WATSON Views

When governance is not working well, directors usually know there is an issue. But unless they are steeped in governance practice, they often aren’t quite sure where to start or how to fix the problem.

When people come to us, they often describe a symptom (e.g., tension between the board and management, meetings that don’t accomplish much, lack of alignment on strategy) but are hard-pressed to identify the root cause. As with many complex structures such as governance, the basic rules are easy to prescribe, but how it works in practice is nuanced based on the organization, its context, and people. This is further complicated by evolving standards of good governance, which inform what is expected of directors to exercise their duty of care.

In thinking about how to help our clients navigate the complexities of governance we decided to peel back the onion and detail, in a comprehensive way, the many elements that go into good governance and how they interrelate. The result is the WATSON Governance Model, or as we like to call it, the W, a straight-forward framework that visually depicts governance in a way that resonates with both boards and management teams across sectors, from non-profits and government agencies to public companies and family businesses.

The Foundation of the WATSON Governance Model

Individuals involved in governance bring a variety of views on what is important, where the board should focus, and how decisions should be made. Without a common language and approach, boards often find themselves muddling through meetings, frustrated by lack of alignment, while eking out slow progress. While shared language and processes are important, the single most important factor differentiating a great board from a good board, is a collective intention to achieve results.

The W (and for that matter, all of WATSON’s work) is founded on our Governing with Intention™ approach. It’s a new way of thinking about governance and is built on three simple tenets:

1. Governance is directly connected to Purpose
2. Shared Belief in the value of governance
3. Mindful Design

The 5 Elements of the W

Boards that govern with intention start by understanding that a board’s singular purpose is to ensure the organization achieves its goals. In designing what they do and how they do it, directors consider the evolving external context (Context), what areas the board oversees and how (Organizational Stewardship), what is required of the board and directors to carry out their responsibilities (Board Stewardship), the most suitable structure and processes to do their work (Framework), and how to foster healthy and productive relationships (Dynamics).

WATSON’s W unpacks the world of governance and presents a holistic view of what it takes to govern an organization. The five governance elements include:

• Context: directors must constantly be aware of the context in which the organization is operating, the evolving external environment, legal and regulatory requirements, changes within the sector, and broader social changes. In addition, with an increased focus on director accountability, expectations of directors are evolving. Boards that govern with intention are alert to their continually changing context and emerging standards for good governance.
• Framework: the governance framework refers to the structure, practices, and processes the board puts in place, or has in place, to carry out its responsibilities. A sound framework provides clarity around two areas: structure (board size, composition, term limits, board leadership, and committees) and process (forward calendar, agendas, meetings, information, and decision-making processes).
• Dynamics: governance is ultimately about people – people who must work together as functioning teams to achieve results. The human dynamics in the boardroom, and the relationship between the board and management, are critical elements of board effectiveness and some of the hardest to get right (and remedy when broken).
• Organizational stewardship: to fulfill their responsibility to supervise the management of the business and affairs of the organization, and to exercise their duty of care, directors choose where and how to focus their efforts. Over time, a strong consensus has evolved as to the types of activities in which directors should be involved, including establishing purpose, direction, and strategies, safeguarding and making efficient use of resources, ensuring strong leadership, and monitoring performance. The list of areas the board oversees has evolved over time as new and emerging areas arise – from DEI and ESG, to people and culture.
• Board stewardship: part of every board’s responsibility is to make sure the board itself has the capacity to carry out its responsibilities and appropriately steward the organization. It is the board’s responsibility to ensure a competent and high-functioning board by focusing their efforts on renewal, recruitment, orientation, education, evaluation, and succession planning.

Intentionality Behind the Design

The five elements that form WATSON’s W are intrinsically linked together and can rarely be addressed in isolation. For example, if you’re constantly bringing new directors up to speed, it may be a function of director terms or the legal structure of your board, as well as recruitment and orientation practices. If you focus your board DEI efforts on recruitment, you miss fundamental structural and cultural factors (think meeting timing, compensation, and the critical role of the chair). If your board-management relationship is fraught with tension, these dynamics may stem from meeting design and the quality of meeting materials rather than the individuals themselves. Understanding the interrelated nature of the governance elements helps to identify and mitigate unapparent issues with far-reaching consequences.

