Preparing CEOs for Success With Their Boards

Bill Johnson, who is chairman, president, and chief executive of H.J. Heinz (HNZ), recently sponsored a study that culminated in the new book Preparing CEOs for Success: What I Wish I Knew (Leslie Braksick and James Hillgren, 2010). The study identified eight key themes around what CEOs said they were not prepared for and what they wish they had known before moving into the CEO role. One was the importance of developing a trusting relationship with their board. To explore the implications of this topic for both directors and CEOs, Bloomberg Businessweek columnist Beverly Behan recently spoke with Johnson. Edited excerpts of their conversation follow.

Beverly Behan: Bill, the participants in your study—27 CEOs, most of whom run companies with revenue of more than $4 billion—said they spent up to 25 percent of their time working with their boards, either individually with board members or collectively with the board as a whole, to ensure an effective working relationship. That's a big number. Is that 25 percent consistent with your own experience in working with your board at Heinz?

Bill Johnson: Absolutely. The percentage of time a CEO spends interacting with the board and with individual directors may vary based on the tenure of the CEO. A relatively new CEO should be spending more time working with the board and establishing an effective working relationship with the directors than a CEO who is more long-tenured and has already built a strong relationship and has a lot of credibility with the board. But 25 percent of your time is roughly the right number, in my view. I'd go even further and say that if you're a new CEO, you have virtually no chance of being successful if you aren't spending at least 25 percent of your time on this.

Is that a big change from the time a CEO might have spent working with the board 10 years ago?

No question about it. I've been on the Heinz board for 17 years, and I serve on two other boards. I've seen very dramatic changes in that time that have substantially [affected] the way boards work today—and the way a CEO needs to work with the board. It is not fair to suggest that the boards of a decade ago were social clubs, but the boards of today are far more engaged. Personally, I value that. I wanted to work very differently with my board than my predecessor had, for example.

How would you characterize the working relationship you've tried to foster with your board at Heinz?

Very open, candid, and very interactive. I really use my board. I bounce things off them all the time and draw on the expertise of my directors, particularly if they have specialized knowledge in an area we're looking at. I talk to every board member by phone at least once between every meeting—more often if there is an issue that someone on the board knows a lot about and is helping us with. We don't always agree, and some of these conversations are difficult. But it's critical to have them.

You said earlier that you wanted to work with your board differently than your predecessor did. How did you go about creating that change?

I sat on the board of Heinz for five years before I became CEO, so I knew the directors well. Regardless, when I became CEO I got a pack of plane tickets and went to talk to every director where they lived. I would encourage every new CEO to do this. It's essential, as this is the foundation in terms of building a relationship with each of your directors as people.

It is also a very different conversation than one-on-one meetings you may have had with them when they were deciding to name you as CEO. That was the seduction process; once you've become the CEO, you're into the marriage. You need to take the time to sit down with each of them at the outset and solicit their views about the direction of the company, how you want to work with them differently, how they may want to work with you differently—all of those things. I was pretty candid in telling them that I wanted to work with them differently and I expected a lot more in terms of their involvement. In some cases of longer-serving directors who were nearing retirement, I asked, "Are you willing to make the kind of commitment I am looking for?" After thinking it over, some directors decided to leave the board for a variety of reasons.

I also sat down with the chair of the nominating committee and told him how I wanted to change the board—its composition, diversity, and how I wanted to work with them. I said, "I need your help," and he really mentored me through this. I told him what skills and experience I felt we needed on the Heinz board, and frankly, we disagreed on some of those things. That led to a valuable conversation. In the end, we both compromised—and we ended up bringing some great new directors onto the board who have added some very useful perspectives and backgrounds. It's essential at the outset for any new CEO to have that conversation with any of the key influencers on the board. And sometimes those influencers are not the people with the title of lead director or chair of a committee. You need to be conscious of that. Because it's only after you have their support that you will be able to really make constructive change.

Bill, it's clear that you invest a lot of time and effort in working with your board. How do they add value for you?

I think it's very shortsighted to view your board as simply playing a compliance role in governance. I use my board all the time. If you've recruited some great directors, as we have, who have great experience and perspectives, you really want to draw on that. Using a board in this way is a lot more work for the CEO, there's no question about it. But it makes the board relationship far more fruitful for the company.