Governance is, more than ever, in the spotlight, and while it may not be a particularly sexy word, it is one that for-purpose organisations should not shy away from.
Poor governance is a huge issue facing the sector today. The team at Strategic Grants knows from conversations with our clients that organisations are often aware that more needs to be done in this space, but they are not sure where to begin. Sometimes they don’t understand good governance should be a priority.
For-purpose organisations operate in a fast-paced and dynamic environment. Boards must be able to navigate the disruption, regulatory change, challenges and opportunities to ensure sustainable growth of the organisation, and to meet the needs of multiple stakeholders.
The fact of the matter is boards and individual directors have a vital role to play in continually improving risk and strategy oversight of their organisation for long-term sustainable growth. Critically, the role extends to boards providing ongoing and effective cultural stewardship.
But how does an organisation go about implementing ‘good governance’? We chat with Marlene Elliott, General Manager of VUCA Trusted Advisors, a trusted partner of Strategic Grants, who has deep experience and knowledge working with for-purpose organisations. VUCA Trusted Advisors works directly with boards on everything from assessing existing governance frameworks to tailored training and coaching around governance, strategy and risk to undertaking independent board performance reviews.
So, what is governance?
“Governance involves systems by which an organisation is controlled and operates, including the mechanisms and tools by which it, and its people, are held to account,” explains Elliott.
“There are several elements of governance, such as ethics, risk management, compliance, and administration. But it’s important for organisations to understand that governance is not a ‘tick-box’ exercise. Good governance is much more and can be demonstrated in multiple ways.
“For example, starting with, identifying a vision and purpose, developing a strategy, selecting and supporting management to deliver that strategy, roles and responsibilities, composition of the board, and setting out clear processes and policies for risk management, reporting, compliance, culture and stakeholder management.”
Is governance a handbrake or a combination of gears?
“Embraced and viewed holistically, governance can be great for an organisation to enable growth and sustainability,” says Elliott.
“Good governance will create an environment to act in the best interest of the organisation, its people and stakeholders. It will also improve performance and productivity, reduce risk, enhance brand and reputation.
“In simplistic terms, you can look at governance as the four Ps of purpose, people, process and performance.”
How does an organisation go about measuring governance?
Elliott acknowledges that good governance can seem daunting and time consuming, and the best approach to begin measuring your organisation’s governance is not always clear.
“Remember, not only is governance critical to an organisation, but it can also be your friend, who will guide, support, nurture and enable sustainable growth,” she says.
“Like a good friend, governance requires open, honest and transparent conversations.”
Who is responsible for the process?
“The board of directors is responsible for oversight of the governance process,” says Elliott.
“Management is responsible for providing the policies and procedures that govern the organisation. The board, together with management, must establish reporting requirements and clear frameworks to monitor and measure the effectiveness and performance of governance.”
What are practical steps you can take if your organisation needs a governance review?
The best place to start is with your board’s charter.
“Organisations striving for best practice in board leadership and good governance will have in place a board charter that all board members understand and formally commit to through the selection, induction and annual review processes,” explains Elliott.
“Typically, a board charter would include a code of conduct, structure of the board and sub-committees, duties and responsibilities, composition of the Board, risk management, conflict of interest, meetings, and performance management.”
If you are unsure of the last time your board’s charter was reviewed, or have concerns, Elliott says there are ways to sensitively bring this up with your Board.
“You could approach the chair, outside of a board meeting, to have a conversation to share your views and concerns.
“You could then allocate time in a board meeting for the board to discuss governance, specifically looking at the current state and performance.
“The board could also engage a governance expert to assist in exploring best practice, building capability and improving your organisational governance.
“Finally, you could undertake a board evaluation by an independent consultant who has strong for-purpose experience, to gain an objective review, benchmark and provide advice on where to lift performance.”
Governance for an organisation operating in a volatile, uncertain, complex and ambiguous world – known as a VUCA world – is not enough. Good governance is absolutely critical for long-term sustainable growth.
Just as open, honest and transparent communications play a vital role in a successful grants strategy, this also rings true for good governance success.
Remember, governance is not a word to fear. The journey to strong governance frameworks is in fact exciting in ensuring your organisation is best-placed to achieve its mission.
Strategic Grants builds the capacity of for-purpose organisations to apply strategic thinking to their service delivery and fundraising programs. Find out more.