Connecting...

W1siziisimnvbxbpbgvkx3rozw1lx2fzc2v0cy9nywx2aw4tcm93bgv5l2pwzy9ibg9ncy1kzwzhdwx0lmpwzyjdxq

News

Even if you’re not in financial services, you need to be rethinking how you interact with your board NOW

by Andrea Durrant

W1siziisijiwmtkvmdivmtgvmdkvmjavmtivntqvqw5kcmvhier1cnjhbnquanbnil0swyjwiiwidgh1bwiilci4ntb4ntawiyjdxq

There has been a large volume of reporting on the Royal Commission, but less about the implications for executive management teams who work with boards. While the Royal Commission focused only on the financial services sector, all good boards are seeking to apply the lessons learned from it. One of the ‘unintended consequences’ of the last nine months of Royal Commission activity is that, in many cases, relationships between boards and management teams, which are so pivotal to the successful performance of both, have come under pressure.

High performing boards develop and demonstrate high levels of trust and respect which facilitates openness and disclosure in the boardroom. So any deterioration in the quality of relationships and dialogue between the two parties has the potential to impact the openness each enjoys with the other.

The area that is probably most problematic now in the engagement between boards and management teams is that of organisational culture. Kenneth Hayne brought the spotlight to all areas of non-financial performance and reporting, but particularly highlighted culture.

The trouble is, it’s also the most difficult area to obtain meaningful data on, particularly leading indicators. We are seeing innovative new artificial intelligence and other tools come to market which go some way to address this, so I am hopeful that this challenge will dissipate over time.

10 areas all executives should be reviewing following the Royal Commission

These are the key recommendations by the Royal Commission which boards will likely emphasise:

  1. Rigorous non-financial performance reporting, including leading and lagging indicators, particularly emphasising customer and culture, with independent (external) validation of management reporting

  2. Insistence on appropriate timeliness and quality of all performance information provided to the board

  3. A greater degree of rigour in the challenge boards provide to management - “don’t tell me, show me”

  4. Regular assessments and reporting on the quality of culture and governance to identify where practice can and should be strengthened; assessments to consider cultural drivers of misconduct (our emphasis)

  5. Risk management and mitigation plans with clear timelines and accountabilities to address any gaps or issues identified in assessments

  6. Regular reviews of interventions to determine whether changes made have been effective

  7. Regular monitoring and reporting on remuneration practices and the behaviours they drive

  8. Clarity in organisational structures and design for management and employees’ accountability

  9. The board to be aware of significant issues and to intervene to ensure appropriate and timely remediation where required

  10. Regular board renewal and rigorous and independent reviews of the board

Further food for thought: quotes from the Royal Commission

  • “I wish the board had pushed management harder to resolve an issue more quickly”

  • “The business too often failed to put customers first”

  • “The board was too trusting of management”

  • “The nature of challenge is changing over time”

  • “The board was too willing to hand out bonuses despite issues”

  • “We took too long to fix problems”

  • “We seem, as an organisation, not to be comfortable with setting expectations for people and holding them to “account”

  • “Rather than just telling someone to fix a problem, the request would be made in terms of "I would encourage you to…"

  • “There is a tendency to rationalise why actions have not been taken"

If you have any queries about how to apply the Royal Commission recommendations in your organisation, or about your Executive team interacts with your board, please phone Andrea Durrant on +61 3 9502 0548 or visit boardsglobal.com