Are You Practicing S.M.A.R.T. Governance? 

Originally published in The Bay Observer, Hamilton ON

Good governance is critical for the success of an organization. We continue to see weak governance at play in many organizations—think Nortel, General Motors, Enron, eHealth, and many organizations which don’t make the mainstream news.

A Board displaying S.M.A.R.T. governance will be strategic, will adequately oversee management, demonstrate accountability for doing the right job right, display respect for the interrelationship with management, stakeholders and within the Board, and is trustworthy and talented.

Strategic governance is focused on mission, vision and values and the organization’s strategic direction and goals. Strategic governance causes an organization to move forward, to be successful, to continuously improve the service that it provides to its customers, to inspire employees to do their best, and to meet the expectations of the stakeholders. But do we have strategic thinkers around the Board table or at the Council table? This is not a trait that fits nicely on those darn checklists for skills based boards. Too many of the players around the governance tables are non-strategic and are focused on fiduciary issues and compliance. The lack of strategic governance is seen in organizations which do not move forward and at best continue to do the same-old, same-old. Did we see strategic governance in the stadium discussions? Or was it all about grabbing the dollars off the table regardless of long term consequences?

Management oversight is the most common governance activity. Over seeing how management is operating the organization is indeed a job for the Board. It is here though that many Board members dip dangerously into micromanagement. Holding management accountable for a positive employee environment, good customer satisfaction, effective operations, and financial health should be focused on the end results. Not on telling the CEO how to do it. Doing an annual review of the CEO’s performance is a must. How did the Board miss the generous spending, untendered contracts and self-dealing at eHealth?

A high performance Board is accountable and independent. The Board has a job to do and it needs to be assessed on how it has done that job. Boards do self-assessments. We know that there are flaws with self-assessments. Having an objective assessment conducted by a knowledgeable governance consultant is the superior method. However few Boards and organizations will invest in governance to actually benefit from this process. Remember when the Education Minister had to relieve the trustees from their duties at Toronto Catholic School Board due to misuse of expenses accounts. Were they conducting themselves in an accountable manner?

Respect is a necessary ingredient for good governance. Respect between Directors, respect by Directors for the expertise of management, respect by management of the role of the Board. If there is a lack of respect on any of these dimensions, there will be a detriment to the governance effectiveness. I have heard more than one CEO muse that his/her job would be so much easier if it wasn’t for the waste of time that the Board is. That doesn’t sound like respect to me.

Stakeholders place trust in a Board of Directors to do the right job in order to have a successful organization. This trust needs to be well placed. Boards can earn this trust by having Directors who possess qualities of integrity, competence, knowledge, and motivation to carry out his/her duties in the long term best interests of the organization. Directors need to exhibit strong ethical conduct, and honour a strong code of conduct. I have often heard the Board of Hamilton Community Foundation described as exhibiting the qualities where donors can place trust in the sound governance that it provides.

Boards need to be talented. To be talented, Boards need diversity, curiosity, knowledge, positive personal attributes, and a commitment to continuous development. The Board should be comprised of individuals who can bring different life experiences, knowledge, diversity of views, as well as strategic thinking to the table. We need Directors to be curious and be willing to ask questions of management that gives them full understanding of the issues. Director education creates Boards with ever increasing capability which can benefit the organization.

Find a Board in Burlington or Hamilton that lives up to 50% of the above characteristics – you will have an average Board – but if you have one that lives up to 80% of the above, join it and tell me who it is!

All Boards should ask themselves if they practice S.M.A.R.T. governance: Strategic, Management oversight, Accountable, Respectful, Trustworthy and talented.

 

Fay Booker is principal of Booker & Associates, a firm focused on promoting good governance, enterprise risk management and operational effectiveness – www.bookerandassociates.com.

Leave a Reply

Your email address will not be published. Required fields are marked *