Decision Making & Governance
Having a clear governance structure helps to separate high-level decision making from operational matters.
Appropriate and effective governance frameworks should be a priority for delivering events of all scales. Governance models may be more complex for larger events but, at a minimum, there should be clear distinction between governance and operations, with clear reporting lines. Proper governance structures and processes will result in more effective decision-making, risk management and outcomes.
The New Zealand Institute of Directors publication entitled ‘The Four Pillars of Governance Best Practice for New Zealand Directors’ notes that there is not one universally applied definition of governance; however, it observes that all good governance guides and codes are underpinned by common principles and values, particularly the RAFT principles:
- Responsibility
- Accountability
- Fairness
- Transparency
Tips:
Governance Framework
To determine the most appropriate governance model, an Event owner should consider which is more likely to achieve the following four key aims:
- Minimise the risks for the event owner
- Minimise planning, delivery and financial risks for the event
- Meet aims and objectives of event owner
- Achieve optimum outcomes for stakeholders
Internal or External Governance
Consideration should be made as to whether the governance and management structure should operate within an existing organisation (e.g. a National Sports Organisation), or external to it.
- Internal Governance refers to being within the current legal structure of that organisation.
- Pros: Direct access to and influence with decision makers, lower direct costs.
- Cons: Potential expertise gaps, conflicts of interest, lack of clarity in roles and responsibilities.
- External Governance refers to establishing a separate legal entity which would have full governance, management and operating responsibility for the Event.
- Pros: High likelihood of an expertise-based Board with clear objectives and decision-making processes, clear reporting and accountabilities.
- Cons: Significantly higher direct costs of governance, indirect connection to stakeholders.
Determining which structural option - internal or external - is most appropriate will be influenced by three factors:
- The size, scale and complexity of the event relative to the existing organisation.
- The extent to which there is, or is not, a strong alignment between the expertise required to govern and run the existing organisation and the expertise required to govern and deliver the event objectives.
- The risk profile of the event relevant to the tolerance for risk of the existing organisation.
Types of Business Structure
Each business structure has different legal and financial obligations.
- Sole traders – are individuals who are starting in business or are contracting.
- Partnerships – a partnership is when two or more people or organisations form a business. A partnership agreement sets out how they’ll share profits, debts and work.
- Companies – a company is legally separate from its owners (directors and shareholders).
- Trusts – a trust is created when a person transfers property to named people (trustees) to be held for the benefit of people chosen by the settlor (the beneficiaries).
- Charitable Trusts – Charitable trusts can be set up by any individual or group to benefit a charity.
- Incorporated Societies – Can be an appropriate structure for the administration of sports clubs, social clubs, music and cultural groups, special interest and special purpose organisations.
The Role of Governance
The role of the Board for an organisation or event includes policy, strategy and direction-setting, with a clear distinction between Governance and Operational Management:
- Governance: (i.e. the Board) defines where the organisation is headed and how it will get there.
- Operational Management: undertake the activities required to achieve the goals and objectives set by the Board.
The Board will determine the organisational purpose, vision, strategies and values (e.g. through a strategic planning process) and in doing so will have responsibilities in the following areas:
- Business and Environment: Understanding of and insight into the business and external operating environment for the Event and the Event organiser, including legal, regulatory and compliance obligations.
- Impact of Unique Event Characteristics: Identifying the unique characteristics of the Event and how these impact on the risk profile for planning and delivery of the Event. These characteristics then determine the required Board and management competencies.
- Transactional Processes: Clarity in relation to the transactional processes by which governance is enacted. These processes can be grouped into: Decision making, Oversight, Communication, Ethics, and Integrity.
- Critical Success Factors: Identifying the critical operational success factors, both pre-event and during the event, which will vary by event type.
- Stakeholder Management: Understanding stakeholder needs and expectations, balancing these interests with the interests and priorities of the Event and having explicit strategies for stakeholder engagement.
- Board Competencies: Some governance-level Director characteristics apply in any Board composition situation, for example, demonstrated integrity, good judgement, commitment and dependability.
- Culture and Standards: Establishing the culture and internal operating environment for the Event organisation. These are achieved through effective leadership of the Chair, the conduct of the Directors and disciplined processes and documentation (e.g. Policies and Procedures Manual, Charter Document, Terms of Reference, Memorandums of Understanding, Role Descriptions, Reporting Templates etc.)
Board composition
A critical aspect in the formation of a Board is the quality of the people appointed. Governance experience combined with experience that is relevant to the purposes, objectives, challenges, and responsibilities of the Event is ideal.
- Expertise based: Appointments predominantly based on the competency needs of the organisation in fulfilling its purposes and objectives – to protect and/or promote the interests of the Event.
- Representation based: Appointments predominantly based upon stakeholder organisational interests – to protect and/or promote specific interests of a stakeholder or stakeholder group.
Size of the Board
- As a general rule, a Board numbering between six and eight members is usually found to be the most appropriate in medium to large size companies.
Role of the Chair
The Chair has an important leadership role – if the Board is overseeing the organisation, the Chair is overseeing the Board. The Chair:
- Understands the strengths and weaknesses of each Board member and ensures each Board member understands why they are there, both collectively and individually (i.e. to serve in the best interests of the Event).
- Sets the culture of the organisation and leads the relationship between Board and Management.
- Must be strong in terms of ensuring appropriate focus of the Board and Management, ability to empower and delegate, ability to lead effectively in challenging stakeholder and political environments and disciplined in ensuring suitable organisational monitoring.
- Is most likely to be the public face of the Board and in some instances, the Event. The role includes ensuring appropriate strategies and protocols for stakeholder engagement, including the media.
Useful Links:
- Institute of Directors New Zealand | iod.org.nz/resources-and-insights/new-to-governance
- Business structure overview | business.govt.nz/getting-started/choosing-the-right-business-structure/business-structure-overview
Have you considered?
- What governance structure will the event operate under?
- What business structure best suits your event's desired long-term goals.
- Refer to [Strategic Planning] section for advice on strategic planning.