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Management and Governance – Dianna Bell

Management vs Governance – It’s Not That Easy

WRITTEN BY DIANNE BALL - NOVEMBER 3, 2010

Estimated read time: 4 minutes

( Editor note: This article describes the three possible modes of board work in an organization. It assumes the role of CEO and a hierarchical structure that are not common in Waldorf schools. But the concept of the different modes of action of a board still hold , even in our collaborative organizations. You need to do a bit of translating to make it relevant to our situations. Still I have worked with different schools where boards worked in these modes and each mode has specific strengths and weaknesses. There is a lot of interest in schools for developing boards that are more strategic than managing, but the lack of resources and the infancy of many administrative structures often makes a board feel they are responsible for cleaning things up and they feel justified in being strongly managerial. An experienced administrator, a strong administration or a well functioning college of teachers all contribute to allowing a board to be more involved in being a watchdog than a pilot. -ms-)

During our education on governance and directorship we are taught that “directors govern and managers manage”. The analogy of steering versus rowing is often used to describe the delineation of roles between directors and managers. Most directors are well aware of this.


It seems that many boards are challenged with the task of getting the ‘right’ balance between governance and management. Why is this so? Experienced directors are aware that every board is different in terms of the way they implement their governance role. Lack of clarity and agreement about this issue can be a source of misunderstanding and potential conflict around the board table.

 

According to Demb and Neubauer (1992)* there are three main archetypal ways for boards to implement their governance role; named the watchdog, the trustee and the pilot mode. In summary, a ‘watchdog’ role is one in which the board provides total oversight and has no direct involvement in the company’s activities. The ‘trustee’ role is where the board behaves like a guardian of assets and is accountable to shareholders and society for those assets. In a ‘pilot’ role the board takes an active role in directing the business of the corporation.

 

There is no ‘right’ approach for a board to take. The stance taken by a board depends on the company’s growth and development, the nature of the industry, national legal requirements and culture and preference. To illustrate how these modes operate we use an example of how the board of Company X would address issues of workplace safety in an industry where safety was a major risk.

 

In the watchdog mode the board monitors the process of corporate activity. It is not necessarily a passive role. If Company X performed in this way they could take an active role in setting up mechanisms of safety and security as an issue of high risk and concern, and scrutinise in detail. The difference between an active watchdog role and a passive role would be the degree of scrutiny and interrogation of information that occurs. The focus of a board in watchdog mode is on monitoring and evaluation and confirming decisions made by the CEO.

 

This mode could be effective if all of the following conditions are met:

 

  • Directors are satisfied that appropriate systems and policies are in place and have been demonstrated to be effective. The important point is demonstration or evidence of effectiveness rather than just the assurance of the CEO.
  • Directors are satisfied that information reported by the CEO includes relevant indicators and other information that directly reflects the integrity of safety and security systems.
  • The CEO is willing and able to guarantee that appropriate safety systems are in place and they have been tested and found to be robust.
  • Contingency and business continuity plans are regularly reviewed and tested and the results reported to the board.
  • Directors are able to exercise critical and independent judgment.

 

If the board of Company X was in trustee role it would ensure that activities enhance corporate value; that is, ensuring that assets used in the business such as natural assets, human, finance, reputation and others, would at the least avoid being depleted. The board would be involved in evaluating what the company defines as its business as well as how that business is conducted.

 

If Company X was in trustee mode it would be more actively involved than a watchdog board but still confirming management decisions. This involvement would be limited in the initiation and implementation of safety systems but substantially involved in analyzing options, monitoring and evaluating results. The following actions would be undertaken in this mode:

 

  • With input from the CEO the board would give direction to senior management to develop an appropriate safety and risk management system. The board would set the parameters and expectations and allow senior management to develop the detail.
  • Directors would be actively involved in analysing options in the safety strategy.
  • The CEO would implement the safety systems and the board would be intimately involved in monitoring progress and evaluating the results.

 

The trustee mode would give sufficient attention to the integrity of safety systems, regardless of whether the existing safety systems are appropriate or otherwise.

 

So how does this compare with the pilot mode? As the name suggests, in pilot mode the board would be actively involved in the direction, management, implementation and evaluation of safety systems. The board would be making more decisions than in the other modes such as the following:

 

  • Deciding what constitutes a safety system and what is to be installed;
  • Determining the degree and method of integrating systems with customers;
  • Actively analysing options;
  • Deciding how and when to implement changes to the safety system;
  • Detailed monitoring of the safety systems, even when there is no evidence of problems;
  • Close scrutiny and evaluation of the systems.

 

Pilot mode could be appropriate in situations where there was evidence of significant issues or after a safety issue had occurred and the board felt the need to directly intervene. Pilot mode would be more time consuming and involve greater degree of involvement by directors.