All five elements are equally important. There is however, intentionality to our design that reflects how we think about governance.

Above and Below the Line

Nine times out of 10, when boards come to WATSON for assistance, they start by describing an issue above the dotted line.

“We want a stronger board that adds value to the leadership team; how do we recruit better directors?”

“Can you help us enhance director performance through an evaluation process?”

“We need a more strategic board – can you facilitate an off-site strategy session?”

“Our CEO just announced their retirement; can you help us find our next great leader?”

Although each of these are important components of organizational and board stewardship and must be addressed by the board, when we start to dig deep, we often uncover contributing factors from below the line.

Most boards focus on what they know they have to do. When WATSON thinks about a board’s responsibilities, we look at the elements above the line as the ‘what’ – the board’s work – and those below the line as the ‘how’ – how the board carries out its work. Stewardship activities – the things above the line – tend to fill forward calendars and meeting agendas – what the board must do, year by year, to be successful and fulfill its role governing the organization. Boards need to be prepared to dig down to uncover the underlying contextual, cultural, and structural issues impacting board and organizational stewardship. We find that the issues that trip boards up and impede their ability to be successful in fulfilling their stewardship responsibilities often stem from their governance framework or dynamics. The reality is boards get so caught up in what work they are doing they often forget they have the power to control how they do the work.

Renewal – So Important it Gets its Own Spot on the W

At the end of the day, governance is all about people. Frameworks and processes be damned; without the right people around the table, your board can never achieve its full potential. By giving renewal its own spot on the W, we want to highlight the need to focus on people – from how you recruit, orientation that is more than a 2-inch board manual, tailored education, ongoing evaluation, to a long-term view to succession planning.

The Central Framework

The focus needs to shift from simply putting a structure in place to understanding how the right governance system works for your board and how to structure your board for maximum effectiveness. The governance processes and composition that work for a national non-profit won’t meet the needs of a publicly-traded telecommunications company. Board structure and composition also change over time as systemic sector-wide issues are surfaced and addressed. Professional regulatory bodies are shifting to more public representation (versus registrant), federated non-profits are clarifying and shifting roles, boards across sectors are seeking more diverse directors and embedding inclusion and equity in their board’s practices and culture.

If you’ve seen one board, you’ve seen one board.

Boards need to take this deliberate approach to all aspects of their governance framework – from designing value-adding board committees to being thoughtful about how they structure their meetings and find the right balance between in person, virtual, and hybrid. And where intentionality is most critical yet perhaps the most challenging to execute, is in board leadership and succession (remember, governance is all about people).

The Cornerstones of Governance

It is no coincidence that dynamics and culture sit as the cornerstones of our governance model. Sitting outside the W, these two elements have high impact yet do not always garner adequate board attention.

• Dynamics is one area that has been historically undervalued and understudied in boardrooms. Outside of the boardroom there is a collective acknowledgement of the importance of culture on organizational performance. Only recently has this wisdom been transferred to the boardroom. Intentionally designed culture and attention to director dynamics can make the difference between a value-adding board and a dysfunctional board.
• Context is the other cornerstone that has a dramatic influence on board process, structure, and strategic agility. In governance, no one size fits all and this is no more apparent than in the legal construct and sector norms influencing board structure. Consider the different makeup and requirements of a university board from those of a foundation. Boards that pay attention to context are better prepared to navigate successfully through the external changes happening around them.

And as for the actual W, with a name like WATSON, well, we just couldn’t help ourselves!

Put the W to Work

Tired of the director who feels the need to comment on every mundane thing that comes before the board? Frustrated by board meetings that never accomplish anything? Dreading the thought of a virtual offsite? You are not alone; however, these challenges beg the question: where to begin. Take the case of the overly participatory director. Is it the result of a bad recruitment choice? Ineffective orientation? Burdensome meeting rules? Or is it a function of the board’s culture? When was the last time you provided directors with feedback? Or is your chair playing ostrich, sticking their head in the sand and avoiding the situation?

