7.2 The governing body and management
Good communication, trust and mutual respect between a governing body and its senior management are essential for effective governance.
Without these factors, an organisation may begin to travel in directions that are contrary to the governing body’s overall vision and policies.
Management may be performing well, but not adequately informing the governing body of risks and outcomes.
This means the governing body will be poorly informed, make ill-informed decisions, or become marginalised and ineffective in governing the organisation.
7.2.1 A partnership with separate powers
Girringun CEO and Board’s close relationship
Girringun Aboriginal Corporation was awarded Highly Commended Category A in the 2014 Indigenous Governance Awards. Here CEO Phil Rist discusses the value of a close relationship between the Board and CEO.
A challenging issue for many organisations is where the governing body’s work stops and that of management begins.
The way the governing body and top manager treat each other’s respective powers does more to affect the quality of leadership and governance in an organisation than just about anything else.
In too many organisations you see senior managers operating as if they are the governing body, unilaterally making decisions, developing governance policies or setting strategic directions without the proper delegation to do so.
And just as often you can see members of the governing body side-stepping their managers and going directly to staff with instructions, or interfering in the day-to-day running of the organisation.
This simply undermines effective governance, confuses staff, subjects them to partisan politics, and brings the organisation as a whole into disrepute.
This is why it is important to clearly define (in written policy documents) the complementary roles, responsibilities and powers of the governing body and the top manager.
This is usually referred to as a ‘separation of powers’. But the term ‘separation of powers’ is a misleading one and should more accurately be called a partnership of powers, as detailed below.
The top manager is dependent on the governing body for:
- authority to function and manage the organisation
- governance leadership of the organisation
- cultural advice and mentoring
- steering the future direction and strategic goals
- representation of members’ concerns, rights and interests
- the collective wisdom it can bring to decisions and planning.
The governing body depends on their top manager to:
- exercise corporate leadership by building a successful team of staff and volunteers
- assist them to make use of their precious time most efficiently
- provide sound information, reports, risk management and options
- contribute valuable input in policy making and decisions
- carry out the day-to-day management of the organisation.
Both sets of roles need to be performed well in order for an organisation to be successful.
In other words, what is required is not so much a separation of powers, but a close working partnership between management and the governing body that is based on a clear understanding of what they each bring to the organisation.
Ngnowar Aerwah Board and CEO working together
Ngnowar Aerwah Aboriginal Corporation (NAAC) was a Finalist in Category A of the 2014 Indigenous Governance Awards. Here Board members Philomena Hunter and Janet Gallagher outline the different services NAAC offers and how the staff, CEO and board support each other.
Two-way governance at the Warlpiri Youth Development Aboriginal Corporation
Warlpiri and non-Warlpiri people are involved in the management and daily activities of the Warlpiri Youth Development Aboriginal Corporation (WYDAC). This video talks about the importance of good relationships to maintain WYDAC’s two-way governance which takes into account Warlpiri laws, culture, language and aspirations as well as knowledge on corporate governance.
A partnership of separate powers—the governing body and top manager
Interviews and hires the top manager.
Contracted to operate under instructions and delegation from the governing body.
Accountable to members who s/elected them.
Accountable to governing body.
Oversights and reviews the work performance of the top manager.
Supports the governing body to undertake self-evaluation of their governance performance and to participate in developing governance capacity. Oversees and reviews the work performance of staff.
Sets the overall strategic direction for the organisation.
Implements the overall strategic directions.
Makes and approves governance and other overall policies.
Supports the governing body in developing policies. Implements policies made by the governing body.
Provides input into and approves overall annual budget.
Provides financial information, reports and plans for approval. Operates under delegation for daily authority.
Provides input into approves business plan.
Develops and implements the business plan.
Makes key decisions about major capital expenditure, investment.
Makes decisions about expenditure and investment under delegation.
Seeks feedback, consults with and report to members for decision-making and strategic direction.
Communicates with members and staff on activities, progress and outcomes.
It is important to be realistic about what is possible.
Focusing on an absolute ‘separation of powers’ won’t work in many communities where organisations simply have to make the most of scarce resources, and the talent and experience they have among their own community members who often wear many different hats. For example, an Aboriginal and Torres Strait Islander staff member in an organisation may also be on its governing body, as well as several other committees, reference groups or working groups. At the same time, they may be a traditional owner with legal rights and interests, a royalty recipient, a native title claimant and the manager of a project.