 

We can see from the above examples that a board can fulfil its governance role and be involved in decision making in a range of different ways, all of which are appropriate in the right circumstances.

 

It is important for boards to take a step back and reflect on the way they behave and ask whether the degree of involvement by directors is appropriate for this organisation, at this time, in this context. Whether the issue is explored in a board evaluation process or discussed around the table, it is important that all directors give consideration as to what is appropriate for your organisation and be in agreement about what is required. Maybe, just maybe, it is time to do things a little differently.

 

About Dianne Ball

Dianne has thirty years experience working in service organisations, mainly in the public and private health sectors and consulting with PriceWaterhouseCoopers. Her roles include senior management and executive positions including CEO Australian College of Health Service Executives, and General Manager Operations with McKesson Asia Pacific. She has several years experience as a non executive director and has Chaired board committees and working parties. Dianne’s particular work interests lie in organisational change, corporate governance, risk and strategy.

 

 

 

Good Governance Checklist from CWP

GOOD GOVERNANCE: THE ESSENTIAL CHECKLIST

Based on and adapted from Capacity Waterloo Region on the internet

Editor's note (I especially like this checklist more than others because it emphasizes attention to overlaps that normally cause problems in Waldorf schools. You can certainly adapt it for your use. As with all checklists, it is a good place to launch a discussion of roles, responsibilities and agreements. -ms-)

CO M M UN I CA T I O N

The Board speaks collectively with One Voice at all times

Admin/Faculty reports to the Board on a regular basis

The Admin/Facultyalways keeps the Board informed of major internal / external issues or trends

The Admin/Faculty does not instruct any Board member, including the Chair of the Board

The Board makes an honest effort to engage with the membership

The Admin/Faculty makes an honest effort to engage with the beneficiaries & customers

 

RO L E S  A N D  RE S P O N S I B I LI T I E S

The Board focuses on governance duties, i.e., strategic visioning & long-term planning

The Admin/Faculty focuses on operational duties, i.e., annual budgeting, goal setting, day-to-day

The Board does not instruct the Executive Director or staff on day-to-day duties

The Admin/Faculty does not instruct any Board member, including the Board Chair

The Board Chair facilitates free and open meeting discussions based on a set agenda

 

MON I T OR I N G

Detailed minutes are kept from all Board meetings, i.e., Motions, Vote Counts, etc.

The Board monitors its own performance on a regular basis, e.g., Self-Evaluations

The Board evaluates the Administrator’s fulfillment of strategic objectives

The Board monitors the organization’s financial conditions on a quarterly basis

Audited financial statements are readily available and accessible to the membership

 

CO M M I T T E E W O RK

Board committees have a set mandate, membership, and lifespan

Board committees report to the Board and thus have no binding authority

Board and staff committees do not have overlapping mandates

Board members on staff committees do not direct staff or report content to the Board

Board committees are used infrequently, as boardroom discussion is paramount

 

AC C O U NT AB I L I T Y

The Mission, Vision, and Values are drafted and enforced by the Board

The Admin/Faculty is fully accountable to the Board for all activities & actions of the organization

The Board remains accountable to the membership at all times

Confidentiality is respected by all Board members and staff alike

The Board is ethical, prudent and legal in all of its duties

 

 

Renewing Governance

Renewing Governance

More and more organizations are seeking to find new governance structures and practices that support a balance between individual creativity and organizational harmony and effectiveness. This was the case 100 years ago when the first Waldorf School was founded. In the past 100 years, we have had the benefit of a great deal of work and insight into the nature, function and development of organizations. Rudolf Steiner offered some keen insights into social development that are still relevant and useful today. In addition, Bernard Lievegoed, the dynamic student of Steiner's, head of the Anthroposophical movement in Netherlands and inspired thinker, trainer, and author worked with this question his whole life and was part of the new world wide movement to bring new insights into understanding organizations and their development. Following on Lievegoed's work, the Waldorf movement in the last 50 years has pioneered new collaborative models of organization and governance. The Center for Social Development in England and the work of Chris Schaefer and others there and in the US have contributed a great deal to the understanding of the dynamics of governance.  New models like Dynamic Governance, Holocracy, and Policy Governance are also examples of responses to this question that continue to offer new ideas about collaborative organizations.. Frederic Laloux, in his book, “Reinventing Organizations”, provides us with another deeper look at a new emerging paradigm in collaborative organizations.

 

The articles in this newsletter offer a variety of insights on the topic of governance – from understanding basic principles of governance and knowing the basic types of governance models, to looking at effective practices in Waldorf Schools and delving deeper into anthroposophical insights into social creation.

 

The images for this newsletter are pictures of tree trunks – each quite beautiful and unique and each serving a similar function – to protect, nurture and support the tree’s growth. Trees stand as a structural element of the forest, much like governance is a structural element in organizations.  -MS-