Most boards are good. Almost none are great. A majority of directors, by any honest reckoning, do a creditable job, and a majority of boards deserve to be called competent. But “good” is not a label most of us in corporate governance can easily sit with. We don’t climb corporate ladders and work tirelessly for decades to be good directors of good companies. As Stanford Professor Jim Collins observed, “Good is the enemy of great.”
In 2001, Collins published Good to Great: Why Some Companies Make the Leap … and Others Don’t, a book based on five years of research studying 1,435 companies. Only 11, less than one percent, had made the sustained leap from good to great. Personal experience and Collins’s research suggest a similar ratio applies to boards. Collins concluded that external factors, such as superior strategy, unique technology or a dominant market position, were not sufficient on their own to explain the leap. To become great, a company had to have a specific kind of leader he called Level 5: an individual who combined personal humility with an unwavering resolve to do whatever was necessary for the long-term success of the organization. Though Collins focused primarily on CEOs, the same principles can be applied with considerable force to boards.
This five-part series for Private Company Director, of which this is the first entry, examines how the best directors operate. Each of the five articles takes one of Collins’s Good-to-Great principles and explores how it applies to the boardroom, through the lens of an accomplished director whose experience illuminates it. We begin with Level 5 Leadership because Collins placed it first in his framework and because the other principles depend on it. The question this piece sets out to answer is what Level 5 Leadership looks like when it has to emerge from a group rather than a single person. There is no better qualified voice on that question than Richard Davis.
In a career that has included more than a decade as CEO of U.S. Bancorp and board seats at Wells Fargo, Mastercard, Dow (as chairman) and the Mayo Clinic (as chair of the trustees), Davis has developed clear views on what separates a great board from a good one. The headline, in his words, is that “being a board member is a team sport, and being a team player is a skill that many board members haven’t practiced in a long time, because we’ve been brought in by invitation from our unique skills and leadership, not our participation skills.” How many boards actually play that sport well? Davis’s estimate is sobering: roughly one in five. “I would say 20% of boards handle that issue when someone needs to go. The majority know it, admit it and don’t touch it.”
Great boards, as Davis explains, behave like teams rather than collections of accomplished individuals. Members check their egos at the door, they hold themselves to the same standard they apply to management, they build strategy collaboratively rather than debate it from fixed positions and they stay open to changing their minds. The harder question is how they get that way, because behavior on a board is downstream of who’s sitting around the table. Davis is blunt about one common mistake: recruiting high-achieving CEOs who have never served on a board. “A CEO who hasn’t served on a board is probably your worst candidate,” he says, “because they just haven’t practiced the team sport.” The skill set that gets someone to the top of a company is not the same skill set that makes a board cohere. CEOs are trained to decide, but directors need to deliberate.
Davis points to three places where Level 5 Leadership shows up in a board’s work: how it is composed and recruited, how it holds itself accountable, and how it partners with management on the strategic questions that separate greatness from competence. These questions have a particular edge for private boards. Public boards have external mechanisms that force at least some of them: proxy advisors, activist shareholders, and regulatory expectations around composition and independence. Most private boards have none of that scaffolding, which makes the difference between a good private board and a great one almost entirely a function of how the people in the room choose to operate.
Board Composition: The First Test of Humility
The first place Level 5 Leadership shows up on a board is in how new directors get chosen. This is a subtle point, and it’s easy to miss, because board recruitment rarely looks like a leadership challenge from the outside. Instead, it looks like an administrative process: A seat opens, a skills matrix gets updated, a search firm is retained, a short list circulates and a vote is taken. Davis argues that the harder work happens before the process ever begins.
“Your first team sport as a board member is to appreciate your responsibility to cultivate the board cohort and to find people that are maybe better than you. I’ve seen boards get along great until Bill says, ‘Well, look, I’ve got a guy who I used to work with and he would be perfect.’ And you’re thinking, well, either I know that guy and he’s not perfect, or I know somebody who knows that guy and says he’s not someone you’d want in the boardroom, or sure, that’s a good name, but I’ll have a better name.”
Instead of thinking about board composition as a list of check boxes, Davis suggests that top performing boards are more focused on team dynamics and whether an individual’s skills, abilities and background make the team more cohesive. Boards should be thinking of themselves as units rather than rosters of talented individuals. A team of All-Stars sounds great on paper, but what matters most is whether they can work together. Subservience to the collective will of others isn’t an attribute most CEOs cultivate, but it must be an essential element in every board member in an organization that wants to get to the highest level of achievement. In Collins’s analysis, it is Level 5 humility, an acknowledgement that someone else may be better qualified to make a decision, or that the collective wisdom of a board is paramount. That selflessness shows up when a great director recognizes that someone stronger should take his or her seat.
