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.

New Zealand Institute of Directors’ publication, ‘The Four Pillars of Governance Best Practice for New Zealand Directors’, notes that there is not one universally applied definition of governance. However, it states that all good governance guides and codes are underpinned by common principles and values, particularly the RAFT (Responsibility, Accountability, Fairness, Transparency) principles.

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, and
• achieve optimum outcomes for stakeholders.

Types of business structure

Each business structure has different legal and financial obligations. Common structures include:

• Sole traders – individuals who are starting in business or are contracting.
• Partnerships – two or more people or organisations that 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 – 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 – 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.

Internal or external governance

Ask yourself, should the governance and management structure operate within an existing organisation (e.g. a National Sports Organisation), or be external to it?

• Internal governance is governance set up within the current legal structure of an 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 for an event involves 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 your organisation.
• The extent to which there is, or is not, a strong alignment between the expertise required to govern and run your existing organisation and the expertise required to govern and deliver the event objectives.
• The risk profile of the event and your organisation’s tolerance for risk.

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, typically through a strategic planning process. In doing so, it 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: effective board members should demonstrate integrity, good judgement, commitment and dependability, and the board as a whole has some responsibility for ensuring its members uphold these characteristics.
• Culture and standards: establishing the culture and internal operating environment for the event organisation. These are achieved through the chair’s effective leadership, the conduct of the directors and disciplined processes and documentation (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. When running events, it is ideal if the board is made up of people with a background in governance and experience relevant to the purposes, objectives, challenges, and responsibilities of the event being organised. Board appointments are often:

• Expertise based: predominantly based on the competency needs of the organisation in fulfilling its purposes and objectives, usually to protect and/or promote the interests of the event.

• Representation based: predominantly based upon stakeholder organisational interests, usually 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-sized organisations.

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 have a strong ability to appropriately focus the board and management, empower and delegate tasks and responsibilities, lead effectively in challenging stakeholder and political environments, and be disciplined to ensuring suitable organisational monitoring; and
• 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 are in place for stakeholder engagement, including the media.

Useful Links:

• Institute of Directors New Zealand | ‘New to governance’ guide
• Business.govt.nz | Business structure overview

Have you considered?

• What governance structure will your event operate under?
• What business structure best suits your event’s desired long-term goals?
• Learn more about Strategic Planning.