In order for a board to govern in this manner, it will require three sets of competencies
- ADAPTABILITY: this is the willingness & capacity to change its governance approach depending on the issue at hand.
- ANALYSIS: this is the capacity to analyse situations and determine which approach to governance is most likely to be effective, and
- APPLICATION: this is the capacity to negotiate a governance agreement between the Board and Management on key issues and stick to it through time.
Lets look at each of these aspects of Situational Governance
.
ADAPTABILITY: the first competency
We think there are at least four different possible answers to the question who should be involved or have influence in a major decision affecting an organization. The options are derived from considering the influence of the Board and the influence of Management on a scale running from low to high for each. The diagram below illustrates four distinct positions.
ck
Board Influence
HIGH
LOW
Management
Influence LOW HIGH
Each of the four positions can be found in abundance in organizations throughout the non-profit sector. When one position dominates the stance of an organization we get these four 'classic' scenarios...
1. BOARD LOW and MANAGEMENT HIGH: This is the situation in which the board functions largely as a 'rubber stamp' for management decisions.
2. BOARD HIGH and MANAGEMENT HIGH: This could be defined as a 'collaborative' approach in which both the board and management have a strong influence on major decisions.
3. BOARD HIGH and MANAGEMENT LOW: This is the classic 'interfering' or 'micro-managing' board that treats staff largely as its 'arms and legs".
4. BOARD LOW and MANAGEMENT LOW: This, unfortunately is the all too common stance in which both management and the board ignore the big issues.
A flexible organization is one in which Board and Management can move from position to position depending on the issue at hand.
If flexibility is acceptable, how do we know when to use which stance.
ANALYSIS: the second competency
is the capacity to figure out on a rational and consistent basis which of the four patterns is most likely to be effective in a given situation.
We think that some of the critical diagnostic questions are..
Who has a big stake in the issue? Board? Management? Both? Neither?
Whose commitment is needed to ensure that the decision is carried out? Board? Management? Both? Neither?
Who has competence and capacity to deal with the issue? Board? Management? Both? Neither?
While the answer to each question may be different, we think that knowing the answer to all three will help you decide which of the four patterns to use.
Look at the matrix diagram again. This time focus on which of the four patterns should be used. And the factors that might influence that diagnosis.
Board Stake,
Competence,
and/or Commitment
HIGH
LOW
Management
Stake, Competence
and/or Commitment LOW HIGH
Issues facing organizations can be placed in any of the four positions which then determines the response that is most likely to be effective. Consider the following
1. BOARD STAKE, COMPETENCE AND/OR COMMITMENT LOW and MANAGEMENT HIGH: When the board's stake in an issue is low and management's is high the board should stay out of the issue (even if the board has some competence and would like to be involved). Low stake issues for the board should be things like..
..the colour of carpet in the office
..the kind of automobile the CEO drives
..minor staff discipline matters
and so on. However, the writer has seen each of these on board agendas.
2. BOARD STAKE, COMPETENCE AND/OR COMMITMENT HIGH and MANAGEMENT HIGH: When the stake for both is high and both have something to offer and want to get involved, the case for a 'collaborative' approach is clear. The article, "TEACHING AN OLD BOARD NEW WORK" from the Harvard Business Review, Sept.-Oct. 1996, makes a strong case for the fact that many issues that face boards fall into this category and that when they do, both parties should be deeply involved.
They describe this new kind of work as follows
"1. Board and management discover issues that matter, mutually determine the agenda, and solve problems together.
2. Board and management both set policy and implement it. Lines are blurred, borders open. Domains are decided by the issue at hand."
3. BOARD STAKE, COMPETENCE AND/OR COMMITMENT HIGH and MANAGEMENT LOW: High stake issues for the board include..
...Hiring a new CEO
..Board renewal
..Mission and Core values
..Organization renewal
..Overall direction, priorities and ends
..Some 'policy' matters, by-laws, limitations
..Fiscal prudence
..Fund raising
...Crisis that threaten the organization's survival, and others.
Even if the board is not very competent or committed to dealing with such issues, they clearly belong on the board's plate. Getting professional help when competence is low is perfectly acceptable. So are workshops and seminars.
What is not acceptable is to slough these issues off on management even if management is competent to deal with some of them and wants to take them on.
4. BOARD and MANAGEMENT STAKE, COMPETENCE AND/OR COMMITMENT LOW: One jaded observer once described the typical board as "the well-intentioned in full pursuit of the irrelevant." While this is obviously overly cynical, far too many low stake issues that no one really cares about get onto the agenda of boards and push out more important matters. Lengthy 'after-the-fact' financial reports often take up time that could be spent on looking at alternative future revenue sources. Detailed reviews of last year's performance of the CEO, while important, often win the competition for time that could be spent on establishing goals, priorities and indicators for next year and beyond. And how often have you heard of boards that cannot find the time to look at strategic, long term planning because this year's budget is taking all of their time and attention.
APPLICATION: the third competency
If you accept that adaptability and analysis are important competencies for boards, then the third competency is required to make the first two operative in your board.
This means that the Board and Management (typically the CEO) should look at each key issue facing the organization and decide who is going to deal with it. Sequus uses a standard format to structure such negotiations.
Once the governance position is agreed the next step is implementation.
For a more detailed look at this model, including information on the Carver model and the results of a recent study on Governance called "The Will to Govern Well" click here to download an Adobe document here to add text.
If you are paying attention to the literature on Boards, you may be confused about how boards ought to operate. At one extreme, Boards are asked to remove themselves entirely from operational matters and focus entirely on policy as in Carver's "policy governance" model. At the other is advice from the Harvard Business Review that "..new boards and management discover issues that matter, mutually determine the agenda, and solve problems together. Board and management both set policy and implement it. Lines are blurred, borders open. Domains are decided by the issue at hand."
At SEQUUS we have responded with a new model called Situational Governance in which the role that the board plays on any issue depends on the nature of that issue and the answers to a few key questions including...
"Who has a stake in the issue?"
"Who has the competence to deal with the issue?"
Another model of Board Governance that we have begun to experiment with carries the label 'SITUATIONAL GOVERNANCE". In this model the way in which the board governs, depends on the 'situation', or more specifically, the issue at hand.
Whether the board deals at the 'Policy' level only or is a 'Working' board depends on which function the board is performing.
