Governments provide the context for governance by enacting legislation which, usually in exchange for limited liability status, sets out responsibilities that drive aspects of governance such as accountability, direction, oversight and power. Naturally therefore, boards tend to focus on achieving these compliance requirements. At the same time however, effective governance is concerned fundamentally with the enhancement of business performance to effect sustained high value creation. This perspective demands more of boards than is often given to the tasks of establishing mission, values and vision, and setting strategy and structure.
At SUCCEED we believe a governance framework that is fit for the 2020s and will support an effective Board has these elements:
The Framework also has three key features that differentiate it:
- It is arranged so that there is a flow
- Each element overlaps with the element next to it and across the risk and culture environment with the others, informing or impacting them
- It is readily adaptable to the needs of your type of organisation and locally-mandated requirements
In outline, here's how to apply the Framework in practice:
First, the Board defines its mechanism for governance that guides it first to set and communicate direction through strategy and vision, and allocate resources to the creation of a capability to operate the organisation. This encompasses recruiting a CEO and establishing the parameters of a configuration of people, process and technology for the realisation of benefits that accomplish the strategic goal.
Next, the Board collaborates with the Executives to understand and monitor the chosen tactics and operational arrangements to implement the strategy. It also assures itself about the processes underlying compliance and reporting.
Then, through its approach to performance and in its relationships with all stakeholders, the Board ensures that their expectations are addressed. All of this impacts and is impacted by the organisation’s risk and culture environment. The governance mechanism may be adjusted in real time as required.
For you as a Chair, adopting a governance framework such as this for your organisation brings immediate benefits:
- It provides a basis and reference point for structuring and focusing collaboration with the rest of the Board, the CEO and other stakeholders
- It facilitates:
- assessment of your Board’s effectiveness (in conjunction with the Framework’s accompanying Maturity Matrix)
- precise identification of areas to address
- dynamic refinement of the organisation’s governance mechanism.
The starting point in the Framework, the mechanism, is crucial, and in the next blog, we'll examine it and the Governance System.
We're working on a White Paper which will explain this Governance Framework and its accompanying Maturity Matrix fully. If this is of interest, please let us know anything specific you would like to see covered or how we may make it more relevant to your needs.