There has been much discussion recently on how to develop a productive and harmonious relationship between the board and management. We know that this is critical for good governance and organisational effectiveness but can be difficult to achieve in reality. The importance of this relationship is critical across all sectors whether the organisation be in the Private, Public or Not for Profit sector.
In an ideal situation, the board and management are trying to achieve the same vision and objectives so a partnership based on trust and respect is appropriate. Central to this partnership is a clearly defined set of roles, delegations and boundaries which allows each side to respect the other’s contributions. The relationship depends on the free flow of information in both directions.
One of the most important first steps isto ensure that everyone clearly understands what the overall vision of the organisation is.
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Setting the culture is a key role of the board, and this includes establishing the tone of the relationship with the CEO and senior executives. This includes explicitly discussing and writing down the boundaries between governing and managing and how best to work together. The chair has an extremely important role in ensuring that this is implemented and adhered to. The relationship between the Chair andthe CEO is vitally important.
It is important for management to understand the board’s role in relation to monitoring and questioning. With management much more involved in the organisation, board members rely on them to pass on all information needed for decision making to fulfil their legal obligations as directors. Directors also anticipate that the information provided for board meetings relates to board issues, not management issues. The board expects management to ask advice and make use of the directors’wealth of experience as well.
Similarly management’s expectations of the board are that the board will trust them to implement strategy and deliver outcomes. The CEO specifically expects from the board clearly stated performance objectives and defined boundaries of authority. Because the CEO is implementing the board’s strategy, he / she will also expect regular and honest performance feedback.
Setting the right relationship between board and management is critically important for an organisation to achieve its long term goals.
Phil Butler is Manager – NFP, Public Sector & ACT at the Australian Institute of Company Directors. Level 3 54 Marcus Clarke Street Canberra T: 02 6132 3200 |www.companydirectors.com.au