Telling Directors and Senior Managers to Buddy Up
from March/April 2008
by Lisa Holton
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You’re the CEO and you suddenly spot one of your board members walking along one of your halls, speaking intently with one of your top managers. You grab your PDA to see if you’ve forgotten a board-committee meeting. Nothing’s on the schedule. Your assistant is away from his desk. You peek around the corner at them again. Why is the director here? She’s going over documents with one of your direct reports—they’re not even on a committee together. What could they be talking about? Do you chase them down and nonchalantly ask what’s going on? Do you put a tail on them? (Wait. That didn’t work out so well for Hewlett-Packard. Scratch that.) What do you do?
If you’re James V. Mazzo, chairman and CEO of Advanced Medical Optics, you wave hi and keep walking. One might say this is a reflection of how secure Mazzo is in his relationships with his directors and top management, and that is definitely a factor. But it’s mainly due to a unique board-officer partnership program he created five years ago at the Santa Ana, California, manufacturer of eye-care products when it was spun off from Allergan Inc., best known for making Botox.
“When we did our spin we had to do a lot of things quickly, and my frustration with board meetings in my former life was that so often you had to spend way too much time recapping stuff at the 30,000-foot level before you could get anything done,” says Mazzo, 50, who was corporate vice president of Allergan’s surgical and contact-lens- care businesses. “We needed board members at the 5,000-foot level because we had to build a new company quickly, and I saw no reason for that talent not to work together.”
With the luxury of building a board from scratch, Mazzo was able to try an idea he’d had well before the spin-off—creating a system where each of the company’s seven outside directors would be assigned to one or more specific top-level executives with complementary strengths and interests. They could talk anytime they wished, and they could meet anywhere. If a director wanted to stop by AMO’s Southern California headquarters or any of the company’s other facilities to meet with a partner, he or she would have a pass and wouldn’t have to report in to Mazzo about the planned visit.
Mazzo told each of his director-manager teams two things: One, talk. And two, the only time I’ll bug you is to make sure you are talking.
One such partnership consists of board member Michael A. Mussallem, 54, chairman and CEO of Edwards Lifesciences, an Irvine, California, developer of products and technologies used in treating cardiovascular disease. His board buddies include Aimee Weisner, 38, AMO’s general counsel, and Francine Meza, 51, head of human resources. “Whether we’re discussing major strategic initiatives or smaller personnel issues, this structure enables both the board member and the executives to learn from one another while making what we believe is the best decision for the company,” Mussallem says. “It was designed to benefit all parties, and I think we’ve accomplished this very well.”
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CEO James Mazzo |
“I like being a sounding board for ideas of all types,” says Link. “In most companies, particularly technology companies, top management doesn’t really have a trusted outlet for that, and board members can’t just reach out. We don’t view our time as a time to focus on core business strategy. We definitely cover that elsewhere, but most of our time is spent on things that are less clear. We’ll definitely talk about open issues relative to technology, because that’s our expertise. But we also might talk about organizational development, personnel integration, identifying strengths and weaknesses in the organizations we’re integrating.”
Borrmann, who has been a CEO and knows something of board-management dynamics on technology start-ups, feels the freestyle aspect of the partnerships will keep the company thinking like a small enterprise as it grows, a skill essential to product leadership. “I’ve been in eight- to 10-person start-ups, and your venture capital relationship is critical for so many reasons beyond the money,” he says. “They have the experience to guide you strategically and make you face reality. And that’s why Bill is invaluable. For us, no topic is off the table. We don’t have a scheduled meeting. We might talk by phone, or Bill might drop by since he’s close.” Borrmann can also expect to hear from Michael Mussallem, with whom he’s paired as well.
Mazzo says he assigns his direct reports to additional board members once they’re given new responsibilities, so they can acquire new knowledge. Jane Rady, 59, for example, previously had Borrmann’s job and, like him, was partnered with Bill Link. Since late 2006 she’s been executive vice president of strategy and corporate development and has an added partner in director Deborah J. Neff, 55, president and CEO of Pathwork Diagnostics in Sunnyvale, California, who joined AMO’s board in 2003.
Neff says, “My experience has been in building and growing businesses based on innovation, and that’s where I add value. To me, the partnering program is very enlightening and useful in both directions. I get a depth of knowledge in this company that very few board members get the opportunity to tap, without crossing boundaries. I never feel I’m blurting stuff I’m not supposed to. Here I have a link right into the company on a management level, and I think it makes for richer discussions with my fellow directors, who also have the same opportunity.” Neff and Rady meet primarily by phone, since Neff is based in Northern California, but they schedule extra in-person time before board meetings at AMO.
“Deb’s got the beauty of both a large- and small-company perspective,” says Rady, pointing to Neff’s experience as a former worldwide division president at medical-technology giant Becton Dickinson. “I’ve been able to spend considerable time on M&A components of our business with her, and that advice has been invaluable. She’s provided great perspective on acquisitions and how we’re growing. She can be an advocate on touchy ideas that we present to the rest of the board.”
Rady says she’s been lucky to have relationships with two AMO directors, because they’ve allowed her to get the right advice at the right time in the life cycles of the company and her own career. “What was great about my relationship with Bill was, we were in the early days of the spin-off and our pipeline was meager,” she explains. “We had to be very frugal and very smart. With Deb, we’re setting our sights on larger properties, and she’s advising me in a way that fits those priorities.”
Rady points out that AMO’s director-executive relationship is much different from the pairings you occasionally see on boards, where executives work with directors to make committee presentations but little more. “The conventional design is a little stiffer,” she says, adding that the informality of her company’s arrangement sharpens any presentations and discussions with the rest of the board, at least from her perspective.
