This is the second in a five-part series. Check out part one of the series.
Anna Catalano was sitting in a board meeting when she decided to say the thing no other director was willing to say. The CEO was one of the strongest she had worked with, a genuinely good leader. That being said, he had been giving his head of operations one second chance after another, despite the safety incidents and the operational problems that had piled up over months. Catalano turned to him. She said, “You’re an A player. So why do you allow yourself to be surrounded by people who aren’t A players?”
Her question gets at something most directors prefer not to confront directly. A great CEO can build the wrong team if no one in the room is willing to ask the question, and a functional board’s job, more than anything else, is to ask it.
Private boards often hesitate to challenge a CEO’s management decisions, assuming the chief executive knows more than they do. Operationally, that should always be true, but a board cannot rise to greatness by handing out free passes. If directors cannot independently assess the abilities of the management team, the board’s oversight role becomes largely symbolic.
This is the second article in a five-part series examining how Jim Collins’s Good to Great principles apply to private company boards. The first article drew on a conversation with Richard Davis, the former U.S. Bancorp CEO and a director at Wells Fargo, Mastercard, Dow and the Mayo Clinic, and covered Collins’s first principle, Level 5 Leadership. Its core argument was that a great board behaves as a team rather than a collection of accomplished individuals, recruits for the institution rather than for the dinner party and holds itself to the standard it applies to everyone else. The principle this article takes up is Collins’s second: “First Who, Then What.”
Collins’s observation was that great companies focus on getting the right people in the right seats before they fix on a strategy, because the right people will figure out the right strategy together. He wrote it about CEOs choosing their executive teams. This series is based on the premise that Collins’s principles apply in a similar fashion to corporate governance.
For a board, the principle scales upward into three concentric questions:
- Who is the right CEO?
- Who is the right team around the CEO?
- Who is the right board around the company?
All three are harder on a private board, where the external scaffolding does less of the work and the people most invested in continuity are often the ones closest to the decision.
If Level 5 Leadership begins with the humility to act as a real team, Collins’s next principle, “First Who, Then What,” asks whether the right people are on that team in the first place. The two questions are inseparable. A board without the humility to act as a team will not have the candor to ask the harder who questions of itself.
The CEO Question: Three Scenarios, One Discipline
Across more than 20 years of board service, Catalano has worked three kinds of situations in which a board ends up choosing a new CEO.
The first is the planned succession, where the outgoing CEO has signaled retirement well in advance. Catalano’s bias is toward internal candidates when the company is on track, because cultural continuity matters and an outsider often arrives feeling obliged to change things that aren’t broken. The pitfall is rarely the process itself but instead a founder, a family principal or the sitting CEO short-circuiting the process by anointing a favorite before the board has done its work. Catalano lived this on one board when the outgoing CEO arrived at the succession debate with a clear preference between two internal candidates. The directors had to push back. “We need you to have your board hat on, not your CEO hat on,” they told him.
The second is the sudden departure, whether through illness, death, or unforeseen circumstances. Such cases test whether a board knows the bench before it is needed. The cleanest version Catalano has seen was at Frontdoor, where the board chair, a former H&R Block CEO, stepped in as CEO after an unexpected departure and stayed in the role. Few closely held companies have a former Fortune 500 CEO chairing the board and willing to take the operating job indefinitely. Because that combination is rare, the discipline is to keep a short list current and to know the candidates on it well enough to move quickly.
The third is the board-induced change, where the directors decide the current CEO is not the right person for the next chapter. This is the most uncomfortable case on any board and the most fraught on a private board, where the founder or principal often has formal or informal veto power.
Catalano was one of three directors who pushed past an internal favorite to bring in an outsider, a McKinsey partner with no industry experience, who then led the company through a merger that redefined the company. The board concluded that strategic perspective mattered more than industry continuity at that moment in the company’s evolution. In closely held companies, consensus typically forms around the principal’s preference long before the formal conversation begins. What Catalano and her colleagues did was name that dynamic in the room and refuse to make peace with it.
Jonathan Johnson, lead independent director at The J.M. Smucker Co., former CEO of Overstock and currently a director at two private companies, has lived inside two of these scenarios from the operating side. He has been acting CEO at Overstock twice, the first time when the founder fell ill and Johnson held the ship steady while the team waited for the founder to recover. The second time, the founder left abruptly, the company was in choppy waters and the “acting” prefix became an obstacle to the changes the company needed.
Interim is the right tool when a board is buying time for a known transition, the wrong tool when the company needs decisive change. “Vendors, bankers, everyone thinks I’m acting, and I’m not acting,” Johnson told his chairwoman after the first board meeting under the new arrangement. “You can’t afford for me to be acting because time is of the essence.” The argument carried the day and the board removed the prefix from his title.
Writing the Job, Not the Person
Reverse-engineering the job around the favored candidate is one of the quieter failures of private board governance, and it rarely registers as a failure to the board at the time. The candidate is competent, the family trusts them, the search firm is satisfied, the vote is unanimous. The cost surfaces years later, when the next chapter arrives and the company discovers it hired a CEO for a job that no longer exists. On a public board, a misaligned hire eventually attracts external pressure from activists, analysts and proxy advisors. On a private board, that pressure does not arrive. The misalignment compounds quietly, and the board that approved the original hire is the same board that has to reckon with its consequences.
