At this time of year it is important for the board and senior management team to reflect on what has transpired in the past 12 months – have expectations that were articulated in the strategic plan been achieved and if not or so, what were the drivers of these results? The more we understand what created a particular outcome, the better equipped we will be to plan for and meet the challenges of the new year. What can be said with relative confidence is that our business, no matter what size or in what sector, will continue to be impacted upon by many external forces and the board and leadership team will need to adopt best practice in its governance and operational management approach to ensure short term viability and long term sustainability.
From our perspective, the 4 key challenges for good governance in the year ahead are:
Direction – is your business model still relevant, does it provide a product/service that is truly unique and valued by your customers/clients, does the price paid represent value to both your business and the purchaser? Where is your business on the life cycle scale – growth, mature or decline? Can your product/services be readily supplied by a competitor? at a lesser price? Does the Mission Statement accurately and succinctly reflect this direction? These are all key questions that the board should ask itself and request information and evidence to support the responses provided by either itself or the management team. The decisions the board takes in terms of its future direction will be fundamental in its quest of sustainability, which by definition, implies viability as well.
Resources – does the organisation have the capacity and capability to deliver its strategic plan? Whilst the board’s sole responsibility is the recruitment, appointment and management of the Chief Executive in the staffing area of the business, it still has a responsibility to satisfy itself that there are the right people in the right jobs and doing the right thing if it is to achieve its Mission. Don’t confuse interest with interference! Furthermore, in terms of capacity, does the organisation have sufficient infrastructure (facilities, technology, funds, and business systems) to deliver its Mission. People without resources will struggle to effectively do what is required, so a board should critically analyse and assess these business inputs and again satisfy itself that it is adequately resourced across all functions of the business
External Stakeholders – does the organisation’s stakeholders support and acknowledge the business? Customers and clients through repeat business, referrals and feedback (solicited and unsolicited)? Funding bodies through direct and indirect feedback? Competitors though their own activities? Without the support of external stakeholders, the organisation will be severely limited in its pursuit of sustainability .Again, the board has to acknowledge the importance of this input into its business and request that activities and outcomes in this area be reported on an ongoing basis.
Culture – 2015 has highlighted the dire consequences of a poor culture – VW and its emissions scandal, the major banks in relation to their financial planning and insurance services and the cheating in sporting activities, all of which can be tied back to the culture of the organisations at the time. If an organisation does not establish, communicate and live it values and principles, then others within the business will create their own rules and these may not necessarily align with what the board is striving to achieve. The board must take a leadership role in creating the right culture to drive its mission, for without the appropriate standards in place, your organisation could be the next newspaper headline.
Governance in the 21st century, whether in the non-profit or commercial sectors is not for the faint –hearted. Governance excellence requires a commitment of effort, time and intellectual application, an enquiring mind and an approach that demands evidence to make an informed decision, rather than mere acceptance of what is either verbalised or written in a report. There is no indication that the “ good old years” will ever come back, therefore board members individually and collectively must be prepared to apply themselves more diligently to their governance and leadership responsibilities. This article has sought to identify the key challenges that will face boards and organisations in the new year. For those who are applying the governance standard that is expected, none of this should be a revelation. (if it does, then further questions need to be asked!) Whilst acknowledgment of the challenges does not present any solutions, you have at least taken the first steps in ensuring your business will be around in the future and that is a fundament requirement and expectation of good governance.
For further information, go to www.governancetoday.com