Opening up: Adopting a Habit of Reviewing Governance Effectiveness

open-closed

Take Away Line

As the group at the ‘top of the shop’ in their organisations, there is an easy and natural tendency for boards to become somewhat closed off, like a closed system, impervious to signals of how it may be going.  Only by opening up can a board develop.  The ‘royal road’ to excellence in governance is feedback and the habit of reflecting on that feedback in a useful and, as this article demonstrates, structured way.

Awkward Moment

‘And, with that, we’ve completed our business for this evening, ladies and gentleman.  Thank you.  Date of the next meeting?  Yes, two months today exactly.  Thank you and good evening, one and all.’  ‘Excuse me, Chair’.  ‘Yes, Mary?’  ‘I think we’ve forgotten the review. We agreed at the last meeting that we’d review each meeting at the end.’  ‘Ah, yes, er, quite right’, the chair stumbled, I had indeed forgotten.

By now, most people had begun to re-assemble their papers and were beginning to pack their bags, wanting to get off home.  ‘So’, the chair resumed, ‘well, how was the meeting?’  Silence.  A few more papers were gathered quietly and stowed into bags and briefcases.  Mary finally broke the silence.  ‘Well, we got through the agenda on time and it was a busy agenda.’  ‘Quite right’, someone added, looking at his watch.

Any other thoughts, anyone?  ‘I wonder if’, Phil paused to look at his papers neatly stacked in front of him, ready to go, ‘in agenda item, er, yes, agenda item 7, when we looked at the strategy, I wonder if that was a bit rushed.  There was so much work in the draft that was presented and we only had about 20 minutes on that.’ ‘True’, someone else supported.  ‘I agree’, said the chair, ‘but it was a packed agenda with the budget and everything, I was concerned about the clock.  Now, any other reflections?’

Faintly comical, perhaps, but I’ve certainly come across many boards where the learning part feels awkward and is often carried out in a perfunctory way – if it’s carried out at all.

Habits of Success

Another blog piece (‘An Awakened Board: A Peak at Great Organisational Governance’) emphasised that good boards, almost by definition, seek feedback, reflect wisely on it and make changes accordingly.  Self-assessment, then, becomes one of the good habits that good boards adopt.  But what might such a habit look like?  What’s the process that a good board should adopt or options from which it should select ?

The kind of process implied in the example just presented is a way of capturing learning ‘hot’ i.e. when it occurs and on a routine process.  This is an essential part of a board’s tool-kit.  But more robust assessments of performance that only need to take place occasionally should also be considered.  The Walker review[1], for example, now incorporated into the UK’s Corporate Governance Code for publicly listed companies, suggests annual governance effectiveness reviews, often externally facilitated, to help a board remain objective about how well it’s doing.  A number of years previously, a publication by the Housing Corporation argued something along similar lines[2].

Relatively Open Systems

The presence of feedback (loops) defines an open system in natural or social sciences,[3] while the absence of external input data, indicates a closed system.  It is all too easy for a board to become isolated from its environment, its sector, its own organisation and even from itself, its own members.  It behaves as if it has no external environment.  Such boards are cut off from their own experience and fail to learn (Figure 1).  As we saw in the previously mentioned blog post, such organisations are the ones most likely to have weaknesses in governance.

Figure 1: An Open and a Closed System: Boards need to be open for learning to take place

System-Environment

Boards must resist this temptation, bending over backwards to remain open systems, open for feedback and open to change. Putting in place systems of feedback helps prevent this tendency.

Of course, most boards are relatively open, although in the present consultant’s experience, some boards can think they are more open than they in fact are.  Back to our awkward conversation, although some learning can still take place – although perhaps not easily in that case – there is a danger in a board becoming self-referencing, relying solely on the internal data, rather than being genuinely open to feedback and influence (Figure 2).  So, boards need a balance of internal and external sources of feedback.

Figure 2: Boards need a balance of internal and external sources of feedback

Open-Close-Loop System

Methods of Feedback

In practice, the means of feedback are many and varied (Figure 3), some are primarily the board looking at itself (closed loop feedback, eg appraisals or, as we saw, end-of-meeting reviews) while others are more externally oriented or open loop in nature (eg Bench-marking [4] or external audit/review.

