The Qualities of a Healthy Governance “Ecosystem”

Many of the conflicts that occur between people and teams within organizations stem from a lack of clarify about who’s doing what – and ultimately who decides what. We’ve written previously about the importance of consulting and informing prior to making a decision. But equally important is the structural clarity of governance – namely, who decides what.

What are the underlying dynamics that make for a healthy governance ecosystem? Let’s start with looking at the dynamic system of the Board and the chief executive. These principles apply to any type of organization – whether it be a corporation, non-profit entity, or public agency.

First, in a healthy ecosystem the Board needs to trust the chief executive’s decision-making. We can unpack that a bit more to say, the Board needs to trust the executive’s process of making decisions. This would include the manner in which the CEO delegates his or her authority to
others to carry out. The Board needs to trust that the CEO will exercise the authority granted via the delegations in an expert, professional and prudent manner.

Assuming that the Board sets the overall direction for the organization, the Board needs to trust that the executive will do her best to implement the policies and the directions from the Board. And at the same time the Board needs to trust that the CEO will bring to the Board's attention
any circumstances that, in the executive’s judgement, cause the CEO to question whether the direction from the Board is sound, given current and projected circumstances. And lastly, the Board needs to trust that the CEO will consult with the Board in a constructive manner, laying
out the information that has caused her to question the soundness of the policy and engaging the Board in a process to explore alternatives.

This aspect of the ecosystem requires the CEO to be an individual who is willing to bring unwelcome news to the Board and have tough conversations, knowing that Board members are acting from a set of assumptions and pre-conceived notions based on the information at their disposal, including the assumption that the Board’s strategic direction will be carried out. This
renders these very important moments and tests of a Board-CEO relationship.

A healthy ecosystem also requires the Board to act in a certain manner. It requires that the Board be open to hearing news from the CEO that its policies need a rethink. An inflexible Board is a dangerous Board, just as an inflexible CEO is a dangerous CEO. When the CEO calls for a “rethink,” all Board members need to recognize the moment, to recognize that
something important is happening that requires their full attention and may require them to rethink their assumptions and expectations. It requires the Board in those moments to have a process for handling that situation – where open, trust-building, fact based dialogue can occur without polemic, without grandstanding, without finger-pointing. Again, these are crucial
moments and tests for the Board-CEO relationship.

This aspect of the ecosystem requires that there be mechanisms for the CEO to inform all Board members of his concerns in a timely manner. And it requires a willingness and a readiness by the Board to engage. Lastly, it requires mechanisms/processes whereby the Board can begin the process of looking at alternatives with the CEO and determining whether a
change in direction is necessary.

A few other behaviors that signal a healthy governance system:

• Everyone recognizes they are responsible for the success of the same organization, that they’re in the “same boat.” Everyone understands that any conflicting loyalties – to another cause or constituency – undercuts confidence and trust.

• There is a willingness to admit failure, to apologize for slights or failings. And a
  willingness to forgive and move on once an apology is given.

• People recognize that effective governance requires both clear authority and strong relationships. And that to focus on effective relationship-building is part of a healthy governance ecosystem.

• People have forums for honest conversations, where dissenting viewpoints and conflicting ideas can be aired out and discussed professionally, without fear of reprisal or humiliation.

Given what is written above, we’ve developed this checklist of a healthy governance ecosystem. As you review this list, ask yourself which of these elements are – and are not – in place in your
organization.

A. Structural clarity:
1. The Board’s role in decision-making is clear and the limits on its role are clear.

2. The CEO’s role in decision-making is clear and the limits on that role are clear.

3. It is clear that only the Board acting as a body can give direction to the organization, and when it does so, it does it via the CEO and other direct reports to the Board.

4. It is clear that individual Board members do not make decisions that drive the organization.

B. Directional clarity:
1. The Board, acting as a whole, gives clear direction to the organization in the form of a
written plan or policies.

2. The Board assures the resources needed to carry out its direction are in place. (It does not hamstring the organization with an over-ambitious plan where resources are not aligned with the goals.)

C. Effective feedback loops:
1. The Board and CEO regularly review the performance of the organization, comparing actual performance to the Board’s goals and objectives.

2. The CEO uses these feedback loops to drive improvements in performance.

3. The Board regularly assesses its own effectiveness in fulfilling its role and
responsibilities.

D. Effective channels of communication:
1. There are clear channels for the CEO to timely inform all Board members of his/her concerns regarding the Board’s policies and potential risks to the organization.

2. The Board and CEO have channels of communication where open, trust-building, fact-based discussions can occur, where dissenting viewpoints and conflicting ideas can be aired out and discussed professionally.

E. Quality of communication:
1. The CEO brings to the Board’s attention in a timely manner any change in circumstances that causes the CEO to question a Board policy or direction.

2. The CEO consults with the Board in a constructive manner, laying out information and engaging the Board in a process to explore alternatives.

3. The Board encourages the CEO to bring forward strategic recommendations that the CEO thinks will benefit the organization and its mission.

4. Board members give the CEO’s recommendations respectful consideration.

5. Board members are open and flexible, able to re-evaluate their assumptions and explore alternatives in a constructive manner.

6. Board members recognize the consequences when they say something in public that reflects poorly on the organization.

F: Inter-personal relationship building:
1. Board members and the CEO recognize that building strong relationships through regular inter-personal interaction is key to building trust.

2. Board members and the CEO regularly provide appreciative feedback to one another.

3. Board members and the CEO recognize they are mutually responsible for the success of the organization and that any conflicting loyalties to another cause undercuts confidence and trust.

4. There is a demonstrated willingness by Board members and the CEO to admit mistakes, apologize for slights, and acknowledge failings in a timely manner.

5. There is a demonstrated willingness to forgive and move on once an apology is given.

Eric Douglas

For more than 20 years, LRI has successfully helped a wide array of government agencies, nonprofit organizations, and corporations achieve breakthroughs in performance. Eric's latest book “The Leadership Equation” shows how leaders can achieve strategic clarity, manage change effectively, and build a leadership culture.