing that the move from FD to chairman is the logical step out of the finance function. “It’s not so much changing roles as bringing the same skills to board supervision.”

But no move is that straightforward. Some of the chairman’s skills won’t have been honed in the finance function – particularly in the area of boardroom diplomacy. And then there’s the question of how you actually get the chairman’s job. With that in mind, we’ve asked chairmen who have been FDs, both long-established and new in the post, about the issues, responsibilities and pitfalls of chairing the board – and what you, as an FD, can bring to the party, whether it’s a long-term appointment or just a one-meeting fill-in for your own chairman.

(Before we go any further, and at the risk of jeopardising our reputation for political correctness, we’ll take a leaf out of former ASB chairman Mary Keegan’s book – the term embraces the female as well as the male of the species.)

So let’s start with an apparently naïve question – what are chairmen for? Patrick Dunne, a director of 3i, has never been an FD. But as author of three books on running board meetings, he’s qualified to sum up the chairman’s function: “Establishing the right strategy, the right resources, and keeping out of jail.” Which, of course, most of you probably do in your current role.

Let’s ask a couple of FDs, then, for a more acute analysis. John Coombe is former CFO of GlaxoSmithKline, was until recently chairman of the Hundred Group of FDs and was last month appointed as chairman of Hogg Robinson. “At one level the job of chairman is a relatively trivial one,” he says. “The chairman chairs the board and the CEO runs the company. But when you work for a good chairman you see how effective they can be. I’ve worked for a couple who do it stunningly well, striking just the right balance between allowing people to express their views and knowing when to step in and curtail the process when it gets too long.”

Alan Clements, former FD of ICI and Granada and one-time chairman of David S Smith and Trafalgar House, claims it’s “partly to tell the CEO when it’s time to go”. (Which is probably the fantasy of many an FD.) That said, he adds more positively, “It’s also to manage the board and make sure it does what it should be doing, even if that isn’t always what the chairman would like.”

So what should you do to ready yourself for the role of chairman? The best preparation, advises Dunne, is to gain experience as a non-exec on a board which has a good chairman. There’s no substitute for seeing how others do it, and the more you see, the more you can learn. He also recommends attending one of the training programmes on chairing the board run by organisations including the Institute of Directors and Cranfield Business School. And he warns that before accepting the chairman’s job you should work through a checklist on the board you plan to chair, to ensure that no skeletons are likely to jump out of the cupboard. Once you’re chairman, you’ll have to be able to deal with them.

The move from FD to chairman also requires a change of mindset, according to Clements. “After being an executive director used to tackling day-to-day decisions, I found it strange that I now had to make sure that the board tackled the major issues rather than just listening to what has happened in the past month,” he says.

But he agrees that being FD on a main board is a good preparation for the role of chairman since in both roles you have to look at the big picture rather than just concentrate on your own section of it. “As chairman I realised straight away that some of my executive colleagues had tunnel vision,” he says. “I had to remind one board member that he should be concerned with the whole operation – I wanted his views even if they were about someone else’s part of the business.”

That’s true even if you find yourself in a position to chair a subsidiary board – these operating company chairing roles are more likely to come up while you’re still in-post as an FD.

Sian Wycherley found her first board meeting as chairman of GE Equipment Services Plant Hire “unnerving”. She’s also general manager at the company, but her background as an FD (of Barcom) gave her confidence in the role. “Having a strong knowledge of numbers will never let you down,” she says. “Most accountants are control freaks, but mentally we tend to be very agile. Our great strength when chairing a board is that no-one can ever argue with the facts. For example, if the creative people suggested painting all the machinery bright pink so it doesn’t get stolen, I would want to explore what it would cost and how it affected their value – look at it as a financial proposition. Accountants are very logical by nature.” (Mind you, it is an interesting suggestion...)

You have to temper that control freakery when you become chairman. “You have to learn to give control away,” she says. “Don’t keep chasing people once you’ve handed them a project – you must trust that they’ll do a good job.”