Figure 3: Methods of Board Feedback

Board Feedback

A challenge, however, with feedback is what to make of it.  This is partly a question of the skills collectively to draw out and focus on the main things, and it can also feel challenging to ‘dialogue’ well, as our previous blog called it.

Dialoguing Practice

As we saw in the opening example, talking frankly and purposefully about how a meeting has gone can feel awkward, especially at the beginning.  I recall one chief executive of a high-profile organisation who liked to end each meeting of his top team with: ‘well, did we add value today?’, expecting frank and thoughtful responses.  His idea?  If such feelings and views are not expressed in the room, they’ll surely find their way into the chatter after the meeting has ended, but he won’t hear it directly, and the team as a whole won’t process it collectively and, in that way, any learning could be lost.  So, it’s worth going through the awkward phase to get to the learning points.

Future blog articles will cover dialoguing in more detail.

Focussing on the Main Things – a Self-Assessment Framework

However, there are so many good practice standards and sources of feedback, how do you sort the wheat from the chaff?  How does a board hold the conversation when there are potentially so many aspects to the question, so much detail?

There is a way in which a board can stick to the main point and ensure that it searches out the details of the evidence that it has to hand.  It’s a simple framework and analysis tool as well as a simple questioning framework.  ‘Treading the Boards: A Self-Assessment Framework for Board Performance’ (Housing Corporation, 2001[5]) offers just such a framework.

In fact, close readers of this blog will recognise this framework, as it is based on the model used to help understand what good governance is like, as outlined in the previous blog.  If we present that structure as a simple hierarchy of questions, the board is encouraged to keep to the main point, which is to ensure that the organisation has the leadership, direction and accountability appropriate to its particular circumstances (Figure 4).

Figure 4: A Framework of Questions to Help Boards Assess their own Governance Performance

Governance Questioning Framework

Fundamentally, the board has to hold three questions in its mind as it discusses data on where it is.  In future blog articles, we’ll outline in more detail how to look at each question, but for now, a little more on the process.

Using the Self-Assessment Framework

Of course, the point here is for a board to make a difference to the organisation, to its ‘bottom lines’, so any thorough-going assessment should start with an analysis of business performance against peers, setting that against data on the board’s performance against good practice governance standards.  That comparison, when accompanied by reflections or ‘soft’ data on the quality of working relations and team performance, permits an analysis, indeed a shared analysis, across the board of its key development priorities for, say, the year ahead (Figure 5).

Figure 5: Building an Assessment of Board Value

Reporting on Board Value

But let’s not think of this as a deficit model in which we’re looking for fault.  Actually, I would hope that there is plenty of scope to reflect on the good things that have been done, the wise decisions made and good tone that has been set and to draw out the value added by the board.  Indeed, it is only in the context of the good done, that the development areas have any context.  So, being rigorous on achievements is just as important as being rigorous on the things that need work.  And these achievements can be published – funders, shareholders and other stakeholders are interested in governance, and welcome evidence of effective performance.  So, publish and be praised!

Debating Points

  1. To what extent do you feel the board you know is open or closed?
  2. What are your board’s learning habits?
  3. How do you find that you can best hold the overview about your board’s performance, using the detailed evidence, without getting lost in it?

[2] Treading the Boards: A Self-Assessment Framework for Board Performance (Housing Corporation, 2001) of which I was the lead author: currently out of print, but please get in touch if you’d like a pdf

[4] Benchmarking is a particular case in point and one that most boards rarely if ever use.  This is partly because there are so few opportunities to do it (BoardsCount being a rare exception), but it can bring valuable insights into how other boards do things.

[5] See note 2, above

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About transformingtales

What you do is what you do, isn't it? Nothing special there. What I do is work mainly with civil society organisations, but also some public and corporate sector outfits, to help them change. For the better. For good. If you provide a list of the things you do, the services you offer, like strategic planning, leadership development, corporate governance, culture change and performance management, they are just words. And tricky sounding words too that put you off and imply more questions than they answer. So, this blog is about the stories, the joys and the woes of making tranformative change happen (on a good day) and when and why it doesn't (on a bad day). And it's dedicated to my daughter who asked the question a few years ago: 'What do you do again, Dad?'
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