Governance for Grown-ups

As long as a story involves magical beings, hidden treasures and/or an heroic journey, children are rapt and fully engaged. As soon as a storyteller shifts the focus to moral instruction, their eyes glaze over and they seek other engagements. The rewards of work and responsibility are not generally appreciated, and the benefits of building better outcomes through sustained effort are poorly understood – even if the moral of the story was that the hero’s victory depended on them overcoming obstacles and improving themselves to achieve ‘success’.

The ‘governance story’ is often mistaken for the moralising of a boring disciplinarian, who is getting in the way of the real work people want to do within commerce and civil society. If governance is about ‘doing the right things in the right ways’ though, we should be able to bring an ‘adult’ response to the topic rather than seeing it through ‘immature’ eyes. As the responsible adults involved in governing and managing not-for-profit organisations, we can appreciate that there needs to be structure and discipline in our work, and that there is a body of knowledge that can be learned to improve the way we perform these vital roles.

Another take on this is to consider the conformance and performance roles of the board. Conformance sometimes coveys the notion of compliance with rigid rules set by external parties via laws and regulation, in which the directors and managers may feel little ownership or relevance. Performance is what they are there for: achieving the results their stakeholders need delivered, based on real and prioritised need.

Regrettably, the news media is full of stories about organisations and leaders who prioritised ends over means, and who lost sight of the tenet that sustainable success requires not just doing the right things, but doing them in the right ways. The Federal Royal Commissions into Institutional Responses to Child Sexual Abuse, and Misconduct in the Banking, Superannuation and Financial Services Industry, for example, have resulted in almost daily media stories featuring ‘governance failures’ as a recurring theme. Stories about associations and charities which have suffered governance failures have also been prominent in recent times, as illustrated in various earlier blog posts.

Several peak agencies have understood the importance of directors having ownership of their governance arrangements, and consequently, they promote reference to principles rather than rules. This respects the capacity of directors to perform their governing role responsibly, but by reference to central concepts that should be evident in any organisation in which people place their trust. Examples of this include the ASX Corporate Governance Principles and the AICD Good Governance Principles for NFP Organisations, both of which have recently been subject to consultations preparatory to the issuance of updated guidance over the coming months.  (Interesting to see that the social license to operate and corporate values and culture are given greater emphasis in the updates proposed by the ASX).

Today’s article in The Age by the ever-insightful Ross Gittins (Why so much money is wasted on the wrong infrastructure) drew attention to another recent example, noting Infrastructure Australia’s promotion of Infrastructure Decision-making Principles that aim to ensure major public infrastructure investments deliver the best outcomes for the community and the best value for taxpayers. While NFP organisations may have little to do with infrastructure issues, the principles offered here are informative, and are worth reflecting upon as an example of how generic good governance principles have been adapted and applied within a specific setting.

Presented below are the headline principle statements for your interest. If you substitute ‘the board’ for ‘Governments’ and your purposes for ‘infrastructure’, you can form a view as to whether some of these principles could be usefully applied to your NFP governance.

  1. Governments should quantify infrastructure problems and opportunities as part of long-term planning processes
  2. Proponents should identify potential infrastructure needs in response to quantified infrastructure problems
  3. Proponents should invest in development studies to scope potential responses
  4. Where an infrastructure need is identified, governments should take steps to ensure potential responses can be delivered efficiently and affordably
  5. Governments should undertake detailed analysis of a potential project through a full business case and should not announce a preferred option will cost profile before undertaking detailed analysis involving multiple options
  6. Proponents should assess the viability of alternative funding sources for each potential project
  7. Project proposals should be independently assessed by an appropriate third-party organisation
  8. Government and proponents should undertake meaningful stakeholder engagement at each stage, from problem identification and option development to project delivery
  9. Governments and proponents should publicly release all information supporting their infrastructure decisions
  10. Governments should commit to develop and release post completion reviews
  11. Where projects are funded as part of a broader program, the corresponding decision-making processes should be robust, transparent and prioritised value for money

What decision-making principles have you identified in your board charter?

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