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Thursday, March 2, 2017

Good Leadership Requires Good Governance - Redux

It's often been said, in one form or another, as goes the leader so goes the company.  Rest assured this is not going to be another blog/commentary about Donald Trump, Justin Trudeau or any other potentially polarizing public figure.  My focus continues to be on the impact that leadership - for good or bad - has on the culture and success of an organization.  But as recent events in my own community have proven out again (http://edmontonjournal.com/news/local-news/a-cross-to-bear-edmonton-catholic-school-trustees-are-plagued-by-conflicts-secrecy-and-questionable-conduct), often times its not just about the President/CEO and their leadership philosophy that can have impact on organizational functioning and success.  For very many organizations the quality and effectiveness of a Board of Directors begins to the set the tone from the very top.

I'm not sure how many of us appreciate the role that Boards of Directors play in setting direction for large organizations and helping it achieve those objectives.  In most circumstances public and media focus falls on a leader - a President, a CEO or other top executive.  Ultimately, however, a well functioning Board is fundamental to the success of an organization through their decisions - not the least of which is their selection of THE senior operational leader.  The quality of their decision making and their commitment to their governance task can have wide-ranging impact.

I have worked with a variety of boards in my 25 year career.  I have worked with good boards and not so good boards.  I have seen them lose their way in a variety of circumstances including being burdened with an ineffective Chair, a disruptive board member, uncommitted board members, boards that get too involved in operations, and boards that simply perform a rubber stamp role for what senior leadership wants to get done.  Ineffective governance can severely compromise and inhibit the ability of an organization to succeed and fulfill its mandate.

Sometimes boards don't even understand what their key responsibilities are.  This lack of understanding or confusion can often arise from the process by which a person is recruited to the board or the quality of the orientation they receive upon becoming a member.  Those boards that function on the basis of being elected have an additional potential challenge of individual "platforms" (e.g., axes to grind) entering into the equation.

Too often board members can be selected on criteria that may have nothing to do with kinds of skills that a board requires to fulfill its functions - they are part of the same personal network as existing board members, they are prominent community members, they are politically connected, they are major donors, and so on and so forth.  None of these factors necessarily make for a good board member.  A poor selection process can then be compounded by inadequate orientation to the role of the board.  In that circumstance, an individual board member has to either rely on the skills they bring to the table from their life outside of the board room, the examples set by their fellow board members (for good or bad), or they may be left to take what orientation or guidance they might get from senior leadership of the organization.  Not the ideal recipe for success.

So what's the starting point for good governance?  The first task is clearly understanding what the roles of the board are.  First and foremost a board needs to focus on setting direction - making clear choices on an organization's vision, mission, values and strategic directions.  Failure to fully engage in this first set of major responsibilities means that an organization can easily drift from its fundamental purposes.  Failure to develop cohesion around these fundamental building blocks also and inevitably leads to conflict between board members that impacts on organizational performance and public confidence.  Moreover, if there is no consensus among the Board as to vision, mission, values and strategic directions how can senior operational leadership be effectively guided or held accountable for performance? 

Second, a board is required to exercise oversight on organizational performance.  It is important here to distinguish oversight for organizational performance from managing the organization.  Neither the board as a whole nor individual board members (including the Chair) should get involved in managing the organization.  The temptation to direct operations is intense, especially for those board members who lead and manage significant entities outside of the organization for which they are a board member. The board needs to remember that they have engaged operational leaders - the CEO in particular - to manage operational matters.  Ostensibly, they have utilized a robust process for recruitment and selection, have followed up with appropriate performance reviews and feedback, and have trust in the CEO and other management personnel to achieve the Board-established strategic directions.  If the Board lacks such confidence then it has erred in selection, has erred in communicating expectations, or perhaps has not been engaged in managing performance at all.  Ultimately, if that confidence erodes the choice of the Board is to more clearly communicate its expectations or remove the CEO.  The choices available to the Board should not include becoming more engaged in operational decision-making.

That being said, a Board MUST exercise appropriate oversight.  It must be clear on its expectations and establish robust and objective mechanisms by which to evaluate CEO performance on achievement of the organization's vision and strategic directions.  Moreover, a Board would do well to evaluate not only outcomes but also - at a high level - how those outcomes were achieved.  The Board has a key role in ensuring that the values of the organization are fostered and upheld.  Every effort should be made to ensure that objective, quantifiable reports on performance are made available to the Board on a regular basis.  In this regard, the Board should avail itself of a variety of forms of feedback to evaluate performance and success in achieving objectives. 

Finally, a Board manages its direction setting accountability, its oversight responsibility, and its own functions by establishing policy.  These policies must clearly distinguish Board function from management function.  Just as important, they must describe and detail how the Board itself shall function - role of Chair and other officers of the Board, how decisions will be made, what committee structures if any will be utilized, and so forth.  This is one distinct way to ensure clarity of roles and to diminish and manage potential conflicts.

As can be imagined, it is easy for Boards to become involved in non-Board activities and tasks.  Board members can easily neglect the very real work that is required to ensure proper Board functioning.   If this high-level, strategic work is not done or is done poorly, there will be little or no foundation for success for the organization as a whole. 

Boards have very real responsibilities.  The tasks they are engaged in cannot be minimized or trivialized.  We have seen too many organizational failures in recent years which can be traced back to governance failures.  Complacency about board performance is not an option.  However, effective governance does not mean becoming more engaged in operational leadership.  Nor is it to establish ever more controls and bureaucracy.  Boards need to do very real work in understanding their roles and responsibilities, establish proper structures to do their work, recruit and retain good members, and set the tone for the values and ethics that will guide the organization.

To achieve operational excellence there must be a foundation of governance excellence.  Good leadership requires good governance.
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Greg Hadubiak, MHSA, FACHE, CEC, PCC
Executive Coach/Senior Consultant
hadubiak@wmc.ca

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.


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