Achieving excellence in governance is challenging, and board members often struggle to balance these high standards with fostering positive teamwork, especially given the diverse and demanding nature of organisations. Best effective governance practices do evolve and by applying a principled model or framework, boards are better equipped to face this changing world.
This article by BoardPro partner Sport New Zealand, explores nine steps to creating an effective governance model.
The first step to developing a strong governance model is to get the right people on board. Without the right skills and attributes present among its directors, any board will struggle to deliver good corporate governance.
Once the right people are on board, there needs to be agreement about exactly what the board’s roles and responsibilities are and what should be delegated to management. Once agreed, the roles, responsibilities and delegations should be written as policies, perhaps as part of a more comprehensive board charter.
Once the board is in place and there is agreement about its function, a chief executive will need to be employed to carry out the operational work of the organisation. Recruitment should be carefully carried out to ensure the right fit. Once in place, the chief executive needs to know what his or her authorities are and what the board expects should be achieved. Clearly defined delegation policies provide the chief executive with the confidence that he or she can apply their decision making skills and authority without having to ask permission from the board to do the job they are employed to do. The chief executive should receive regular performance feedback based on objective criteria.
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The chief executive is employed to achieve governance outcomes rather than to merely be busy doing ‘things’. A statement of strategic direction or strategic plan makes clear what is to be achieved. Good governance plans should be written in outcomes language as the basis for effective monitoring and evaluation, and as the basis for measuring organisational and chief executive effectiveness.
The board meeting is the place where a board does most of its work. Board meetings should matter. They should be well run and should focus on the board’s job, not the CEO’s. Meetings should be predominantly forward-looking and offer satisfaction to directors, who can leave the meeting knowing they have added value as the result of applying their experience, expertise and wisdom.
Even the most experienced boards and directors can find themselves drifting away from governing responsibilities and becoming involved in management matters. It is imperative the board stays on top of its role. Determining governance structure, monitoring and assessment of organisational effectiveness is the bread and butter of board meetings. However, these functions should not dominate the meetings. Time should be spent at every board meeting looking ahead; a portion of every board meeting should be the equivalent of a mini strategic retreat.
A work plan ensures that directors view their role as continuous rather than episodic and involves making timely provision for all the tasks and functions that the board must address over the course of the governing year. Boards in all sectors are now developing board annual work plans.
Increasingly boards in all sectors are undertaking regular performance assessment. Often guided by an independent specialist, this process also includes individual director assessments based on peer and self-performance feedback.
Step 9 closes the loop. Recognising that most boards have a regular infusion of new members bringing new skills and experience to their considerations, it is imperative that all newly appointed directors are provided with an effective induction into the affairs of the board and the organisation.