It’s easy to point the finger at the symptoms of poor governance – unproductive meetings, ineffective committees, a lack of trust between board and management. It is much harder to connect the dots to identify the causes of the underlying issues. There are a lot of pieces to governance and to the board’s work, yet it can be challenging to see their interdependencies, especially when you’re in the thick of it.

Boards can take a proactive approach to their governance by putting the W to good use. WATSON’s W Governance Model was designed to help organizations and boards perform better. Over the years we have watched clients incorporate the W into their governance to help:

• Orient and educate new directors – by bringing a universal model to the table, directors develop a shared understanding of governance and are able to identify how to mindfully design governance practices, processes, and policies.
• Evaluate board and director performance – the comprehensive model helps boards see how the various governance components are interrelated and think about their board functioning in a more holistic way. Over time, boards are better equipped to identify, discuss, and solve governance problems.
• Rise above the fray – boards are most comfortable working in their governance, not on their governance. The W helps them see the forest through the trees and lets them look down at all components of governance to pinpoint where the root of the problem may be.
• Drive focus – when the right framework is in place, there is a foundation of inclusion, and information is timely and trusted, boards can shift the dialogue to the issues that matter most.
• Recruit better directors – boards that have a well-defined purpose (and supporting strategy), an appreciation of their culture, and equitable practices are better equipped to identify the diversity, character, competency, and commitment they need from incoming directors and can be more thoughtful in their recruitment.

A board’s work happens around the table, but its impact extends beyond the boardroom walls. Board decisions shape organizational culture and strategy. Boards guide the management team’s work and focus. They influence the organization’s social impact and how the organization interacts with members, rights holders, and stakeholders. A great board pays attention to all five governance elements and their interdependence. They mindfully design their approach to governance to ensure that the focus is on the dialogue and decisions that matter most to their organization’s success.

People in a New Paradigm

The summer months lend themselves well for time for reflection and perhaps this summer more than ever. While many of us are looking at the pandemic through the rear-view mirror, boards are bringing key reflections forward to the road ahead of them. And many of those, with no surprise, focus on who is most deeply affected and creates vital value to an organization: its people.

Pre-pandemic, the board’s role was already in a state of evolution. There was increased awareness of people-related risks (e.g., workplace culture, ethics, attracting talent), and more attention to diversity, equity, and inclusion (DEI). There were evolving HR committee mandates to better reflect consideration of human capital, people, and culture. We saw an increased demand for HR skills in director searches and board skills matrices. And boards were looking for increased reporting on people dashboards and strategies.

With an almost overnight change to the workplace and a universal pandemic-spurred strain, the spotlight veered decidedly to the people. We see increased worry about retention, talent shortages, and now economic disruption. Leadership and employee fatigue are ongoing concerns, coupled with higher scrutiny on how employers support workers’ health, livelihoods, and dignity.

We’ve witnessed resilience, adaptability, innovation and, in equal doses, strain on relationships, fatigue, and the struggle for work/life balance with blurred lines between the office and living room. What we now know is, the board’s role in the oversight of human capital and organizational culture has never been more critical.

There is organizational impact by and on people at every level. And while some solutions are simpler to tackle, boards need to be attuned to them all. Consider these:

• Shifts in business models and an increased emphasis on the link between people, leadership and culture, and an organization’s ability to compete and succeed
• Exposure and amplification of stories such as unsafe workplaces, sexual harassment, modern slavery, poor labour practices, inequitable workplace policies, etc.
• Shifting priorities in some demographics, with talented workers prioritizing and demanding healthy culture, growth experiences, wellness, and balance; perhaps more than in the past
• Increased expectations for CEOs and organizations to make public their views on issues of social justice, with potential backlash if coming across as inauthentic
• Investor, funder, and other support expectations in terms of ESG, purpose, and DEI
• Global demographic forecasts that predict skills and talent shortages, and intense competition to address them

And the worker-employer relationship has been put to the test, too. We are seeing a relationship that is fundamentally changed, and still evolving.

So, what should boards be doing to keep pace?

