CREATING YOUR BOARD’S KEY CONNECTION
By Caroline Oliver
If your board is really clear about the people on whose behalf it governs – your organisation’s legal and moral ownership - it needs to know how it is going to connect its authority with theirs, which is the subject of this article. If your board is not really clear about the people to whom it owes its primary accountability, you may wish to read the article Ownership and Boards first (available at www.goodtogovern.com).
The Board as Owner-Representative
Most boards represent a wider ownership of a size that prevents them from being at the board table in person. If you are an NHS Foundation Trust or a Further Education College for example, you are likely to think of your ownership as your local community who never make it into one room, not even to elect their representative to Parliament.
For the board to do its owner-representative job well, however, it is essential that it can demonstrate that it acts at all times in its owners’ best interests. It is also essential that it can demonstrate that it makes a consistent effort to connect with its wider ownership in order to account for its actions and ensure that owners’ best interests are being interpreted correctly.
Of course, not all owners are infused with the spirit of responsible ownership and you may well find that many, or even all, of your owners, knowingly or unwittingly, fail to operate in the best interests of that which they own. Some owners are utterly irresponsible – that is they do not care for your organisation beyond their own personal use of it, are not concerned with it as a whole and do not care if it is productive or safe. And, as long as they are acting within the laws of their land, they have every right to be so.
Day-traders care about the value of the companies they invest in but usually only from a very short-term perspective. Parents care about their local schools into which their taxes go, but typically not much beyond the moment when their child heads off to work or further education. Clearly, all of these owners are acting well within their legal rights. However the board has to remember that when owners legally or morally appoint them they are in effect out-sourcing their ownership to them. And, as owner-representative, unless it is directly told otherwise, the board has no option other than to assume that their owners wish them to play that role responsibly. In other words, in effect, boards are charged with being more owner-like than many owners are themselves.
The importance of the board accepting this charge is clear. Think for example of a small group of members of a conservation charity trying to commandeer a large chunk of the charity’s resources for an area in which they have a direct personal interest without regard to the wider impact on the charity . Even if the members concerned are legal owners (i.e. they are entitled to vote at the charity’s AGM), the board needs to be ready to defend themselves and their Chief Executive if such an action would not be in the best long term interests of the wider ownership. It is the board’s responsibility to be the link between owners and their organisations and the board that leaves its Chief Executive at the mercy of owners who do not realise that they are damaging their asset is a board that is not doing its job. In another example, governmental owners can be very prone to issuing instructions of such number and complexity as to tie the organisations they own into vast bundles of Gordian knots and the responsible board will not hesitate to point this out.
Being owner-representative is therefore not being merely a messenger between owners and executives. Nor is it about representing any sub-set of owners. It is about “standing in for” or “acting on behalf of” the ownership as a whole taking an informed view of their best interests. Therefore, the responsible board member is one who might say “I vote the way my owners would vote if they:
a) Knew what I know.
b) Had a future perspective.
c) Had an obligation to represent all owners.”
Building Owner Relations
The first step in building your board’s connection with its owners is to recognise that, without that connection, your organisation could become dangerously adrift from those to whom it owes its primary accountability and therefore its very existence. Large, widely-owned companies have long recognised “investor relations” as a crucial discipline. Yet for all organisations, what I might term, “owner relations” are a fundamental, indeed I would argue, the first, job of a board. The board may indeed employ others to help it fulfil this function, including the Chief Executive, but it remains directly and fully accountable for the successful performance of that function.
Every board needs good relations with its owners because:
a) Owners’ authority legitimises your board’s authority, or not!
b) Owners are the people to whom you ultimately have to account for everything.
c) The interpretation and fulfilment of owners’ best interests is what unifies your board members in common cause - it is your group job.
d) Your interpretation of owners’ best interests provides your ultimate touchstone for making difficult governing choices.
e) Your owner-representative role distinguishes your role from the role of your Chief Executive and staff.
f) A clear hold on the best interests of owners as a whole enables you to insulate yourselves and your Chief Executive from pressures that could divert your organisation from achieving its goals.
Designing an Owner Relations Strategy
The following sets out the elements involved in designing a typical owner relations strategy.
A Commitment Statement.
You will probably want to start with a statement of your board’s commitment to its ownership. This statement needs to:
a) Clarify who your legal owners are, along with any wider moral ownership that your board chooses to identify.
b) Set out your overall purposes in connecting with your owners which are likely to fall into the following categories:
1) To engage them in responsible ownership.
2) To be accountable to them.
3) To create the future they want.
An Owner Relations Plan.
Next you will want to create a plan to ensure that you follow through on your commitment to communicate with your owners. Your Owner Relations Plan time-frame can be whatever makes the most sense to you but one year is probably the minimum and three years the maximum. In building your plan you need to think about how your owners see their relationship with you now and whether or not you need to start from helping them understand what their ownership status means to your board. In other words your board needs to discuss the kind of relationship you want with your owners and to let them know that before you attempt to engage them in conversation. A typical plan is shown in Figure 1. below.
