A Skills Audit is not a Governance Review!

I am by no stretch of the imagination a car enthusiast or aware of the process of carrying out a service for my car. But a quick search on the internet prepared me with the following shortlist for what happens at a car service. I have amended the list and summarised in parts, so please don’t use it as a basis for your next car service!

Before I get into the detail, there are three things that I have noticed about the service of my car that I think every good review procedure should have:

 

1.     I am notified because of the on-board computer of any impending danger to the safe driving of my vehicle so that I can take corrective measures straight away. In a similar vein, every board should have a mechanism, perhaps a set of indicators or an internal audit process that works like an on-board computer, keeping track and letting the board know if any urgent action needs to be taken.

2.     My first service is carried out after a designated number of miles have been reached or one year after purchasing the car. Once I reach this limit, I get a warning so that I can book it in for a service. This service is carried out regardless of how well I think the car is running and although it is not a major service, it still needs to be done. Boards should be made aware that they should carry out an annual review of their governance, even if they think they are effective and operating effectively.

 3.     After the first service and at some point around the 3 year point, I normally have a more extensive service where a number of the parts are replaced. Boards should have a comprehensive governance review (externally facilitated where possible), with a robust documentation review and board observation every 2 to 3 years.

 

At TGF, we use our BASE (Board Appraisals, Systems and Evaluation) model for carrying out reviews and at the risk of over engineering this analogy, I have broken the process down into the stages that I identified for the car service, plus a final stage.

Stage One – Pre-work inspection – (This is where the garage would review body defects, the lights, wipers, horn, mirrors etc.) Just as the garage would want to ensure a driver could drive safely, I would want to ensure the board has all the tools to operate properly. I like to carry out a preliminary document review which includes a brief discussion about the frequency and nature of board meetings and the size, expertise and composition of the board. The minutes, terms of reference for the board and committees would be reviewed here. In much the same way, the pre-inspection work would help to indicate where further focus may be required in the review.

Stage Two – Low level operations – (The garage would then check aspects such as the condition of the battery, level of anti freeze, seat belts, air filter, fluid levels etc. These functions are critical to the smooth and safe running of the car). If you want to ensure that your organisation is effectively governed, the next thing you will have to look at is the board members themselves, the meetings and compliance with governance best practice. To do this, I normally suggest that a basic skills audit of the board members is carried out to ensure that the core competences are in place and the diversity of background skills and experience is looked at. It is also at this stage that the board should be asked to consider how the information they receive and the format of the board meeting agendas allows them or hinders them in carrying out their role effectively. The timing of meetings, attendance of members to meetings and frequency should all be reviewed at this stage. Finally, I like to carry out a review of compliance with a governance code and establish the evidence against the categories identified in the code.

Stage Three – Core operations – (This is where the garage will ensure that all the key areas of the service are checked for example the wheels, tyre depth, brakes and suspension, steering). In our governance review, we now need to determine the capacity, competence and performance of the board. Are the board able to steer the organisation in the right direction, can they put the brakes on when it is required? Just like a car needs good suspension for the bumpy rides, you should consider how resilient the organisation is to the internal and external influences on performance, sustainability and achievement of objectives. Board members should have annual appraisals of their performance and the results used to ensure that they have collective feedback where training needs are identified and also individual goals to improve their performance. Board members should also contribute to a more robust appraisal of the board’s performance and the committee’s performance. The discussion could be initiated with questionnaires, a workshop or a mixture of the two. What is important is that the results of the discussion form an action plan that the board can work towards achieving.

The final stage… Road Test! (This is where the garage will carry out a road test to ensure that the car is running properly, particularly where major parts have been replaced.) The final stage of the governance review should also seek to get assurance that the board is carrying out its role effectively. An organisation may seemingly have all the right documentation, have regular meetings and be fully compliant with the codes of governance. But on further assessment, just like a road test on your vehicle, this might reveal that the car isn’t running smoothly or as well as you would expect. The final stage of the review should be a qualitative review of certain documentation. To get a feel for the content and decision making processes, three or four sets of board minutes should be reviewed, there should be at least one board observation and committee observation. In a three year cycle, some element of stakeholder feedback would also be beneficial at this stage and tracking the risk plan and corporate plans in the attitudes, comprehension and behaviour of the board is also important.

 

I don’t try to service my car myself, in fact I would go to the extreme and say I don’t do anything except drive the vehicle and respond to the warning signals of the on-board computer. I even have a satellite navigation system which helps me navigate my routes in the most effective manner providing I know where I am trying to get to. I am not suggesting boards have a hands off approach to governance and let the ‘governance experts’ dictate every aspect of your governance. I am suggesting however that boards should make use of experts and the tools and resources to help them to competently execute their role, which is to drive the organisation forward to the destination that they have determined.

 

Until next time…