How good is your structure and governance?
Questions for your board?
Does your structure work for the business or get in the way?
Are people crystal clear about the scope of their responsibilities?
Does matrix management work in practice?
Could the Board members state what matters fall to the Board to decide??
Do you have the right Committees to support the Board?
Are you certain that Board decisions are acted upon in every case?
Is there a balance of expertise on the Board sufficient to provide the necessary competence in all necessary areas?
Does everyone know the strategy and prioritise the implementation issues at the Board meetings?
Governance has risen to the top of the international agenda and remained in the spotlight following the financial crisis and subsequent investigations and reports across the globe. In the UK, the Walker Review and UK Corporate Governance Code have been enshrined in the financial services regulations. Good governance is here to stay on the regulatory agenda.
There are some common areas that can create a lack of clarity and sometimes conflict in governance structures. They are also matters the regulator has spotted and raised from their supervisory visits:
- matrix management, often indicated by a large mesh of lines on an organisational chart. Whilst not against any formal rule in practice they can create conflicting instructions from different sources, confusion about which Board or Committee has the ultimate authority to make decisions and sometimes can leave holes in terms of the scope of responsibilities.
- Wide spans of control, we have seen up to twelve people reporting to the CEO. The issue can be short term as re-structuring takes place but a quick calculation of the commitments of a senior manager with so many direct reports will often show that the job is not "do-able".
- New ventures or far away offices detached from the main business functions and who can be poorly supervised and fall below the radar of the Board. They are often the source of problems simply because they are not effectively managed.
- Diverse functions grouped under the same director, which can be inevitable in small businesses but can happen because nobody knows where to put those items or they fit the person, rather than making any logical sense.
Most Boards will tolerate their Governance Structure until prompted by a major change or challenge from a Non-Executive Director or the regulator to carry out a review.
In our experience every assignment has its own challenges and no organisation is the same. We work closely with the Chairman or Company Secretary to set out and agree a clear plan of action, communicate clearly and set clear goals to meet to ensure you have the right structure and governance in place. You will find more detail about how we conduct reviews in the Board Review section.
“Ultimately, management are responsible for running firms and ultimately firms fail because of the decisions taken by their boards and their management. These decisions are made within a firm’s corporate governance framework. The crisis exposed significant shortcomings in the governance and risk management of firms and the culture and ethics which underpin them. This is not principally a structural issue. It is a failure in behaviour, attitude and in some cases, competence,” FSA April 2012.
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