From CEO to Colleague: The FIP (Formerly Important Person) Challenge

The FIP is a “Formerly Important Person”. This person is often a CEO who has just left their role where they were an imperial CEO. A leader who didn’t have high EQ or whose role enabled their ego to be unchecked for too long.

While this FIP is an outlier example, many of us have experienced a version of this behavioral phenomenon.

I’m speaking about what you do when you have someone on the board who’s used to being in command and control. The FIP is used to a hierarchical nature where anything he/she says is considered absolute/incontrovertible and should be immediately acted on. It is very hard for the Formerly Important Person to make the transition to learn how to be a good board member.

Board members after all are essentially a group of peers. There isn’t any one person whose voice is more important than the others.

Board members are a group of peers. There isn’t any one person whose voice is more important. It is the role of the chairman or the lead independent director to ensure that everybody’s voice is heard.

It is a unique and learned skill to learn how to engage properly as a board member. This means you don’t give assignments to people. Management operates the company. The board does not.

We have to constantly help Formerly Important People (FIP’s) who are in their first board role to make this adjustment. Often helping to remind them of what it was like for them when a board member overstepped and didn’t just do board oversight but overstepped into operational areas.

FIP’s also aren’t used to actually doing work themselves. They’re used to a staff of minions. Shifting the mindset that they are now supposed to be doing things for the company. They have to make this adjustment.

After all, if you think about “the role of the Director” it is to be a resource, an asset and an accelerant to the business.

The key thing to being a great board member is to invest the time, build respect and credibility in your relationships. The penultimate goal is to become a true thought partner to the CEO. When you become the person that the CEO calls on the commute home, or the commute in with a coffee, or on a Saturday when they are out doing an errand and has a little time and wants to bounce an idea off somebody as a sounding board. If you are that person, you really have achieved the role of a thought partner.

Formerly Important People are used to success. They’re used to metrics, and they are used to outcomes. We have to educate the Formerly Important Person that now the metric of success is actively listening and learning, contributing only the one or two key nuggets that will move the discussion forward. They are there to make a contribution to the business judgment the board as a whole will reach.

There are a couple of reasons why you add a former CEO (FIP.) The reasons are frequently that that person has experienced the things that the CEO will face. The goal is to help the CEO grow and benefit from the FIPs experience. This can include things like going through an IPO, coaching for the public company earnings call, restructuring, post-merger integration, looking at organizational design and evaluating what models are most efficient – is it a matrix? Is it geographic? Is it business unit, etc.? These are some examples of things the FIP likely has experience on and where they can offer mentorship and coaching.

Their wisdom and experience is valuable. But it must be delivered in a way that the CEO can absorb it, not in the way that the FIP wants to deliver it. The FIP has to change how they measure success. It is often a challenge for the chairman or the lead independent director to help the FIP in this transition of how to weave connectivity with the rest of the board. They need to learn how to be a team player, not the captain of the team. The CEO is used to being the captain of the team. The chairman or lead independent director facilitates and maximizes the contribution and impact from ALL the board members.

Relationship capital is another key reason people add a FIP (former CEO). Presumably, the FIP has a broad, global high profile, high-level set of relationships that they bring to the company.

As a board member I believe it’s very important to think of your “relationship capital” as one of the assets that you try to offer to the CEO and leadership team to see if this relationship capital will help move the business forward.

It’s always important to remind oneself of the actual role of the board. You have really only three basic duties:

  1. You have a “duty of care” to be thoughtful, engaged, informed with objective outside information.
  2. “Duty of loyalty” to the board and not self-interested.
  3. Lastly, most importantly, business judgment, based on being loyal to the company, and having carefully gathered independent information from expert resources (be they compensation, consultants, accountants, attorneys, etc.), you form a business judgment.

There’s nothing in this description above for self-aggrandizement, ego, or self-promotion. This is a hard transition for the FIP. They are used to a lot of attention.

When selecting the FIP for your board, one of the big watchouts is to be sure that truly appreciate the nature of the role and the shift. Similar to the corporate hiring wisdom, you don’t want to be the first company to hire somebody who spent their entire career at IBM or Proctor & Gamble and when they leave that they can’t adjust to a new culture / they fail. Perhaps the same is true of an FIP … The first board role for the FIP is a tough adjustment for them.

Also, after serving on 37 public boards, I have observed a surprising statistical fact…I have seen three Machiavellian assassinations. Two were successful. One was blocked. This is a situation where the FIP wasn’t happy in their retirement role. They decided maybe they would do a better job than the CEO and orchestrated a coup d’état.

Don’t put somebody on the board who might get bored and decide they want your job.

Most importantly, do your diligence – is your FIP generous hearted? Will they share their relationship capital? In my experience less than 5% of people are generous hearted and truly share their relationship capital. They keep it for themselves.

