Jeremy Sole explains how, in the new world of CCOs, the Tauranga City Council’s recent bi-annual CCO board review was provided by a framework based on the 10 key governance areas identified in the recently minted ISO 37000:2021 International Standard for Governance of Organisations.
Council-controlled organisations (CCOs) began with the Local Government Act 2002. This was a brave new world for local authorities in that it provided opportunities to reduce financial risk; introduce a separation between operational decisions and political direction; allow service provision to become more commercially efficient in its operations and planning; and become more responsive to a community’s changing needs.
Another positive is that CCOs provide opportunities to appoint the relevant commercial skillsets and experience at a governance level that you probably don’t have sitting around the Council table.
Has it worked?
Well, it seems that in most cases, this brave new world has settled quite nicely; notwithstanding some rather high-profile exceptions from time to time.
As we all know, ratepayers often don’t grasp the subtleties around CCOs’ independence, this means Councillors can find themselves frustrated in bearing the brunt of backlash when a CCOs’ work programme is misaligned or misunderstood – versus the expectations of some ratepayers or with the shareholding Council. Auckland readers will be keenly aware of this.
This eventuality would be no surprise to those experienced in managing disparate private sector commercial entities, and it appears no different to the CCO and Council relationships and controls – other than the ‘noise’ being a lot louder when a CCO triggers the ire of ratepayers.
However, the good news is that these gaps, potential strategic drifting, and the financial and political costs associated with them can be mitigated through strong and coordinated governance.
The Tauranga example
Tauranga City Council’s recent bi-annual CCO board review cycle identified opportunities in this area, and staff went out to the market to find support for them and their CCOs to work more closely together from a governance perspective.
Both the Council leaders and the CCOs wanted clear direction and efficiency, and maintained close and effective relationships. All this without adding to onerous compliance and reporting, and without the need to be looking over each other’s shoulders and second-guessing where the other party will be heading tomorrow, all of which tends to suck energy and can undermine confidence and trust along with it.
Tauranga was looking for a fresh approach to assessing governance, given the awareness that the Board evaluation report can sometimes feel more like a consultant’s personal view, rather than being anchored in an identifiable or empirically defendable framework. The outcome of this is often that the participants are not in alignment with the ‘advice’ to the extent that buy-in is low, and sometimes directors feel they just had to suck it up. After all, who are they to question the ‘expert’ that Council had engaged?
In such cases, the outcome is that it does get done, but only from a compliance perspective; really it becomes little more than a box-ticking exercise. And one of those boxes says, ‘yes we did a board review’ with a subtext of ‘but it was a waste of time and money.’
Tauranga was attracted to the idea of a facilitated approach that would draw on the experience and expertise of the people around the table, including CCO General Managers, and that would transition its own ownership and momentum to key leaders in the organisations.
This, in turn, would ensure the new way of governing becomes embedded in the organisation rather than simply in the heads of a few people who will eventually rotate out of their governance or management roles. They were interested in a robust, open, self-reflective and participant-driven process conducted at a manageable pace and with appropriate prioritisation. What emerged from this is a blended planning, strategy, engagement, and governance learning process, culminating in a robust participant-owned governance structure that will endure when people come and go.
“The review has improved our governance, assisting in our prioritisation, and resulting in some tangible actions that benefit from a range of tools to assist,” comments Russ Browne, Chair of Tourism Bay of Plenty.
“It has supported our strategic thinking and assessment of where the opportunities lie.”
Of course, a natural meta-outcome of the process has been closer bonds and relationships across the governance group that emerged from a high feeling of psychological safety throughout the honest and constructive discussions.
In the case of Tauranga City Council, the context for the review was provided by a framework based on the 10 key governance areas identified in the recently minted ISO 37000:2021 International Standard for Governance of Organisations and rolled into a sophisticated monitoring and reporting tool from Govn365.
One of the review participants commented afterwards, “The new understandings and formal framework have given us a robust benchmark for governance and accountability at all levels.”
One key to success in this approach is that the implementation is not a slave to the structure but rather is enabled by it. This dimension is critical because every CCO is different in terms of aspirations, size, and resources and will bring different flavours to their conversations and outcomes.
As such, no single set of priorities or content can meet every organisation’s needs. Paradoxically, having different outcomes but also strong alignment across several related CCOs becomes more achievable, given that their reviews and plans emerged from the same process and underpinning framework. This also has a spin-off in that Councils and Councillors can experience a synergy, or at least familiarity, when engaging across their potentially diverse CCOs.
The key is always to facilitate the process by generating conversations that build competency and confidence along the way. In this way, the Council and CCO teams take over and own their own governance capability-building, which then becomes embedded in the organisation and a natural and normal way of doing business.
CCO and Council participant feedback from the process was that the discussions were deeper and broader than usual, given the focus was primarily on the organisation rather than the Board.
This brought plenty of lightbulb moments. These observations demonstrate another benefit of having the conversations in the context of the formal ISO37000 structure embedded in the Govn365 governance maturity tool.
The board members in each CCO also commented that they gained insights into their, and their colleagues,’ respective strengths and opportunities for growth, and the power of being aligned at a much deeper level.
Another benefit recognised in the process was that the tool enabled the board and the management team to form a bridge that each can relate to in their contexts and that can anchor everyone to the core purpose, values, and objectives.
Russ Browne also commented that; “Awareness of our performance and the opportunity to improve was the most valuable thing in terms of where we stood, and defined what we needed to work on – followed up with some great tools and resources.”
One of the participating Board chairs also commented that this was the best governance review they had done and will propose that this is continued rather than chopping and changing providers.