It’s not just strategy, diplomacy and delegation. The practicalities of running the board meeting should be carefully thought through to ensure that it runs smoothly and effectively. Wycherley advocates setting dates for board meetings 12 months in advance; always having a well-defined agenda; and always reporting back after the meeting. A strong believer in getting out and meeting staff, she moves board meetings around the business units at five different sites.

So what homework should the chairman do before a board meeting? Wycherley asks all board members to send a report beforehand about the items they’ve worked on, the issues they want to raise and their agenda for the next month. “It’s important that I read them all in advance and ask questions beforehand if something isn’t clear,” she says. “You can’t go in at five-to-nine and just wing it. I have a board meeting tomorrow morning and have been away from the office all week – so I’ll be up at 5am to prepare.”

And don’t neglect the housekeeping. The comfort of the participants can help determine whether or not the meeting reaches its potential. Dr Sophie Petit-Zeman, author of the newly-published How to be An Even Better Chair, stresses the benefit of details like good – though not necessarily expensive – food, a cheery room with natural light and comfortable chairs.

She also highlights a key factor for effective chairing: understanding physical communication. “Avoid long, thin tables where you can’t see everyone,” she says. “You need to be able to watch people’s body language, even when they’re not addressing the board. Have some lighter items on the agenda – they can help keep concentration levels up. And very importantly, smile!”

The relationship between chairman and CEO is vital for the success of the organisation. “But banish any thought that the chair’s task is to support the CEO,” says Petit-Zeman. “That may be part of it at times, but the main role of a chair is to performance-manage the CEO. It’s a hard-to-pin-down, give-and-take aspect to the role. And it involves trust, shared values, respect and friendship.”

OK, but that’s a bit woolly. For a more practical answer, try Keith Hamill, veteran chairman and former FD of WH Smith. He points out that CEO is a lonely position, and the chairman is often the only person he or she can talk to in confidence. “If they develop a relationship of trust, it can be very powerful, but if they don’t get on it’s fatal,” he says. That means the relationship between the two is often regarded with suspicion by the other board members. “They either say that the situation is not good because the chairman and CEO get on very well and carve everything up before the others arrive; or it’s not good because they don’t get on – so sometimes you can’t win.”

So the chairman’s role is one long balancing act. And with the recent focus on corporate governance, non-execs now also have increased responsibility and involvement in the business to complicate matters. In the past, executive board members would present the strategy to NEDs as a fait accompli. But Coombe believes that it’s now crucial for NEDs to have an input into company strategy. He recommends an “away-day” for the whole board focussing on strategy so that the executive directors can benefit from the collective wisdom of their non-execs.

Coombe has learned many lessons from observing good chairmen in his time as an FD and non-exec. But he’s also learned from the bad ones – though he is careful to generalise his comments. “The chairman shouldn’t be overbearing,” he says. “Though he’s at the top of the organisational pile, he shouldn’t use his position to dominate meetings. The danger is that this will result in a subservient board.” In both organisational and corporate governance terms, this could be a disaster.

So what is the chairman’s role when trouble’s brewing? Keith Hamill was formerly chairman of the airline Go! “It was understood that if there was a problem the chairman would be involved immediately,” he says. “You are the most senior person and have to protect the company. When management is the issue you must make a judgement and either support them publicly or take responsibility for their failures.”

As bad publicity becomes increasingly inevitable in the corporate world – the media, consumers’ groups and now bloggers love a bad news story – that can play into the hands of the FD-chairman. “It requires analytical thinking, a skill which lends itself very well to the FD discipline,” says George Bartlett, who runs the Institute of Directors’ programme on the Role of the Chairman. He also argues that managing risk is the responsibility of the whole board, rather than a specific committee, again putting the emphasis for the chairman on skills traditionally rooted in the finance function.

But however skilled and successful a chairman is, everyone eventually comes to the end of their shelf-life. Probably the most important question which should exercise the mind of any chairman – and his board – is: how will he know when to go?

