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
- 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.
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.
Things the chair should know
- The board’s policies and delegations
- Standard meeting rules
- How to get the best out of the boardroom team
- Their own strengths and weaknesses
- Agenda detail and desired meeting outcomes
- How to deal with conflicting views
- When to close off a discussion
- How to handle maverick directors
- How to guide and develop the CEO.