These relationships are not static and overlap. There is no ‘one right way’ to negotiate them.
But a good starting point for building a sound working relationship between the governing body and management and staff is to:
- have clear boundaries written down in policy documents about their different roles and powers
- reinforce a wide understanding and appreciation of those through workable processes, inductions, training activites and codes of conduct
- realise the importance of clear communication, including making the time to meet and discuss issues.
What can we do? Footy and playing the governance game
Thinking about how footy is played is a good way to think about governance. For every footy team, there are a lot of different things that need to be pulled together on the day if the team wants to play its best and win the match. It's the same for governance. You can use this worksheet to think about your governance and the roles of your governance team.
The job of the top manager is a bit like that of a footy captain. The captain is the leader of the players (staff members) when they play, giving them inspiration, helping them to use the tactics and skills they have practised, and encouraging them to play their best.
The governing body is like the coach. They do the overall planning, setting the strategies and tactics for the game and the year. But during the game, they have to sit on the sidelines and let the captain and the team get on with playing the game.
Yes, they have different jobs to do—but if they don’t all work as a team, they won’t win the footy match let alone the premiership.
7.2.2 Reviewing the performance of the top manager
One of the most important roles of the governing body is to interview, select and employ the top manager, and then monitor his or her contracted work.
This means that every governing body should annually review the work performance of their top manager.
The survival and success of the organisation may depend upon this.
Unfortunately, very few governing bodies have the procedures or experience to do this. And even fewer have the requirement for a performance review written into the top manager’s contract.
Some do not give any feedback at all to their manager; others do it in an ad hoc way and often only when things have started to go wrong.
Definition: Performance is the act of doing something successfully, or getting something done well. Reviewing means to look back on, or to examine something again with the aim of identifying problems or making corrections.
So a performance review is a formal, face-to-face process in which an individual’s work performance is systematically assessed using agreed criteria.
The aim is to fairly and objectively consider a person’s performance over the whole year, and their potential for development, including:
- what worked, what didn’t and why
- what aspects of the person’s performance can be improved
- what support (for example, from the governing body or others) do they need in order to improve.
The benefits of carrying out such an annual performance review are considerable.
The review process is supposed to be informative and constructive; it should focus on solutions and areas for improvement.
The top manager’s position at the head of the administration often makes it difficult for them to get honest feedback. The review by the governing body is one of the few ways they can get feedback on their overall performance and areas for improvement.
It is also an opportunity for the manager to reflect on whether he or she is on track in their own work and in their relationship with the governing body, and to request additional support, mentoring or professional development.
It helps the governing body and top manager clarify their mutual expectations of each other.
If a review is not done or feedback not given, then poor management performance can often go unchecked and good management performance is not given the necessary reinforcement.
This allows differences and misunderstandings to become entrenched, resulting in mistrust, strained working relationships, and in some cases, a damaging cycle of high turnover of managers.
With Aboriginal and Torres Strait Islander organisations under increasing pressure to produce outcomes, it is important that the members of your governing body can confidently review their top manager’s performance.
Tailored training should be given to your governing body on the concept and ways of carrying out such reviews—with the aim of designing a workable review process they can carry out, and that suits the particular circumstances of your organisation.
7.2.3 The power of delegations
As part of its responsibility for the governance of an organisation, the governing body has power (usually subject to legislative conditions) to delegate parts of its responsibility to another party to enable the organisation to operate effectively and efficiently.
Definition: A delegate is a person or thing designated to act for or represent others—in this case the governing body. When a function is delegated, the governing body still holds final responsibility for it, and remains accountable for what occurs.
Financial delegations occur when the governing body authorises individuals (or sub-committees) to perform financial transactions or exercise financial controls on its behalf.
A governing body may delegate some of its responsibilities to a manager, a sub-committee, any governing body member or any staff member.
So delegations within an organisation are powerful things.
Careful thought needs to be given to what powers and responsibilities are delegated and to whom.
It is essential for delegations to be made properly or the organisation and delegate may be at risk.
In organisations where there is a low level of financial literacy among the governing body, delegations can be particularly problematic.
For example, a manager may authorise expenditure in the belief that this is within their delegation, but the governing body may believe the delegation has not been properly approved or is contrary to their policy frameworks and strategic goals. A staff member may knowingly exceed their delegation, but remain undetected because of poor monitoring.
For these reasons, it is essential to ensure regular monitoring and reporting processes by management back to the governing body, including regular internal and external review and audits, and risk assessments of all delegations.