Over recent years, there has been increasingly wide acceptance that good governance practices can benefit all organisations, not just larger ones such as ASX listed companies and multinationals. An example of this acknowledgement is the mandatory application of the ACNC Corporate Governance principles for charities.
Unfortunately, for many time poor Boards and CEOs, the adoption of governance principles and frameworks has led to a compliance based approach whereby components of good governance become a compliance "tick the box" exercise. The result of this is that often, the potential benefits of applying strong governance is not realised.
A catalyst for positive change
Although the cause of this compliance based approach is different for each organisation, applying strategy development principles to the work of the Board itself can be the catalyst for positive changes in governance practices. A Board is taking the first steps towards increased Board effectiveness simply by asking itself strategic questions of where is the Board now, where do we want the Board to go, and how are we going to get there.
By asking these questions, a Board will often determine that the collective wisdom and experience of the Board can have a significant positive impact in the development of strategy, risk management and in fulfilling the its’ monitoring obligations as the ultimate protector of the organisation.
This combined realisation of how much a Board has to offer, coupled with the weight of its fiduciary obligation to the organisation, motivates the Board to implement many of the following activities:
- Developing a clear understanding of the role of the Board and the role of management
- Effectively monitoring of financial performance and financial plans including budgets by adopting a questioning mindset coupled with a desire to more clearly understand the financial reports
- Actively ensuring appropriate organisational policies and controls exist and are operating
- Implementing an appropriately scaled approach to strategy development, planning and evaluation
- Adopting a functional risk management process and risk monitoring and risk considerations become an ongoing part of Board and management discussions and decision making
- Developing a structured and considered process for supporting the CEO and evaluating CEO performance
- Developing, communicating and monitoring organisation and management performance KPIs
- Implementing a Board evaluation process.
The benefits to the organisation of implementing these processes are clearly evident and well accepted.
In developing a strategic plan for the Board itself, the need for skills development, improved induction processes and streamlining meeting activities and decision making processes become priorities. These areas for improvement can become KPIs for the Board in order to monitor and evaluate its own performance, there by commencing a continuous improvement process.
In many ways, a Board that firstly focuses on itself results in a win / win for both the organisation and the Board.