Figure 1. Example: Board-Ownership Linkage Plan Goals: 1) To engage our owners in responsible ownership. 2) To be accountable to our owners. 3) To create the future our owners want. Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 1 Agree Draft Ownership Commitment Statement Agree parameters for ownership database. Focus groups with selected groups of owners to confirm ownership commitment statement. Commence building ownership database. See previous quarter. Ownership Commitment Statement Agreed. Draft Owners Guide produced. Annual Report circulated and Annual Meeting held. Input sought on draft Owners’ Guide. 2 Ownership Commitment Statement and Owners Guide on website. Monthly communications to ownership database commence. Key questions for owner consultation developed. Consultation programme commences. Consultation programme continues., Annual Report circulated and Annual Meeting held. Discussion of alternative formats. Consideration of input from consultation programme. 3 Report to all participants and ownership database on consultation programme. Format and content of Commitment Statement and Owners’ Guide reviewed. Annual Report circulated and Annual Meeting held. Board-Ownership Linkage Plan evaluated. New plan drafted.
Example: Board-Ownership Linkage Plan
1) To engage our owners in responsible ownership.
2) To be accountable to our owners.
3) To create the future our owners want.
Agree Draft Ownership Commitment Statement
Agree parameters for ownership database.
Focus groups with selected groups of owners to confirm ownership commitment statement.
Commence building ownership database.
See previous quarter.
Ownership Commitment Statement Agreed.
Draft Owners Guide produced.
Annual Report circulated and Annual Meeting held. Input sought on draft Owners’ Guide.
Ownership Commitment Statement and Owners Guide on website.
Monthly communications to ownership database commence.
Key questions for owner consultation developed.
Consultation programme commences.
Consultation programme continues.,
Annual Report circulated and Annual Meeting held.
Discussion of alternative formats.
Consideration of input from consultation programme.
Report to all participants and ownership database on consultation programme.
Format and content of Commitment Statement and Owners’ Guide reviewed.
Annual Report circulated and Annual Meeting held.
Board-Ownership Linkage Plan evaluated.
New plan drafted.
The Right Questions. Part of helping your owners understand that they are owners is identifying the kinds of questions on which you are going to want their ownership input. Asking very open questions will often elicit customer input. This is not because people are not capable of thinking more broadly. It is generally because that is the only context in which your organisation has hitherto related to them.
In involving your owners in discussions about your organisation’s future you will often be asking them to think deeply about things that they have not considered before. For that you will need well-crafted questions which, if you get them right, can produce a wealth of new perspectives and possibilities. It is important that your owners understand that there are no wrong answers and that you tell them how you are going to use their answers and then report back afterwards about how you have used them. Do not promise more than you really mean.
As an illustration let us take the board of a further education college that wants input from its local community members as owners of the college on what they would like to see as the college’s priorities in the future. Asking “What do you think this college should do in the future?” is likely to produce a long list of items that stem from people’s own personal experience as actual or potential users of the college. However, clearly showing those same people the sources and amounts of the college’s likely income over the next twenty years and asking their opinions on the different options that the board is considering in terms of prioritising service provision within that income, should produce some rich and meaningful owner input.
Fullest Possible Outreach.
For the boards of organisations with large and diverse ownerships, being representative cannot mean relying on the input of individual board members who have been elected or appointed by specific sections of the ownership. Even if one person could reasonably be expected to reflect the views of many others, the board as a whole is the responsible body and has the resources to come up with far superior ways of finding out what ownership groups think.
Tools for the Job.
If your ownership is a large group you will need to consider if you want to use tools that give you the maximum outreach such as direct mail, mass media, telephone polling. The internet opens all sorts of possibilities such using email campaigns and other media to direct people to your website where you can offer information and interaction. There are a wealth of great resources to be found on websites that relate to community engagement and social capital as well as to books on subjects such as the “wisdom of crowds” and “smart mobs” many of which are very relevant to owner relations.
However, even if your ownership is a large group, you may be better off looking at more targeted options for reasons of cost and quality. A focus group will often be more productive than a public meeting.
As an overall resource, you could consider creating an owners’ guide to your organisation that you can distribute to owners whenever and wherever you meet them. This can help board members too who can use it to remind themselves of the main points that they want to communicate.
Every board’s standard reporting tools are the annual report and accounts which get presented to its legal owners. These are good opportunities not only for reporting but also for more general owner education and you might consider producing a short version of the annual report for wider distribution.
The Policy Governance® system¹ is a tool specifically designed to help boards organise themselves in their owner-representative role. Using this system, the board translates a judicious summary of owners’ wishes into written standards (or values or policies or whatever term your board wishes to use) for governing your organisation on behalf of its owners. Thus reporting to your owners becomes a straightforward matter of reporting on the criteria that you have established and how the organisation is doing against them. And, once you have your policies in place, you may well want to consider making them available to your owners. Many boards are putting their policies up on their organisation’s websites along with an explanation of the way they organise themselves using the Policy Governance system.
Communication Channels for Other Input.
People need to communicate with your organisation for all sorts of reasons and however brilliant your owner education, your board members are bound to be approached for all sorts of reasons that are unrelated to its governance agenda. Before implementing your Owner Relations Plan therefore it is important to make sure that your organisation has clear channels through which board members can direct non-owner communications such as individual customer suggestions and complaints.