We get asked a lot about governance – and it’s amazing how many organisations don’t have the first clue what governance really is! Some think it is having an executive that controls every aspect of the organisation; some think it is having a board of directors that controls the purse strings via a finance and risk committee.
The Australian Institute of Company Directors (AICD) believes that “Corporate governance is a broad-ranging term which, amongst other things, encompasses the rules, relationships, policies, systems and processes whereby authority within organisations is exercised and maintained.” True good governance, in our minds, results in you having the right people, with the right amount of authority, doing the right things for the business, achieving outcomes that allows transparency for all involved in the business including key stakeholders (such as funding partners), the employees as well as the directors themselves.
We see a lot of organisations bury their head in the sand in regards to governance. Many not for profit organisations hide behind the great emotional connections that the causes they support create, but poor governance creates such a huge potential for really bad things such as fraud, bullying, theft and poor performance which could put them in the spotlight for all the wrong reasons. Directors cannot ignore governance, as it starts at the top.
High performing boards of directors, together with the CEO / Executive need to establish a solid governance framework, lead by example and foster a culture where accountability and responsibility are important, together with an environment where taking measured risks is okay– that’s how we innovate, learn and grow.
We would suggest that a good governance framework should include:
– Board effectiveness (including board performance and the contribution of the directors of the organisation);
– Methods how governance is applied in the organisation (this may be organisation structure, delegations, separation of duties); and
– The strength of the relationships with its stakeholders.
Do this stuff badly, and the consequences can be far reaching. Finding yourself on the front page of news media can impact future funding sources, limit your ability to hire key talent and most importantly dilute the important outcomes that you are working so hard to achieve.