Governance Matters!

Boards of Directors play a crucial role in the health and success of any organization, whether that be in the not-for-profit, public, or private sector.  Outside of being an operating or managing board, where individuals are tasked not just with setting direction but actually getting their hands dirty carrying out day-to-day operational duties, the role of board directors can be summarized at a very high level as providing/supporting long-term vision for their organization, ensuring oversight to the actions and health of the organization, and providing perspectives due to diversity of experiences, skill sets and relationships beyond what any one person would possess.  These expectations can be summarized in three words - Foresight, Oversight and Insight.  Simply said but often far harder to accomplish in practice.

Over my 25+ year leadership career, followed up by another 12+ years in consulting to organizations and boards, I have experienced first-hand how difficult governance can be and how easily a board can go from high performing to significant dysfunction (and back again).  These challenges in governance can lead to a variety of negative outcomes including but not limited to:

• Board level conflict resulting in lack of effectiveness in decision-making even to the point of paralysis;
• Board level conflict that negatively impacts board member recruitment and retention;
• Dysfunctional relationship with CEO and operational leadership;
• Reputational damage with key stakeholders and public in general;
• Negative impacts to financial health and sustainability; and
• Legal challenges up to and including lawsuits between board members and dissolution of an organization.

This is by no means an exhaustive list of negative consequences that can arise from not identifying, paying attention to, and actively managing core governance issues.  

What then are some of the core issues that an organization and Board of Directors needs to attend to?  My suggestions are noted below.

1. Governance Philosophy

An organization has to be clear about what governance means within their own context.  Even if recruits to a board have had previous governance experience that may not directly or appropriately translate to the next governance role.  Moreover, to be truly effective an understanding and appreciation of governance expectations must go well beyond well-articulated written statements and policies.  There must be strong, ongoing efforts to reinforce expectations - and boundaries - of the governance roles for the particular organization.  If the expectations of a board are to provide foresight, oversight and insight what are the appropriate ways in which that is supposed to happen?  When does the board (or board member) start to become too operational and effectively take over or inhibit operational duties?  How does the Board make decisions?  How does the Board evaluate its performance, either collectively or individually?

2. Recruitment and Selection of Board members

One of the greatest challenges that any board faces is that of recruitment and selection of new board members.  Too often proxies for selection of board members can overtake the hard work necessary to identify key attitudes and skill sets necessary to be an effective board director.  What are some of these proxies?  In some cases, it can simply be willingness to serve on the board!  Getting skilled, competent board members is an ever-increasing challenge for many organizations.  The desire to serve, sometimes in a voluntary capacity, against a backdrop of not insignificant time commitments and public/legal expectations, can have many qualified people opt out of a governance opportunity.  In other cases, an organization looks simply at a resume, reputation, or existing relationships (friendships with other board members) as suitable reasons (excuses) to say yes to a new board member.  

Boards have a duty to ensure they are bringing on the right people with the right skills that will adhere to an established governance philosophy; in support of working at the right level of decision-making; with the understanding and intention of acting with a duty of care, loyalty and obedience to the board/ organization; and, with the attitude and commitment that the existing board believes it demonstrates and expects of a new board member.

3. Clarity of Governance Roles

So much to say here and certainly related to the foundations discussed above.  The board needs to be clear about how governance philosophy translates into practical governance work. How does the board carry out its role of foresight?  How does the board contribute to strategy?  Does it build and communicate a set of strategic directions to operational leadership or does it receive and react to what is proposed by operational leadership?  Or is there some balance between those options?  

How does the board exercise oversight?  Does it engage in deep, even supervisory tactics, on a regular basis and even set expectations on remedial actions? Does it direct operational leadership via board membership on a range of committees?  Does it expect and rely solely on what operational leadership provides as updates on progress on strategic directions?  

As board members are usually or hopefully recruited based on their past experiences and or current skills sets (e.g., accountant, lawyer) what are the expectations for how those skill sets are used?  There is always a risk - and even a danger - that an individual or the organization confuse technical skills and competence with how those skills should be used in a way that supports the role of governance.  All involved need to remind themselves that a board member should provide insight, perspectives and ask salient questions that support governance excellence first and foremost.  They have not been recruited to fulfill an operational requirement.  

4. CEO Relationship

More than a few paragraphs are needed to address the board's relationship with its CEO and this could easily be a topic for its own blog or book!  Suffice it to say that the topics already discussed set context for what a board needs in a CEO, how they should go about recruiting for this position and how they manage this relationship going forward.  Clarity of responsibilities, mandate and expectations for the CEO are critical topics for the board to align on in order to provide appropriate direction and support for their most important employee.  

Like any relationship - personal or professional - there needs to be recognition that clarity, communication and mutual commitment are key to success in this partnership.  It is unlikely that every aspect of the relationship can be pre-defined or that every possible scenario that the organization encounters can be anticipated with complete certainty.  The board must be very clear about the nature of the relationship they want and need with their CEO.  How does the Board manage or create trust with their CEO?  What can the Board do to support effective and transparent communication with their CEO?  How will the Board effectively and appropriately monitor and evaluate CEO performance?  What role will the Board take in supporting and developing their CEO?

5. Board Development

The cliche phrase of "the strengths that got you here won't get you there" applies directly to governance excellence.  A board should be as vigilant about its own performance and development as it should be about the performance and development of its CEO and the organization as a whole. Unfortunately, all too often, little attention is paid to supporting board and board member development.  This begins with the quality of orientation and onboarding.  Efforts here can range from one extreme to another - from "welcome aboard" and "learn on the job" to days of being overwhelmed by written policy manuals and strategic plans.  

Beyond this initial phase of learning, well-developed boards should look to integrate learning about the organization's environment aligned with annual and longer-term objectives being pursued. In addition, the board should regularly touch base on their agreed governance framework.  This is not just work for new board members but can act as reinforcement for all directors.  This can include clarifying and reinforcing roles and responsibilities of a board member, the role of the Chair and other officers, and the code of conduct by which the board manages itself.

Finally, there is also some reason for the board to focus on how to enhance its teamwork.  In reality, the board is, in fact, a team like any other in the organization.  Like any other team, there is space and need to understand and leverage the diversity of the team, attend to development and improvement of team skills, and otherwise enhance team capacity in support of board and organizational effectiveness.  This targeted development effort also suggests some reasonable and honest effort at evaluation of board effectiveness.  

In Summary

Governance can be a rewarding endeavor for many if expectations are understood and if necessary diligence and energy are invested on an ongoing basis.  Given the importance of good governance to the success of the organization as a whole, the responsibility for doing it well cannot be underestimated.  If done well, the effort need not be overly burdensome either.  The cost of not taking governance seriously?  Let's just say that the annals of business magazines and documentaries are filled with many case studies of lessons that should be learned with 20/20 hindsight.

It's all about leadership and in this case it is about leadership at the governance level. 

_______________________________________________________

Greg Hadubiak, MHSA, FACHE, CEC, PCC

President & Founder - BreakPoint Solutions

3rd Generation Canadian Ukrainian

gregh@breakpoint.solutions 

www.breakpoint.solutions 

780-250-2543

Helping leaders realize their strengths and enabling organizations to achieve their potential through the application of my leadership experience and coaching skills. I act as a point of leverage for my clients. I AM their Force Multiplier.