Mission Driven Governance

I have just read an interesting article from the Stanford Social Innovation Review, which talks about mission driven governance. Given that the Summer Foundation is less than four years old, we are still working out our board culture and trying to find a balance between a ‘command and control’ focus and looking at ‘performance and impact’. I found this article really useful in the way it articulates the need to balance the legal aspects of governance with the behavioural elements to be a very effective board.

Following is a summary of the key points made in the article:

The prevailing governance model is fundamentally adversarial, pitting board members in a never-ending struggle with executives. This model may ensure that the legal requirements of oversight and compliance are met, but does little to advance the organisations goals. An alternate and more effective framework is one where board members and executives work together to advance the organisation’s mission. The inability of boards of directors and non-profit executives to keep their organisations focused on clearly articulated mission is a significant and overlooked governance problem. 

Legal perspective 

An adversarial model emphasises that the board’s function, as overseers of the organisation, with a focus on making sure that bad things don’t happen. This often results in a boardroom dynamic that looks something like “Let’s look for what is wrong with proposal x”. Accountability and oversight are absolutely necessary in achieving and maintaining public trust and the organisation’s legitimacy, and therefore are necessary elements of good governance. But there are many examples where governance structures that were adequate from a legal perspective still produced bad outcomes. In fact, it is not unusual to observe the simultaneous presence of poor governance and legally adequate accountability. 

Behavioural perspective 

An alternative focus encourages boards to make sure that good things happen. From the behavioural perspective, the goal of governance is organisational success as defined by the organisations mission (not accountability) and it is preoccupied with performance (not structures and controls). To produce good outcomes people have to work together, taking advantage of individual strengths. Consequently, the ideal relationship is based on trust, not rules. The primary role of the board is not oversight, which often creates a climate of conservatism and risk aversion; it is a group decision making that is robust and open to opportunities. The behavioural perspective often manifests itself in a cooperative dynamic that looks something like this “If proposal x will make us better, lets figure out a way to do it.” The legal perspective focuses on control. The behavioural component focuses on performance. 

The key to improving corporate governance is to incorporate both approaches into a single framework. The legal and behavioural perspectives exist in tension, which help explain the conflicted feelings board members and executive members bring into the boardroom. These tensions can’t be eliminated – they are an inherent part of organisational life – but if both perspectives are embraced, the tensions can be made more productive. 

	Legal perspective	Behavioural perspective
Goal	Accountability	Success
Preoccupation	Structures and controls	Performance
Means	Relationship based on rules	Relationship based on trust
Primary activity	Oversight	Group decision making

Summary from article by Fisman, Khurana & Martenson in the Stanford Social Innovation Review; Summer 2009; 7,3; pp 36-43

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