Secondly, FIP’s are always very worried about their personal brand and reputation. They worked a career to build their brand and reputation. They treasure it, and rightly so. The reason why you brought the FIP is because of their big brand and reputation. Consequently, when something goes wrong (and in all corporations eventually something goes wrong) the FIP often gets loose in the saddle, concerned about their personal reputation. They resign when the going gets tough and there’s a critical problem in the company. They don’t want to be embarrassed. They don’t want to look like they did a bad job. They’re not used to being part of a team. They have to help shoulder the tough issues of a board crises whether it’s a financial restatement, a cultural issue like sexual misconduct, or a financial debacle like the zone of insolvency or any other catastrophe – a major breach, i.e. cyber breach, Equifax … whatever it might be). The FIP’s are often the first people out the door.

Remember you need your board members for the hard times. In the good times management is leading the company, things are going well, and you need board members for oversight, to help give thoughtful guidance and perhaps help challenge you with different logic and thinking that might not have occurred to you as you go to particular growth phase of the company. These are the normal table stakes of a well run board.

But the board is really needed when something goes wrong. That’s what you need wisdom, the pattern recognition, the scar tissue, and the commitment and courage.

Let’s say there’s a catastrophe, a major safety issue. How do you handle this? How open and forthright are you? How early in the cycle do you disclose things? How do you message things effectively? How do you deal with the regulators? How are you getting through the crisis?

This is when you need your FIP, and all your board members. Are these people your life boat picks? Will they pick a up the paddle and row with you when the seas get rough? Do you want them in the foxhole with you? Are they courageous?

Courage is hard to find. Courage is a rare commodity.

When you bring a board member on, you’re looking for somebody who is courageous, has character, has values like yours, and is oriented to help management as opposed to being fault finders.

FIP’s are often used to finding fault. Great leaders are not hyper critical. They guide with Socratic questioning, they motivate, and the inspire. However, there are many leaders who lead with fear, who are critical by nature and fault finders. If this is part of somebody’s persona, this is a very negative attribute to figure out early in the interview process. You want to avoid introducing it into your boardroom and being put in the position of having to constantly shield management because coming before the board inspires fear and anxiety, as opposed to an exciting, motivational opportunity to learn and grow.

So how do we help the FIP in their transition to becoming a good / great board member? This is a challenge for the chairman and lead independent director. First of all, you have to coach them privately. Help them understand the different role and actively assess with them if they are up for the learning and the change. It’s a new phase in your career. An opportunity for them to learn and grow. It’s an opportunity for them to mentor up, as well as mentor down. There’s an opportunity to learn from their peers if they are open to building the fabric of connection and weaving those relationships. Their peers are bright and have something they can learn from too.

Out of any collection of 10 to 12 people you get a multitude of personas. You get the cheerleader, the faultfinding, the talker, the egoist, etc. Figure out what is the persona of your FIP. What are their positive behaviors that you might nurture, and bring forward that would be most helpful. Have this conversation in private and be direct. It will be a shock if the FIP is not used to getting critical feedback. They haven’t had much critical feedback in a while. They need the direct feedback, and if they can’t really embrace the areas for change/improvement, it’s better to find out early and graciously create an off boarding pathway.

Ultimately what you’re trying to do is create a team. You want to motivate these 10 or 12 individuals and get them to process as a team, motivate them and inspire them to give their best for the management of the company and to do the proper oversight for shareholders in a way that is constructive and valuable to the enterprise. This is hard to do well but it’s certainly incredibly valuable. There’s a huge force multiplier when you pull this off.As FIPs transition into their new roles, the yardsticks of success shift. Direct impact, while still valuable, takes a back seat to a new set of competencies. Active listening and learning become paramount. FIPs must be sponges for information, absorbing the diverse perspectives of fellow board members and management alike. They need to cultivate a genuine curiosity, asking insightful questions and actively seeking out new viewpoints. This isn’t just about gathering data; it’s about building a deep understanding of the complexities at play.

But knowledge alone isn’t enough. FIPs must also master the art of concise contribution. Their comments, while impactful, should be laser-focused. They need to hone their ability to distill complex thoughts into clear, actionable insights that move discussions forward. Every contribution should add value, propelling the board towards informed, collective decision-making.

Finally, success hinges on building trust and respect. FIPs earn their place at the table not through forceful pronouncements, but through collaborative engagement. They must demonstrate a genuine willingness to work with others, fostering open communication and building bridges across the boardroom. By actively seeking input, respecting diverse viewpoints, and consistently delivering valuable contributions, FIPs can forge strong bonds with their peers and management. Their goal should be earning trust and respect; this is the true hallmarks of success in their new roles.

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