• Keep your eyes open. Build your board’s awareness and increase directors’ understanding of the workforce challenges executives/management teams face in a post-pandemic world, as well as the longer-term trends requiring increased attention.
• Stock your toolkit. Ensure the board and management have the skills, practices and focus to navigate these people-related shifts, challenges, risks, and opportunities.
• Ask the right questions. Be a sounding board for management and support management to think strategically (short, medium, and longer-term) about people, culture, and leadership.
• Get (and use) the data. People issues can feel difficult to quantify, but you must establish metrics to measure progress on people-related initiatives and monitor risks.
• Seek out new voices. Recruit board members with diverse lived experience and fresh perspectives. This might involve looking beyond your usual networks – a search firm can help.

If you’re unsure where your organization stands on people-related issues impacting businesses, consider taking dedicated time for your board to answer these thought-starter questions:

1. Are we skilled, organized, resourced, and prepared as a board to address these complex short, medium, and long-term people and culture issues?
2. How are labour market developments impacting our organization? How do they intersect with evolving technology and other forces?
3. What are our retention risks? And more importantly, which roles and talent are mission-critical and need additional focus? What succession plans do we have in place, and which succession processes do we use?
4. Are people burned out and disengaged? And what implications does this have (e.g., productivity, strain on management, fracturing of culture)?
5. How will we meet expectations as a workplace over the next couple of years, assuming we will continue to face disruption?
   • Flexible work hours? Flexible work locations? Work from anywhere?
   • How do we show appreciation?
   • How will we reinforce culture and values?
   • How do we ensure standards and practices are being followed?
   • What do health, safety and wellness look like in a hybrid work model?
   • Are we evolving workplace policies?
   • What do we offer as total compensation, including non-monetary compensation?
6. Do we have our house in order with respect to DEI? Have we assessed ourselves and identified where and how we can strengthen?
7. Are we taking care of leaders? Are our expectations of them evolving? Do we have a plan and process for how we will ensure leadership resilience and succession?

If the pandemic has highlighted anything, it’s that when it comes down to it, we’re all just people, in this together, navigating our way through changing and tumultuous times. These issues are here now, and they’re not going anywhere.

We know it’s a lot to tackle and if a trusted advisor in your corner is what you need, WATSON is here to help.

WATSON’s Leadership & Performance Practice Lead, Rachel O’Connor, recently sat on two panels at the Council on Licensure, Enforcement, and Regulation’s (CLEAR) 2022 Virtual Symposium to discuss The Regulatory Role in Diversity, Equity, and Inclusion (DEI). Rachel and her fellow panelists – representatives from professional regulators at different stages of integrating DEI into their organizations and work – discussed regulators unique and crucial role in furthering DEI, along with challenges and opportunities inherent to the sector.

As regulators, you have many DEI touchpoints – your board and committees, the organization itself, registrants, and the public. This unique position provides regulators with an opportunity to address systemic issues, such as unequal access and outcomes for members of the public. Interested in making an impact? We think you’re up for the challenge.

Here are just a few key takeaways for those of you in the regulatory world, and some practical steps for your board to take, no matter where you are on the DEI journey:

• Professional regulators are at different stages of DEI – some are ramping up foundational capacity and understanding internally, while others are truly leading. Healthcare regulators have built capacity around cultural safety and humility as a powerful foundation for DEI in relation to Indigenous peoples. Regulators across professions can learn from each other here. As panelist Louise Aerts from the BC College of Nurses and Midwives succinctly put it: “You can lead while you learn, and you can also learn while you lead.”
• The importance of DEI in the health regulatory world is brought to life when you look at the recent In Plain Sight report, linking negative health outcomes to systemic racism against Indigenous people in British Columbia. Regulators can play a role here by linking DEI initiatives to competency requirements, and ultimately improving health outcomes for the public.
• The “E” in DEI can often feel nebulous, but there are many opportunities to increase equity on regulatory boards. For example, when was the last time you looked at your per diem and expense policy? Making small adjustments here could make a huge difference in enabling people with lower income or who require child or elder care to participate in board and committee meetings.
• “Be transformational, not transactional” advised panelist Carrie Waggott, College of Licensed Practical Nurses of Alberta. Invest in thoughtful initiatives that flow from the board to committees, the organization, registrants, and the public in key areas (e.g., registration, quality assurance, inquiry/discipline, standards)
• Engage in ongoing board and management education around DEI. This is a rapidly evolving area of governance, and your leaders should be up to speed on the issues facing your industry – and how to address them.
• Recruit a diverse board and management team – be creative about where and how you can have influence.
• Tie your leaders’ performance goals to DEI. Send the message that DEI is not optional and attach meaningful metrics so you can measure your progress and impact.