The self-control that prevents this failure runs in the opposite direction. Once the scenario is clear, the focus shifts to defining what the company needs. Johnson has watched boards repeat the same mistake, writing the job description for the person they intend to hire rather than for the job they need to fill. “If you say, ‘Well, look, our COO is going to be the next CEO,’ and the job description starts to look an awful lot like the COO’s resume, that’s a problem.” The temptation is strongest in closely held companies, where candidates are personally known and the search firm’s gravitational pull is weaker. The restraint he recommends is the opposite: Define the job the next chapter requires, then evaluate every candidate — internal and external — against that definition.
In Catalano’s 20-plus years on boards, the qualities directors look for in a CEO have generally stayed the same: a proven track record, the ability to communicate to different audiences, strategic clarity and the willingness to be decisive once the input is in. What has changed is what she calls “intellectual nimbleness.” By that, she means a CEO who reads disruption coming from outside the industry and anticipates how things like AI will reshape supply chains and customer relationships, causing entire portions of a value chain to be redefined. A CEO who is not externally curious will be surprised by the next disruption rather than well-positioned for it. Her interview prompts test for this perspective:
- “Where do you see this industry in 20 years?”
- “Tell me about something in your career that surprised you and how you responded.”
Support Is the Everyday Work
Selecting the right CEO is only the beginning of the board’s work. The familiar framing of the board’s central job — that it hires and fires the CEO — leaves out the work that fills the years in between, which is why Johnson reframes it: “We hire, we support and we exit or fire CEOs. The hiring is a process that results in a singular event. Termination, when it comes to that, is a shorter process that results in a singular event. But the support is the board’s everyday responsibility.”
When it comes to the discipline of “First Who, Then What,” the support work is where the board sees whether the who they hired is becoming the who the company needs. Johnson observes that CEO succession, raised on its own, tends to put the sitting CEO on edge. “Sometimes they’re prepared for it. A lot of times it’s very threatening to them, because they’re the founder or they have a long runway, and they know that if a board’s job is to hire and fire a CEO, that first one’s already happened.” His alternative is leadership training, run constantly as a permanent line item on the board’s agenda. It surfaces the same information CEO succession does, develops the next layer of executives and does so without triggering the threat response. Used well, it produces “a CEO succession bench not just for the next CEO, but the next CEO’s next CEO.”
For evaluating the sitting CEO, Johnson favors two approaches. The first is metrics that do not migrate from quarter to quarter. “We’ve all been part of board meetings where the package looks really good, but it’s not the same things that looked really good last quarter. The metrics are cherry-picked to show greens rather than reds.”
The second is feedback delivered through one voice. As lead independent director at Smucker, Johnson gathers the board’s perspectives in executive session, packages them and delivers a single message. “It’s almost like having 15 parents, everyone telling you how to do this or do that. It’s almost always better to have one person delivering the message.”
On a private board, the head of the compensation committee or any director with the chair’s confidence can play that role. One voice, candidly delivered, is more useful to a CEO than eight voices nibbling at the edges.
The Who’s the Board Forgets
The C-suite below the CEO, and the board itself, are the layers where “First Who, Then What” most often goes unapplied, and where the consequences accumulate quietly. Catalano’s playbook for getting to know the executive team includes dinners and site visits, the settings where directors see how managers actually lead. Committee leadership creates natural depth. The comp chair gets to know the CHRO, the audit chair gets to know the CFO and the nominating chair gets to know the general counsel. A director who chairs a committee for three years knows that executive in a way no boardroom presentation can match.
When Johnson was CEO of Overstock, he worked the same problem through a smaller lever: who sat next to whom at board-management dinners. “People naturally gravitate toward folks they know or folks they have similar interests with. I wanted that to stop, so I assigned seats at dinners, with name tags at each seat.” At Smucker, the sitting CEO does the reverse, seating Johnson next to a different member of management at every dinner by design. Over a year of meetings, the seating chart is the difference between a board that knows one executive eight times and a board that knows eight executives once.
A CEO who creates conditions for directors to know the team is signaling confidence in the bench. A CEO who keeps directors at arm’s length is signaling something else about either the bench or the CEO, and the distance itself is useful data.
Private company CEOs, particularly in founder-led or family-owned businesses, often serve tenures spanning 15 years or more. Director tenure, in turn, has barely moved, even though the same forces of change apply to both.
The previous article in this series argued that a board that won’t confront its own composition cannot confront anything else that matters. The harder corollary is that boards rarely apply the principle to themselves with the same rigor they apply it elsewhere. Self-reflection and self-enforcement do not come naturally.
After 16 years on the Willis, and subsequently the Willis Towers Watson (now WTW) board, through four CEO transitions and a successful merger, Catalano chose not to stand for reelection. The company needed different skills in the next chapter, and she felt as though her presence was getting in the way of the board getting them. Few directors take that step. The reason, in her view, is that they rely on age or term limits, which she believes are, for the most part, “a cop out for a good conversation,” a substitute for the harder work of looking at board makeup to determine whether the directors around the table possess the skills that the company needs. “We all spent our careers hiring and firing people. We’re not very good at doing that once we become directors, and we’re certainly not good at firing ourselves. It’s seen as a Supreme Court appointment, and it shouldn’t be.”
With every board he has joined since focusing more deliberately on governance, Johnson has told the CEO or the nominating committee, “The day I’m not useful to your board, just let me know. Board members that hang on or that aren’t keeping up, I think are a problem.” On a private board, where no external mechanism will force the question, that culture is built deliberately and from the inside, or it is not built at all.
For a company that aspires to make the leap from good to great, the work begins long before the first strategy session and long before the CEO closes the door of the corner office.
“First Who” should be asked at every level the board oversees and, most of all, at the level the board itself occupies. A board unwilling to apply the principle to itself cannot apply it credibly anywhere else.