Challenging Entrenched Governance Ideas.
Last week I had the great pleasure to present at the Governance NZ AGM in Canterbury. The topic was; Behavioural Governance the Future of Board Performance. The presentation covered two key themes; Behavioural Governance, and The Third Team and why they are the future of governance for high-performing organisations.
A synopsis of the presentation is this:
The third-team model challenges a range of closely held beliefs within governance circles. These beliefs result in the failure of executives to use the board’s intellectual capital as a strategic resource for the benefit of the organisation.
Contrary to popular belief, defining the combined board and executive as the third team does not imply the destruction of organisational hierarchy. In fact, the third team facilitates the continuing existence of hierarchies and structures; it defines how the boundary between board and management is bridged, enabling the board’s intellectual capital to improve organisational performance. And surely that’s what they’re there for? As long as hierarchy and structure add value to performance, there will be a need for the relational space defined as the third team to span these boundaries.
A board’s ability to influence the performance of the organisation it governs ultimately depends not on one single characteristic but on a complex mix of multiple characteristics and attributes.
Importantly, it is specific attributes and characteristics contained within the Third Team that are important in facilitating the board’s ability to influence organisational performance. This has led to the understanding that it is the board and executive combined as the third team whose behavioural governance influences organisational performance.
Alongside this, was the simple, yet not widely held or understood fact, that boards influence organisational performance, while the executive impacts organisational performance.
Lastly, the topic of board reviews was discussed and how the elements of Behavioural Governance and the Third Team combined into a review that gives the organisation a multi-level 3-dimensional view of the board, executive and their combined and individual performance.
Essentially, if we can accept that the combined board and executive, are the Team with the most influence over, and impact on organisational performance. Then shouldn’t we also accept, that understanding how the board and executive function as a team is imperative to enhancing organisational performance?
Sadly, more often than not, the currently popular methods of review only serve to impress the stakeholder with the idea that a great deal is being done, when, in reality, very little is intended to be done. Thereby ensuring that it is also quite harmless to the individual and collective egos of those involved, the directors.
I outlined six elements that make the current processes utilised for reviewing the board and executive as separate teams and not as a collective ‘Third Team’ problematical:
A board’s collective preference for simplicity.
A boards general aversion to any measure that highlights dissonance and ambiguity,
Their deep-rooted belief that they operate in an orderly world, which is somehow, disconnected from the executive. The chamber of secrets
That no one, but them “truly understands what they do”
That the level of secrecy surrounding board reviews and their outcomes damages the trust and confidence that all stakeholders (including the executive) have in the process.
There is a general lack of understanding of the importance, impact and influence that the collective and individual characteristics and attributes of the third team have on organisational performance.
The use of my methodology allows organisations to develop a profile of their Third Team’s behavioural governance.
This behavioural governance profile provides the basis on which the Third Team can review how its performance is influencing and impacting the performance of the organisation.
Furthermore, the behavioural governance profile provides the opportunity to develop and enhance the skills and functionality of the Third Team.
Thereby, empowering the Third Team, to drive the organisation’s performance in a collaborative and mutually accountable way. And surely that’s what board's and the process of board performance reviews are meant to achieve?
Thanks for your talk last week. I and my guest talked for ages afterwards about the importance of the acceptance & fostering of the 3rd Team & how this challenges traditional thinking of the separation of Governance & Executive. I liked your differentiation of “Influencer” & “Impactor” – nicely articulated. A wonderful presentation – you are truly a governance thought leader!