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  • Published on

    So, what exactly is governance?

    Governance Management Performance Readings Research
    One of the most common requests I get in my advisory and research work, and at speaking engagements, is to provide a definition of 'governance'. I think it keeps coming up because there's no universally accepted definition. To press the point, when Africa Zanella asked for a definition of governance on LinkedIn recently, her question generated over 50 replies.

    Notwithstanding this, we need to try understand what governance is and what it is not. Here's my take (which also appears as one of the 50 replies): I have come to understand that governance is an activity. It has a purpose (what) and a process (how).
    • The purpose of governance is to protect the owner's interests, and to optimise the performance of the organisation in accordance with the owner's wishes.
    • The process of governance is encapsulated in one word: oversight 

    To be effective in governance, boards need to understand their purpose, and have a process through which to determine performance goals (develop a strategic plan, together with management) and oversee performance against plan (a monitoring regime). In contrast, the primary role of management is to implement the approved plan (having contributed to its development, with the board).

    Hopefully, this view is helpful. Love to hear what you think!
  • Published on

    Failure of governance leads to ... a large payout. Gulp!

    Governance Management Performance
    The failure of governance that I commented on a couple of months ago has now provided the ratepayers of Christchurch with an unwanted headache. Reports have emerged today that outgoing CEO, Tony Maryatt, will leave the Christchurch City Council today with a large severance payout estimated to be in the order of $400,000. The severance payout will have been triggered by provisions in Mr Maryatt's employment contract, no doubt. 

    While the media, ratepayers and members of the public will raise their collective arms in horror at the scale of the severance payment, another less visible—but arguably more significant—factor actually merits more attention; that of accountability. Councillors need to think more carefully about their motivations and their actions. The common good must prevail over personal or party agendas.

    With the local body elections upon us, voters would be well-advised to quiz candidates carefully, to satisfy themselves that each candidate understands governance; is committed to a creating a strong and effective team of leaders; and ultimately, is focussed on working productively towards the common goal of rebuilding the city of Christchurch. 
  • Published on

    On board reviews: providing some bite

    Governance Management Performance
    The much maligned board review process needs to be overhauled because the complex, socially dynamic, endogenous nature of boards—and the idiosyncrasies of human nature—render it somewhat toothless in many cases:
    • People don't like to "score" themselves or their colleagues harshly
    • People tend to have an artificially positive or negative view of performance
    • Differentiating between the performance of individual directors and the performance of the board (as a whole) is difficult
    • Even if a high-quality review is completed by an independent party, the results may still be ignored or suppressed by the board, for fear of reputational damage

    Notwithstanding these challenges, the board is responsible for optimising business performance, on behalf of the owners. But how does one hold the board accountable, to ensure it performs well?

    One approach to provide some bite could be to apply the "one-up" principle. It works well within organisations: the CEO is reviewed by the board, general managers are reviewed by the CEO, and so forth. However, the one-up principle is more notional for boards, so a variation is required. The audit process provides helpful guidance. In most companies, the owners appoint an Auditor (normally at the AGM), who is then responsible for providing a report to demonstrate that the accounts are a true and accurate record of performance. This is, in effect, a one-up process.

    A similar process could be applied to board reviews, whereby a resolution is brought to the AGM to approve a Reviewer, who is charged with conducting a formal board review and reporting back to the next AGM. Such an approach would expose the review findings to the owners; give the owner's some teeth; and, enable the owners to hold directors accountable via the election process. It could be very threatening to some incumbent directors though...
  • Published on

    On meeting people, and learning from them

    Conferences Governance Management Performance Phd Research Strategy
    One of the things I really enjoy when travelling is meeting people for the first time. My doctoral research journey provides a case in point. It has brought me into contact with many interesting people, including members of the international academic and governance communities. The conversations and experiences that I've been privileged to be part of have helped me gain new insights; form opinions; and, map out the next steps of my journey. The sights and sounds of unfamiliar cities, and the conversations with hotel staff, shopkeepers and other locals, have added context, colour and richness.

    When I am in England and Europe in November, to present a paper at ECMLG'13, I hope to continue conversations started in Bangkok back in February; to start new conversations and build new relationships; and crucially, to help others grapple with the demanding topic of how governance can help improve business performance.

    If you'd like to join the conversation or arrange a meeting, please contact me, so that we can find a date and time that works best for you. I'm available to meet anyone, anywhere.
  • Published on

    European tour: available to speak or consult in Nov'13

    Conferences Governance Management Performance Phd Research
    Are you based in the UK or Europe, and do you need any assistance with governance or strategy? I will be presenting a paper at ECMLG'13 (European Conference on Management Leadership and Governance) in November. As the itinerary has me arriving in London the weekend before the conference, I have some time available for other meetings or speaking engagements, as follows:
    • Sunday 10 November: arrive in London
    • Monday 11 November: available
    • Tuesday 12 November: available
    • Wednesday 13 November: travel to Klagenfurt, Austria
    • Thursday 14 November: ECMLG'13
    • Friday 15 November: ECMLG'13
    • Monday 18 November: available
    • Tuesday 19 November: depart

    If you would like to me to meet with you and your colleagues, or speak (in London or any other capital city), please contact me to let me know how I can help.
  • Published on

    Well done Mr Palmer

    Governance Management Performance Strategy
    I understand that the Chairman of Air New Zealand, Mr John Palmer, will retire at the upcoming annual general meeting, after twelve years in the role. Mr Palmer became Chair in 2001, when the airline was on its knees—essentially insolvent—save a bailout from the government of the day.

    For ten years, Mr Palmer worked closely with now former CEO Rob Fyfe, to rebuild the organisation to become the strong, innovative and, importantly, profitable carrier that it is today. The journey was not always plain flying however. The test-flight tragedy in southern France cast a long shadow, and decisions to close engineering facilities (with the inevitable staff redundancies) and various routes would not have been easy. On the positive side of the ledger, new safety briefing videos, new uniforms, new cabin layouts, improved levels of service, and innovative fare structures have contributed to increased demand, and ultimately, better financial performance. Clearly, the company crafted an effective strategy, and implemented it well.

    Mr Palmer has led well during his time as Chair, and his peers have recognised his not inconsiderable impact, by naming him the Chairman of the Year twice, in 2007 and 2009. Well done Mr Palmer, New Zealanders owe you a debt of gratitude.