Davis notes that boards almost always pay a third party to run a search and often end up selecting from names the directors themselves brought forward. That is not necessarily an issue because directors know the territory, and well-connected directors know good people. The problem is when the process gets captured by personal preference dressed up as professional judgment. “I’m here to create a team of shareholder representatives,” says Davis, “not bring on my friends. And that is a very hard test.”
Private company boards face this challenge in concentrated form because they tend to be smaller, more personally connected to the owners or the principals, and less exposed to the outside scrutiny that can surface a weak recruitment choice on a public board. A private director whose name came through a friend of the founder may never face the same kind of vetting a public director would, which means the responsibility for rigorous selection falls squarely on the directors already in the room. If they cannot hold themselves to a standard of recruiting for the institution rather than for the roster, no one else will do it for them.
The practical test Davis suggests is worth reflection. When a name comes forward, the question every director should be prepared to ask of themselves is whether this candidate raises the ceiling of the board or merely rounds out the dinner party. The directors who can answer that question honestly and act on the answer are the ones practicing Level 5 Leadership in the most basic and most consequential way a board member ever does. They are choosing the institution over themselves before the first meeting has even begun.
Self-Accountability: Turning the Standard Inward
Choosing the institution over yourself at the moment of recruitment is, in one sense, the easy version of Level 5 Leadership. The candidate is hypothetical, the conversation is prospective and the costs of honesty are paid by someone who isn’t yet in the room. The harder question comes when the same standard has to be applied to a colleague, a loyal director who has been serving alongside you for years and, sometimes, to the director himself. This is where humility must be paired with resolve, the other half of Collins’s Level 5 formulation. A great board holds its own members to the standard it uses to recruit them and is willing to act when a member no longer meets it.
The 20% figure Davis cites is not an abstraction for him. It comes from direct observation across more than a decade of chairing and serving on boards of significant scale, and the reason he raises it is visceral. “It frustrates me, because a board is hired by shareholders who trust the board to do right by that investment. And a board which is not strong enough to manage itself makes you wonder how good are they going to be when the strategy is tough?”
In any other domain of corporate life, a four-out-of-five failure rate on managing your own team would be considered a governance failure but, on boards, it is somehow accepted as the norm. The reasons are understandable even if they are not defensible. Directors are often personal friends or long-time professional acquaintances, and the social cost of raising a concern about a colleague feels higher than the institutional cost of letting the problem persist.
Davis’s point is that a board unwilling to confront its own composition will have trouble confronting anything else that matters. The same instinct that keeps a weak director in place is the instinct that will keep a weak CEO in place, that will soften the language in an audit finding, that will decline to push back on a management team that has stopped hearing bad news. Self-accountability is the precondition for strategic courage.
The practical question is how a board develops the discipline to do this work before it is forced to. Davis describes a mechanism he has seen operate effectively, which is to build accountability into the annual self-evaluation process from the beginning, rather than inventing it in a crisis. In the approach he favors, directors are asked each year to name three board members whose skills and contributions are most aligned with where the company is headed and three whose skills may be waning relative to where the company is going. No action is taken in year one or year two. The questions become a routine. By the time a pattern emerges, the chair or the lead director has the standing to approach a colleague privately and say, in effect, that the board’s own process has surfaced a concern, and that it would be better for everyone if the director considered stepping back voluntarily. The hope, he notes, is that the individual self-selects out, and in his experience it is usually how the situation resolves.
The mechanism is harder to build into a private company board and more important when it exists. Private boards typically operate without the rotation pressure of annual shareholder votes, without term limits on most boards and without the external scrutiny that can sometimes force a public board’s hand. A private director who should have stepped back five years ago can stay on indefinitely if no one inside the room is willing to raise the issue. The institutional cost of that inaction is rarely visible in the short term, but it accumulates. A board that has not practiced the discipline of honest self-assessment in calm conditions will not suddenly develop it when the company faces a succession question, a strategic pivot or a crisis in the management ranks.
The Level 5 board is willing to apply to itself the same standard it applies to everything else. The director who asks hard questions of management in the boardroom is the same director who, when the circumstances call for it, is willing to ask the hardest question of a longtime colleague, and sometimes of the person in the mirror. That willingness is a shared norm that the board builds deliberately, usually through the quiet design of processes that make the question unavoidable over time. Boards that develop it tend to be the ones that rise to greatness. Boards that do not, regardless of how capable their individual members may be, are the ones that stay stuck in the good category Collins warned against.