Thank you to CLEAR for inviting us to be a part of the 2022 Virtual Symposium. We look forward to seeing where the regulatory world goes next in terms of bringing diversity, equity, and inclusion to life for their boards, organizations, registrants, and, ultimately, the public.

Are you interested in more education for your regulatory board? WATSON’s Governance Academy offers tailored courses in a range of board and organizational stewardship topics, including DEI, designed to address the challenges facing your board. Our governance expert facilitators have experience advising regulatory boards across industries, and will get to know your unique context in order to provide the practical skills and knowledge your board needs. Click here to learn more about our Intentional Board™ workshops.

Asian Heritage Month has been an opportunity for us all to learn about the achievements and contributions of Canadians of Asian heritage, reflect on the biases that Asian Canadians experience, and understand the perspectives of Asian Canadians on boards, in the workplace, and beyond.

Canadians of Asian heritage have helped shape and continue to make valuable contributions to our society, culture, and organizations, just as they have faced and continue to experience significant adversity and racism.

This month, we celebrate these contributions and achievements, and the individuals behind them. Like Margaret Lyons, CM, the first female vice president of the Canadian Broadcasting Corporation, a Member of the Order of Canada, and a child of Japanese immigrants, and Senator Vivian Poy, an immigrant from Hong Kong, entrepreneur, author, historian, fashion designer, and the first Canadian of Asian heritage appointed to the Senate of Canada. These are only two of countless examples of leaders making an impact in Canadian culture and society.

And yet, according to Statistics Canada, visible minorities remain underrepresented in Canadian leadership positions. About one in ten Canadian women executives and one in fourteen men executives identify as belonging to a visible minority group, while they represent about one in five people in the workforce. Major visible minority groups represented among executives included South Asian and Chinese, with fewer Black and Filipino executives [source]. And while there have been gains in the diversity of directors of S&P 500 companies, directors of Asian descent remain underrepresented with only 7% of new board seats in 2021 (down from 8% in 2020), and only 5% of all S&P 500 directors. [source]

At WATSON, we strive to promote diversity, equity, and inclusion in each of our practice lines – through the governance advice and performance support we provide our clients, mitigating bias in director and executive searches, and governance education for boards and individuals. Here are some ways you can elevate diversity and inclusion in your organization.

• Diversity at the board table is essential to any organization’s success, and recruitment firms with access to a wide range of candidates beyond the personal network of current directors and management can help. Ask us about the methodology our Search team uses to reduce unintentional bias in the recruitment process.
• Foster an inclusive environment that encourages and embraces diverse perspectives. Considerations for things like language barriers and cultural differences when drafting meeting materials can go a long way and are often overlooked. Read more tips here.
• Reduce barriers to joining the board or taking on leadership opportunities like committee or board chair. For example, do some of your directors care for children or elderly family members? This could make it difficult to serve on a board with multi-day in-person meetings that involve travel. Create an environment where diverse perspectives can thrive.
• Is DEI part of the DNA of your organization? Boards of all shapes, stripes and stages of DEI need to understand where they are today and align on a vision of where they want to be tomorrow, but many struggle. Take our free self-assessment and see if your board could use a DEI Health Check.

As we close out Asian Heritage Month, join us in celebrating the achievements and contributions of Canadians of Asian heritage, learning more about the experiences and perspectives of this diverse group, and considering what we can all do to create a more diverse, equitable and inclusive workforce.

This month, the WATSON team shared some resources to educate each other and spark conversation amongst ourselves, and we would like to share them with you as well.

• About Asian Heritage Month
• Noteworthy Canadians of Asian heritage
• Events in Canadian history
• Canadian Asian timeline
• Canada-US trade leaders interview
• Forms of racism that Asian Canadians may experience
• What you can do to be an ally and see a list of great resources