Sometimes the timing is obvious to everyone except the person at the centre. Hamill warns of the type of chairman who is a good guy, runs meetings well and is an effective face for the company with the stakeholders – but who doesn’t get to grips with the issues, whether that’s strategy or, more commonly, individual managers. That type is more difficult to get rid of than an outright bad chairman. “The ones who behave badly are easy to deal with because everyone unites against them,” he says.

But for successful chairmen who do their job well, we’re offered two high-risk strategies to find out when they’re no longer wanted. Hamill suggests asking fellow board members every three years after your appointment whether you should go. “People are pleased to be asked and usually say it’s the last thing they want,” he says.

More dramatically, Coombe recalls an impressive gesture by a chairman on the day of his appointment. “He walked into the boardroom and gave a letter to the company secretary which was his signed, but undated, resignation,” he says. “He told the secretary, ‘When the board decides they no longer want me as chairman, just add the date and I’ll abide by it.’ It was an act of bravado, but it set the tone.”

Perhaps, like Caesar triumphant, you need someone behind you in board meeting whispering “you are mortal” to ensure you keep your feet on the ground. Or perhaps – unlike those CEOs who maybe take chairmanships to further boost their egos – self-awareness and realism ought to accompany strength with numbers, a strong sense of corporate governance and a holistic view of the business as the defining skills of the successful FD-turned-chairman.

Life in the chair: Keith Hamill

Former WH Smith FD Keith Hamill is currently chairman of Travelodge, brokerage Collins Stewart Tullet, nightclub operator Luminar, insurance broker Heath Lambert – and Moss Bros. He’s also a director of other private companies in the UK and US. We asked for his views on the FD-chairman move – and how he got there.

“Having worked fairly hard in a number of interesting CFO roles, I was about to transfer to a very big new one about six years ago when I suddenly realised... I didn’t want to do it any more. I was relatively young so I still needed something to do and a headhunter friend told me that my type of accountant sometimes do not make particularly good CEOs – but can make decent chairmen. Then one of my neighbours, an investment banker, said he needed a chairman in a hurry for an IPO he was doing.

The main issue for me was that if I took that job there was no way back to full-time executive work. Of course, soundness and probity of the business were also issues – and also whether you like the people.

“I’ve got a lot of experience at looking at figures and reaching reasonably reliable conclusions from them fairly quickly. This is a big advantage to a chairman in making a contribution. But I think I’ve got more strategic in the last few years. The nature of the chairman-CEO relationship also makes you more of a listener and a coach. And as a part-timer you have the advantage of being more detached than you would be as an FD – which can help your judgments.

“For the modern chairman, the key is to do only what you need to – and make sure that you do it well. Also, if there’s a very serious problem then a chairman should be visible – that means you’re in the firing line. The price of doing the job properly is that you have to be willing to help take responsibility for things in a tight spot.

“I seem to be in demand as a chairman, so I think I got the pricing strategy wrong and must be too cheap! The amount you can charge depends on the size, complexity and issues of the businesses – and their ownership. Private equity is much easier: you don’t have to waste time on corporate governance bureaucracy and you can easily talk directly to the investors. I have also taken on quite a lot of work in relatively small companies, although I’m doing my best to help make them a bit bigger. It’s easier for a part-time chairman to add more value in a smaller business, and it’s often more fun.

“Getting a good spread of roles is helpful in developing your experience and gives you broad perspectives. But despite my varied portfolio, I’m planning to do a bit less work over the next few years.”

Low-risk chairmanship*

1) Establish the principle of “no surprises” on your first day. 2) Foster a culture of openness and transparency.

2) Don’t depend solely on the CEO for information about what’s going on in the organisation. Develop your own antennae.

3) Ensure board papers are written succinctly and unambiguously.

4) Ensure board decisions are clearly recorded and a master set of signed minutes is kept securely.

5) Honesty is the best policy. Don’t be afraid to go out there early and apologise.

6) Manage your stakeholders proactively, especially if things are going wrong.

*Source: How to be An Even Better Chair, by Dr Sophie Petit-Zeman

Freelance journalist Widget Finn writes for the Times, the Daily Telegraph and a range of other publications on management and HR issues.

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