Step 1 – Define and agree the board’s role

Nine Steps to Effective Governance

The governance process

Governance is the process by which the board:

sets strategic direction and priorities
sets policies and management performance expectations
characterises and manages risk
monitors and evaluates organisational achievements.

At the heart of a board’s challenge is the same basic requirement: to act on behalf of ‘owners’ to translate their wishes into organisational performance.

Boards in all sectors – private, public and non-profit – develop and use a board charter as the basis for defining their governance principles and practices.
The board is a layer of ownership down not a layer of management up.
The board is focused on creating the future not minding the shop.

Other aspects of governance

Governance is:

servant leadership – described as “…an insistent motivating force…that obliges the institution to move toward distinction as a servant” – Robert Greenleaf
not management – to see the organisation is well managed without doing the managing itself
accountability to the organisation – not to individual stakeholders.

The board’s job is to govern – providing direction and control. The chief executive’s job is to manage operations.

The key tasks of the board are to:

define the organisation’s purpose, direction and priorities (Step 1)
develop a governance policy ‘umbrella’ (Step 1)
specify key outcomes and approve the availability of resources (Step 4)
appoint, support, evaluate and reward the chief executive (Step 5)
establish a framework for assessing and mitigating risk (Step 6)
regularly scan the environment beyond the organisation (Step 6)
gain owners’ and other stakeholders’ input into determining direction and goals, and maintain communication with them (Step 6)
ensure the board complies with statutory and contractual requirements and with the board’s policies (Step 6)
set standards for and evaluate the board’s performance (Step 7)
ensure there is appropriate succession planning (Step 8).

Governing structures and the legal and accountability framework

A variety of structures can provide good governance but they all have the same key principles:

Clear accountability – the responsibilities of different roles in the organisation are defined with clear lines of accountability. This is especially important if directors also act in other capacities
Clarity in staff accountability to the board
Collective and individual responsibilities for board members.

The role of the chair

The chair is not ‘the boss’.

The chair’s primary role is to provide assurance of the board’s governance integrity via the effective management of governance processes. In particular, the chair’s role is to:

ensure consistency with internal and external rules and applicable law
chair meetings with the commonly accepted power of the position
ensure meeting discussion focuses on the issues that clearly belong to the board
ensure board discussions are timely, fair, orderly, thorough, efficient and focused
encourage full participation of directors
observe a recognised ‘rules of order’ process for board discussion
take steps to resolve unproductive conflict
ensure the board charter is maintained and up to date
act consistently with agreed governance policies and processes
avoid making independent operational decisions which are the prerogative of the chief executive
not directly supervise or direct the chief executive other than to provide support.

The chair should know exactly what issues are to be discussed at the meeting, in what order, and what outcomes are sought from each item.

Policy leadership

Many organisations rely on their constitutions for guidance on governance. This is a starting point but a constitution is not governance policy.

A policy is an agreed basis for action, made ahead of time

It is generally accepted that the role of any governing board is to determine and monitor policy. It is the job of management to implement that policy.

It is not the board’s responsibility to adopt or approve operational policies.

The four areas of policy based on the work of governance theorist John Carver

Governance Process policies – define the scope of the board’s job and design its operating processes

Board-Chief Executive Linkage policies – the board’s delegation to the chief executive and the methods to be applied in determining their effectiveness

Executive Limitation policies – the limits the board places on the chief executive (and by implication other staff and volunteers)

Ends policies/Results to be achieved – the organisation’s fundamental reason for being and the outcomes to be achieved.