Strategic Collaboration: Building the Answer Together
A board that has learned to recruit well and to hold itself accountable has done the preparatory work of Level 5 Leadership. The question that remains is what that preparation produces in the moments that matter most, which, on any board, are the strategic ones. Composition and self-assessment are ongoing disciplines carried out in the background of board life, but strategy is the foreground. It is where the company’s direction gets set, where the CEO looks for counsel and where the individual directors earn the seats they worked so hard to fill. It is also where the Level 5 instincts established in the first two sections either prove themselves or reveal their absence.
The temptation surrounding any strategic question is to arrive with a view and defend it. Directors are typically recruited because they have accomplished things in their fields, and their accomplishments rest, in part, on a willingness to form strong opinions and hold them under pressure. That habit serves a CEO well in most of what a CEO is asked to do. It serves a board member poorly in almost every strategic conversation the board will have, because the work of a board is to build a better answer together than any single prepared position in the room, whether the CEO’s or a director’s, would reach alone.
Davis puts this directly. “Do not come in and stand your ground. This is so foreign to the rest of us. The goal is to move your ground. It’s to move it to a place better than you had it, better than anyone else had. There is no perfect answer, even the one we come up with. But if 12 or 13 people decide this might be the best way, and we started an hour ago, we’ve come up with a better answer than any one of us would have on our own.”
The phrase “move your ground” is worth dwelling on, because it inverts the usual language of executive persuasion. The familiar picture of a strong director is someone who walks into the room with a view, makes the case, listens politely to the counterarguments and then votes. Davis is describing something different: A great director walks in with a view, puts it on the table so the others can see it and then listens for the reason to change it. The willingness to be moved is the Level 5 quality in strategic work. It is humility in service of a better decision, paired with the resolve to change position when the argument warrants, rather than nodding along while privately holding the original view.
This is harder than it sounds, especially for directors who came to the board from chief executive roles. In most board conversations, the CEO has already come to the meeting with a position, and the board’s responsibility is to engage with it rigorously: to pressure-test it, refine it and, when the argument warrants, help move it to a better place. Former CEOs, new to board service, often struggle with this discipline. In their prior roles, a well-argued case tended to get adopted. In the boardroom, a well-argued caseopens the real conversation rather than closing it.
The more experienced directors hold the CEO’s position up to genuine scrutiny long enough for the group to do meaningful work on it, and they are willing to sit in that ambiguity before moving toward resolution. That willingness is an acquired skill and one of the clearest markers of a board that has internalized Level 5 Leadership at the group level.
The practical implication is that a great board treats strategy as a collective act of construction instead of a debate among prepared positions. Even as the CEO brings a position, individual directors bring their domain knowledge, their pattern recognition from other boards and their own views on the question at hand. The board should use all that as raw material for decisions it will build together. The answer the board arrives at after an hour of that kind of conversation is rarely identical to the CEO’s opening position, or to the view any single director brought into the room. Davis’s point is that this is a feature of board work. The collective answer is better because the process that produced it was better.
The stakes of getting this right are particularly high in the private company context. Private boards often work with smaller management teams, fewer external inputs and more concentrated ownership. The board is frequently the only significant check on management’s strategic thinking, and it is sometimes the only forum in which the owner or the CEO encounters sustained, informed disagreement. A private board that treats its strategy sessions as occasions for each director to offer a prepared view and then yield to the principal’s judgment has drifted into operating as a panel of advisors, each director in isolation, with the principal assembling whatever pieces he finds useful and discarding the rest. A private board that builds strategy together, in the way Davis describes, provides something the principal cannot get anywhere else, which is a genuinely integrated perspective that incorporates all of the board’s knowledge rather than a selection of its fragments.
Such a cultural shift does not happen by accident. Davis compares the chair to a conductor, making space for the CEO to put the opening position on the table, pulling particular director voices forward when their perspective is most relevant, reining in the ones that dominate and keeping the conversation oriented toward the answer the board is trying to build rather than any of the starting positions in the room. The chair’s role is to create the conditions under which move-your-ground behavior is the norm and expected.
Still, each director is responsible for their own behavior, and no chair can manufacture an optimal outcome where the individuals have not accepted the premise. Level 5 Leadership at the board level requires every person at the table to hold the same understanding of what the conversation is for. The quality of the team and its willingness to embrace excellence, regardless of personal interests, is what will determine the quality of the outcomes.