Erika Eliasson-Norris, Founder and CEO of Beyond Governance, discusses with her team governance in the not-for-profit sector
Governance in the not-for-profit sector will always be about people and how they interact. Whereas an organisation’s purpose is the “what,” governance is the “how.”
Regulators have recognised the value of governance by developing codes aimed at enabling organisations to realise their potential. It’s a practical guide to doing the right thing by your stakeholders, whoever they are and whoever you are.
Existing arrangements can be complex and unclear, and this confusion and lack of transparency can lead to convoluted and inefficient processes. This is often just the result of a lack of understanding or “the way we’ve always done it.”
Governance and the right thing to do
Not-for-profit sector organisations should not be afraid to look outside their own sector and obtain help or advice if required. There is a role for the Governance Professional in every organisation and this shouldn’t be considered a “nice to have” or an add-on to an existing role. Governance isn’t just the right people talking about the right things at the right time, it’s also the right thing to do. Organisations usually have a Finance, HR and Marketing department but often no Governance Professional – this needs to change and can be sourced externally if necessary.
The role provides key support to senior decision makers through the introduction of a proportionate and nuanced approach to addressing the challenges faced including:
Stakeholder identification and management:
Directors have a legal duty to consider the best of interests of their stakeholders and ensure the best outcomes. The purpose and culture of any organisation should align to the needs of its stakeholders.
Winning the hearts and minds of your people can be achieved by listening to them and setting the tone from the top and employers have a duty of care to protect their people’s wellbeing.
Regulation and legal compliance:
In the world of big corporates, governance has become firmly established improving effectiveness and efficiency. Take the opportunity now to review how you do things and make improvements as required.
Organisations need comprehensive processes which ensure the integrity and security of the data they hold so it can be utilised effectively. GDPR also requires the honest, transparent use of data.
Sustainability and liquidity:
Directors are custodians of an organisation’s wealth, health and reputation. Governance can help with this objective and build the key ingredient essential to any organisation’s success – trust.
Board room dynamics:
Corporate governance is about people and a dominant CEO or weak chair will be a problem in any sector. Where there are people there is politics. This situation can be improved with training and coaching.
Board reporting and information flows:
How big is your boardpack? Are reports up to standard? Are the packs circulated on time? How secure are your methods of distribution of confidential materials?
How many directors do you have? If it is more than 10, is the decision making effective? Also, there’s the practical challenge of trying to get everyone in the same place at the same time.
A key component of governance, risk management should be a priority for all. Risk cannot be avoided, only managed. Do you have a risk appetite statement and risk register?
Succession planning and recruitment:
Are the right people in place with the correct skills, experience and backgrounds to maintain trust and ensure sustainability? Is there a suitable pipeline and has diversity been addressed? This can be tested with a skills matrix or a more substantial effectiveness review.
In the media, corporate governance is often associated with organisational failing. However, failures often lie with the people in positions of trust, not the decision-making processes and frameworks. It’s the people in charge, who lose sight of the purpose of their role and ignore the rules which are there to protect them and their stakeholders. Trust is essential in whichever sector you operate in and governance is the key to building and demonstrating this.
Custodianship brings responsibility so pay should be fair and incentivise the right behaviours.
An often overlooked and under-valued discipline and skill. Good minutes are important as a record of the key decisions taken, particularly when things go wrong.
Organisations should also look at conflicts of interest, division of power and delegated authorities. There are simple administrative solutions that can be implemented including a compliance calendar and a board planner. Undertake a gap analysis versus the requirements of whichever Governance Code you use or against the UK Corporate Governance Code which is considered the “blue riband” worldwide.
The pandemic caused some cracks in organisations to become chasms. Governance professionals can help close these gaps. The time is right for all organisations to review their governance arrangements to make sure they remain sustainable, achieve their objectives and are able to support those who need them most.