GOVERNANCE

The expression “eyes on and hands off” is a good reminder to board members of their function. Monitor but don’t interfere, writes Cathy Parker.

Hands off. By Cathy Parker.

GOVERNORS GOVERN and managers manage. If only it were that simple.

In reality the relationship between the two is not always that clear, partly because it can vary based on the organisation's size and structure.

However, it is important that both parties understand the structure as it affects their organisation.

Governance: The dictionary definition (Cambridge Dictionary) is: “the way that organisations or countries are managed at the highest level, and the systems for doing this”.

A more specific definition for companies from comply.com is: “Governance refers to oversight and decision-making related to strategic direction, financial planning, and bylaws – the set of core policies that outline the organisation's purpose, values, and structure.”

Management: The dictionary definition (Cambridge Dictionary) is: “the group of people responsible for controlling and organising a company”.

A more specific definition from comply.com is: “Management refers to the routine decisions and administrative work related to the daily operations of the organisation. Management decisions should support or implement goals and values defined by governing bodies (such as the board of directors) and documents (such as the bylaws).”

For larger businesses the interface between board and management is usually via the CEO who reports to the board and would have a strong interface with the board chair between board meetings. The CEO may be an executive director and sit on the board, although this is less common in New Zealand.

Even with these robust separations there is often temptation for the board (or board members) to stray into management territory. The expression “eyes on and hands off ” is a good reminder of their function – monitor but don't interfere. Similarly, management often looks to stray into governance areas, or game the system to avoid board oversight or control, which can be equally as negative.

Smaller organisations, by their nature, can't have such rigid demarcations – often the staff or management is small (or in some cases the day-to- day work is done by the board).

In these cases board members often have to remember they have two hats – the work they do for the organisation but when at board meetings they need to take that hat off and put the governance one on – something that can be challenging, especially if they lack governance experience.

A useful perspective when delineating the roles is that the governance aspect is about the ‘ what' – what we stand for (our kaupapa), what are our goals, what we do. Whilst the management role is the ‘ how' – how do we achieve those goals honouring our kaupapa, the tactics and day-to- day operations.

In closing, the Institute of Directors Four Pillars of Governance Best Practice encapsulates some of the challenges well.

“The character of the governance/ management relationship can vary significantly, and one size does not fit all. Boards and management should be prepared to tolerate a robust but respectful interface, where good communication and open information exchange go far to ensuring smooth and effective operations.” Cathy Parker is the director of Adrenalin Publishing, which owns Management magazine, and she sits on a number of boards.