Forecast for 2017 - Government boards

Directors of government boards operate in an increasingly volatile and short-term environment. Alexandra Cain reports on the challenges for the year ahead.

Expect 2017 to be another busy year for directors on government boards. With the 2016 federal election settled, Federal Government boards will be managing their response to the long-term policy rollout process.

At a state level, there is lots of action due to the infrastructure boom. Local councils are also extremely active managing property development and social services programs.

The Hon Tom Stephens OAM GAICD knows the challenges of government and governance well. The former long-term Western Australian state parliamentarian now holds multiple directorships.

“The main challenge facing directors of government, or any other organisation, is to maintain the highest ethical standards while bringing high levels of professional expertise to the boardroom, in the service of the community,” he says.

Stephens says adopting and securing the implementation of good policy that responds to community needs has to be a major focus for government boards this year.

He says government board directors should also ensure the boardroom operates to the highest ethical standards. By doing this, the aim should be to create maximum benefit and minimise risk, do no harm, respond appropriately to those in most need and be a good corporate citizen.

A challenge for directors, according to Stephens, is to be alert and cognisant of government policy. This involves being always ready to engage appropriately and transparently with government in discussing, shaping and delivering policy that responds to community needs.

“‘Open, frank and robust’ should be hallmark traits of the relationship. Where this is not on offer there should be a parting of the ways. Directors who bring independent expertise to the role, bolstered by high ethical standards, will help ensure narrow partisan political preoccupations don’t come into play,” he says.

Sector-specific challenges

John Peberdy GAICD is the chair of the Victorian Managed Insurance Authority. His organisation is facing challenges particular to its sector, the financial services industry.

“In the financial services sector, the whole question of investment returns is a challenge. The expectation is for them to be lower than in the past, thanks to low interest rates and higher volatility of returns. This will reduce income significantly for financial services businesses such as ours,” he says.

Another challenge for government boards is recruiting and retaining talent at senior levels in light of the difference in pay and conditions in government compared to the rest of the market.

Says Peberdy: “People come into the sector, but often they do not stay long and these are very talented people who could make a real difference. Building capability in the organisation is a key priority for most boards, so this is frustrating when you recruit someone and within a year they have gone back to the private sector.”

In terms of the intricacies of government boards, he says achieving long-term thinking during short-term political cycles is a significant challenge.

“You are subject to the politics of the day. Boards of government organisations feel that more than most because we are trying to deliver a long-term commitment, which can change with governments,” he says.

Filling board seats is another perennial issue for government boards. Many appointments are political in nature, which is quite different to the way other board appointments are made.

Juggling act

Government directors must also ensure government departments are consulted, which adds an extra layer of complexity to decision-making. Additionally, ongoing government reviews of the business can be a distraction from the organisation’s main purpose.

Stakeholder management is also top of mind for Sophie Devitt MAICD, chair of Stadiums Queensland, which manages and operates the state’s major sports facilities. It has two major live projects, the new Townsville Stadium and State Netball Centre, and its venues will also be involved in the 2018 Commonwealth Games.

“There is a range of stakeholders who have an interest in these projects, and it is important that everyone’s views are considered as they progress,” says Devitt.

She says the way to manage this is to ensure that there is good dialogue between the organisation and each of the stakeholders. “It’s about having a good exchange of information and working collaboratively. This is something we always do, but there is an extra focus around this right now,” she adds.

Local focus

From the perspective of local governments, Michael Tudball AFSM FAICD, chief executive officer (CEO) of the Southern Grampians Shire Council, says working within the legislative environment requires ongoing management.

In Victoria, a local government legislative review has prompted significant changes to how councils and their executives operate. Tudball says the review would have benefited from further consultation between the government and councils about the best outcome for this process.

Having a relationship with a mayor who has no real power other than a titular and spokesperson role, but who ostensibly leads the council, is another challenge “You can’t be as agile in local government. That’s a challenge that’s not going to change in the near future,” he says.

Tudball identifies proper training for directors as another stricture. “Directors should have some training to give them basic skills. Governance is a big part of local government and councillors and board members must understand this responsibility.”

Another problem, applicable beyond government sector boards, is balancing community expectations with an organisation’s capacity.

“Sitting at a corporate boardroom table you don’t get to interact with the organisation or the community like not-for-profits (NFPs) and local government. But local councils are in the local community all the time and communities have huge expectations. But councils only have a certain capacity to deliver. Balancing that community expectation with council capacity is tough.”

According to Tudball, an emerging trend known as ‘deliberative engagement’ is another issue. “Deliberative engagement is being able to demonstrate to government or the board that you’ve deeply consulted with the community. It involves ensuring the community has the information it needs, that you have sought its feedback and you are able to demonstrate that you have responded to that feedback,” he explains.

Building on the theme of having the capacity to deliver to expectations, Tudball says being able to demonstrate that the organisation has discharged its deliberative engagement obligations will place further imposts on councils that are already stretched for resources.

“It’s going to be interesting to see how much time organisations really do have to spend out there consulting. It’s vital to consult, but you still need to deliver. I have 18,000 direct constituents and consulting them on every decision will produce paralysis. How we resolve the balance between community engagement and consultation, and delivery for the people elected to represent their communities is a challenge for us into the future,” he adds.

Top Five Concerns For Government Directors

• Balancing a short-term political cycle with the long-term objectives of their organisations.
• Building organisational capacity when staff leave to take a position in the private sector and building directors’ governance skills.
• Being able to demonstrate adequate consultation with stakeholders while being able to roll out effective programs within a reasonable timeframe.
• The added complexity of consulting with government departments during the decision-making process.
• Building an effective board culture in the event that a director’s appointment is political rather than skills-based.