The human side of governance
A lot of my work is involved with governance at the moment. I’m advising a start up charity on their governance arrangements, I’m chairing a review of the governance of a financial services company, and I’m now chair of the Trustee Board of a charity (the Shakespeare Schools Festival – plug: come to our performances which see students from all sorts of backgrounds, many of them underprivileged, rise to the challenge of performing an abridged Shakespeare play in a professional theatre).
Three big questions come to me in all these areas.
First, how do we put the formal governance arrangements in place that will stand the test of the Charity Commission or the Financial Regulators, or whoever else has to be satisfied. At one level this is quite easy. There are templates and examples of good practice. In so many cases however all the effort goes into getting the formal engineering right and rather less goes into the human side of governance.
Second, how do we really make the human side of governance work in practice? How do you fine tune the relationship between a chair and a CEO so that they work within the governance framework and at the same time bring the best of each other as human beings to the party. How do you ensure that a trustee Board or a PLC Board applies the right levels of challenge and support to management and that they keep a focus on the longer term strategy? My observation is that the reality of good governance is often about making critical relationships work, e.g. Chair/CEO, Board/Executive, at a human level, but within a clearly understood and delineated governance framework. This requires some conscious ‘human engineering’.
Third, how do you stop governance arrangements becoming an end in their own right. Universities, through their wish to balance academic freedoms and administrative necessities have evolved very complicated governance structures. But they have also evolved expensive administrative machines to keep these structures fed with a never ending stream of papers and minutes and meetings and consultations. I don’t know yet of an economic ratio that captures the input to governance vs the output of improved business performance. My caution, especially for smaller organisations developing their governance structures, is keep them proportional.
A final sobering thought: Jeffrey Sonnefeld’s HBR article ‘What makes great Boards great’ catalogues how the corporate governance arrangements of one company ticked every box and more. That company was Enron.