Mazzo says he’s tried to impose few rules on the program, simply because he wasn’t sure at the outset that it would succeed. “This seemed like a good idea that could make us work better and faster. I didn’t know if it was going to last a month or a year. So far it’s lasted five years, and I don’t know if it will last five more,” he says. “But that it’s worked isn’t a credit to me. It’s a credit to the board and my direct reports. They’ve made it work, not me.”
How does he know the teams are working?
Mazzo says he’ll discuss the relationships formally in his annual one-on-ones with directors and executives, but notes that a CEO who can’t pick up day-to-day cues about the effectiveness of these relationships isn’t judging the talent correctly. He never asks what the partners talk about, he says, but it’s “unusual” if one partner doesn’t bring up the other in conversation with him. “So far I’ve never had either a director or one of my direct reports come to me and say, ‘Break us up. It’s not working.’”
Neff thinks good chemistry between director and executive is critical. “Without it, they don’t have the natural inclination to reach out and make the call on even the smallest issue,” she says. “In fact, the relationship shouldn’t require some huge issue or problem to keep going. There’s an aspect of ‘Let’s just touch base’ that’s necessary to make it work.”
Are there any no-nos? Mazzo probably puts it best: “Your [director] isn’t your priest. My executives and my directors know that each other’s time is at a premium, so the discussion content has to be important in the way they define that.”
Because management and the board develop more direct ways of communicating as a result of their partnerships, they tend to operate pretty effectively in times of crisis. This spills over into how well board members work together too. AMO announced a major recall of a market-leading contact-lens solution early last year, after an outbreak of infections. Mazzo recalls, “Bill Link and [audit committee chief] Jim Rollans were able to take action in a way that, in terms of sheer brainstorming, I don’t think they would have been able to if they didn’t have the depth of knowledge gained from working closely with their respective management partners.”
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Adds Link: “There is no question that there are relatively low boundaries between the directors and the senior team. There is no sense that senior-team members are off-limits if they’re outside our partner activity. To Jim [Mazzo]’s credit, he encourages direct interaction. I think it’s one of the reasons I and my colleagues on the board feel fully informed and don’t feel that the information we get regarding the company is massaged or managed. Hopefully we, in turn, are engaged and can pitch in when a special need arises.”
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Take Your Partners |
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| Director | Executive |
| Christopher G. Chavez, 52 President of the Neuromodulation Division, St. Jude Medical Inc. |
Angelo Rago, 44 Senior Vice President of Global Customer Services |
| Elizabeth H. Davila, 63 Former Chairman and CEO, VISX Inc. |
Richard A. Meier, 48 President and COO |
| Daniel Heinrich, 51 CFO, Clorox Co. |
Michael J. Lambert, 46 CFO |
| William J. Link, 62 Co-founder and Managing Director, Versant Ventures |
Jane E. Rady, 59 Executive Vice President of Strategy and Corporate Development Leonard R. Borrmann, 49 Executive Vice President of Research and Development |
| Mason Morfit, 32 Partner, ValueAct Capital Partners |
Sheree Aronson, 52 Corporate Vice President of Corporate Communications, Investor Relations, and Market Research |
| Michael A. Mussallem, 54 Chairman and CEO, Edwards Lifesciences |
Francine Meza, 51 Corp. Corporate Vice President of Human Resources Aimee Weisner, 38 Executive Vice President of Administration and General Counsel Leonard R. Borrmann, 49 Executive Vice President of Research and Development |
| Deborah J. Neff, 55 President and CEO, Pathwork Diagnostics |
Jane E. Rady, 59 Executive Vice President of Strategy and Corporate Development |
| Robert J. Palmisano, 63 Former CEO, IntraLase Corp. |
Doug Post, 56 Executive Vice President and President of the Corneal Refractive Group C. Russell Trenary III, 50 Executive Vice President and President of the Cataract Refractive Group |
| James O. Rollans, 65 Retired President and CEO, Fluor Signature Services |
Richard A. Meier, 48 President and COO Sheree Aronson, 52 Corporate Vice President of Corporate Communications, Investor Relations, and Market Research |
Mazzo is the first to admit that this kind of director-executive partnering might not work everywhere. He counts off the reasons: “I think we have some advantages as a small board. I can’t see 15- or 16-member boards making this work as informally as we do, and I think informality is a big reason it does work. At that size, it nearly becomes a structure unto itself. Also, because we’re relatively new as an independent company, it’s something we were able to launch at the start, and now it’s a part of us. It might not be so easy to do at a major conglomerate that’s been doing things differently up until now.”
He points out another important reason director-executive partnering may not travel well. In view of the massive board workloads brought on by Sarbanes-Oxley, requiring directors to spend time with executives just might be the one item in the job description that persuades a candidate to turn down a board seat. “We don’t pay our directors extra for this. Not that the money matters all that much, but it’s clear that it’s a time-consuming task we don’t compensate for,” Mazzo says. “I told everybody that up front, and they still joined. But that’s not going to happen everyplace.”
It could be that he’s underestimating directors. The partnering is “part of a psychic reward system that most directors don’t get,” says Theodore L. Dysart, a managing partner at recruiter Heidrick & Struggles. “Directors are tremendously talented people, and if you can say at the outset that there’s an established system to learn the company faster and give them the opportunity to spot talent within the organization at levels below where most directors get to go, then you’re giving them a broader preparation for succession planning, which is part of their job.”
Of course, the secret to making it work is a CEO who doesn’t feel the need to be involved in what at many companies could be career-threatening discussions.
