How to align your board and management to achieve your strategic goals

This paper, written by Deloitte Consulting, provides board members and executive leaders with a practical approach and framework to evolve their relationship and optimise governance effectiveness. If you have any questions, contact Gert de Beer at gedebeer@deloitte.co.za, Garth Bell at gbell@deloitte.co.za or Carla Clamp at cclamp@deloitte.co.za.

Boards and Management renew their vowsA new era of collaborative leadership

A renewal of vows is a symbol of a renewed commitment between two parties. Sometimes parties renew their vows to celebrate relationship milestones and reaffirm their commitment to each other; other times, they renew their vows after a challenging period in their relationship, when their commitment to each other and their relationship has been tried and tested.

Arguably, the Board–Management relationship has been through a challenging time. It suffered a protracted period of scrutiny and tension due to various scandals over the past decade resulting from lack of oversight and accountability (Enron and Worldcom being the most notorious). This has resulted in corporate governance reform across a number of national and international jurisdictions, with a specific focus that boards and executive management be held increasingly accountable for the actions of their organisations. This heightened accountability has put a strain on the Board’s relationship with Management, a strain that has intensified during the recent financial crisis and which has resulted in the increase in Board oversight and involvement in corporate strategy, risk management, executive compensation and achieving sustainable, high-performance cultures. Although increased Board scrutiny on these dimensions is likely to improve business performance and better serve the interests of the shareholders, managing such a large agenda is challenging, and Boards cannot do it in isolation. The reality in this day and age is that Boards must work with Management to both inspire organisational performance and address the expanding accountability agenda. A significant challenge in this regard is the Board’s ability to engage and collaborate in a way that does not compromise its objectivity and independent oversight role.

To achieve the desired Board–Management relationship, a change from the status quo is most likely required for most private and public enterprises. For those organisations that aspire to strengthen longer-term performance and optimise governance effectiveness, the starting point is to understand the current governance culture and the Board–Management relationship, and how they need to evolve.

With this strategic opportunity in mind, this paper will provide Board members and executive leaders with a practical approach and framework to evolve their relationship and optimise governance effectiveness. Furthermore, it outlines an approach to collective leadership which should ultimately enhance organisational performance, increase shareholder value and address the need for increased accountability for inspiring and optimising the commitment of employees to strategic direction and operational performance.

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