GovernWith Blog

In our increasingly interconnected world, the importance of socially responsible and sustainable business practices is gaining more attention than ever before.

We have had close to 1000 Directors complete our Board Governance Review and Director Skills Matrix. The results around ESG continually indicate a need for development in the awareness and capabilities of those at the Boardroom table, to contribute and think strategically in this area.

When prompting further discussion, the most common question is "What on earth is ESG?". 

What is ESG?

ESG stands for Environmental, Social, and Governance trends and issues. The handprints (Social) and the footprints (Environmental) of an organisation. 

Environmental indicators look at how a company performs in the sustainability of our natural world. It may include waste management, energy use, consumerism, climate change mitigation and handling of extreme events. 

Social indicators examine how a company manages relationships with its stakeholders: employees, suppliers, customers, and the communities, through its operations. They may look at issues such as workforce (retention and HR practices), cybersecurity, social inclusion and diversity, modern slavery, minority groups, gender equity, First Nations people and community development. 

Australia is no stranger to the growing importance of ESG. 

The country’s exposure to environmental risks, such as covid, bushfires and floods has amplified the need for organisations to consider environmental factors in their strategic planning.

Australia’s social issues, including the reconciliation with its First Nations people and ever growing cyber hacking crime, also play into the policies and strategies seen more and more by those at the boardroom table.  

Why is ESG important for boards and organisations? 
 
Risk Management: Being aware of, and understanding ESG trends and issues help companies identify potential risks that may arise from environmental damage, social issues, and poor governance. By proactively, strategically addressing these factors, organisations can mitigate these risks and secure their long-term sustainability. 

Workforce: Understanding that staff are key stakeholders of an organisation and therefore, representing their voice, diversity, gender equity and inclusion is crucial. This starts at a board level. Reducing churn, increasing retention and building a strong work place culture, the handprint of an organisation is most strongly reflected through prioritising the voice of its staff, and its ability in not only implementing but encompassing ESG principles.
 
Investor Appeal: There is a growing trend of investors favouring businesses that uphold ESG principles. Companies demonstrating strategy, process and mission statements around these principles can potentially attract more investment, boosting their success.  
 
Regulatory Compliance: With an increasing focus on sustainability, governments worldwide, including Australia, are introducing more stringent regulations related to environmental protection, social issues, and governance. By adopting ESG principles, organisations can ensure they stay ahead of regulatory changes and avoid penalties. Coming into 2024 we are seeing an increase in these mandatory requirements such as Climate Change and Modern Slavery.
 
Reputation and Stakeholder Engagement: Companies known for their commitment to ESG principles enhance their reputation, which lead to increased consumer loyalty, better relationships with stakeholders - including workforce, and overall business success. Reputation is more exposed than ever before, while also becoming more intrinsically tied to the integrity of how organisations embody ESG. This again ties back to investor appeal and the long term sustainability of the organisation. 

What are the key questions we need to ask first? 
 
As the world continues to change and evolve, so does the definition of good business practice. By developing ESG strategies and practices, boards and organisations in Australia can build sustainability while contributing positively to its community. 
 
Things to initially consider: 

• Do we know the Environmental, Social and and related Governance trends and issues (ESG) that are affecting our organisation? 
  
• Do we discuss and strategise ways to manage these ESG trends and issues and prevent associated risks within the organisation? 
• Are we proactive in our approaches and strategies in relation to ESG trends and issues and the contribution our organisation could be making externally? i.e., Reconciliation Action Plan, ethical supply chain partnerships (uniforms, equipment) 
• Do we have a designated Board Subcommittee that has oversight of the risk factors and strategies in relation to ESG trends and issues? 
• As a Board are we assured we are doing the right thing for our own workforce in relation to these ESG trends and issues, what do our organisation's retention and turnover rates reflect? 

Unlocking the Potential of Director Induction in the Board Governance Journey

In the intricate world of board governance and the director lifecycle, director induction emerges as a critical, often underestimated component. This article delves into the pivotal role of director induction in ensuring a seamless transition onto a board. Drawing from the insights of experts Fi Mercer and Megan Motto, we explore the challenges and solutions associated with this crucial phase.

Director Induction Snippet

Bridging the Gap in Director Induction

Fi Mercer and Megan Motto concur on a common challenge – despite meticulous planning and professionalism in director recruitment, director induction often falls short of expectations. Alarmingly, a significant 44% of directors express dissatisfaction with their induction experiences, highlighting the urgent need for improvement.

Unpacking the Director Induction Challenge

Megan Motto provides valuable insights into the reasons behind this concerning trend. The issue extends to both boards and incoming directors. Frequently, new directors overlook the importance of investing ample time in understanding the nuances of their roles and responsibilities. This oversight can hinder their ability to make meaningful contributions to the board.

Megan also underscores a fundamental concept: the induction process commences long before a director's official first day on the job. It initiates with the recruitment process itself. How an organisation handles the recruitment phase sets the tone for the director's journey. From the initial email correspondence to the interview process, these interactions not only contribute to shaping the organisation's culture but also influence the director's expectations.

Emphasising the Significance of Early Steps

Megan's perspective underscores that the induction process is not an isolated event; it's intricately woven into the cultural fabric of the organisation. Early steps, such as punctuality, communication style, and follow-up, serve as integral components of the induction process. They establish the foundation for how the director is expected to conduct themselves, interact with colleagues, and engage with the organisation.

Key Insights for Effective Director Induction

1. Commence Early: The journey of director induction starts during the recruitment phase. It is essential to ensure that all interactions and communications align seamlessly with the organisation's values and culture.
2. Effective Communication: Pay meticulous attention to communication with potential directors. Timeliness, language usage, and follow-up significantly influence their perceptions and set expectations.
3. Cultural Harmony: Align the induction process with the organisation's cultural norms and expectations. Directors should feel a sense of belonging and purpose right from the outset.
4. Promote Continuous Learning: Encourage directors to proactively invest time in comprehending their roles and responsibilities before assuming board positions. This proactive approach enhances their effectiveness as engaged board members.

In conclusion, director induction is an indispensable element within the director lifecycle, deserving of paramount attention. It lays the groundwork for a director's journey and profoundly influences their ability to make meaningful contributions. Recognising the significance of early steps and cultural alignment empowers organisations to enhance their induction processes, ultimately fostering more resilient, engaged, and effective boards.

Director Induction: Unlocking the Full Potential of the Director Lifecycle

In the intricate journey of the director lifecycle, director induction emerges as a critical, often underestimated phase. While many organisations excel in certain aspects of induction, there's a broader and more profound process waiting to be explored. In this article, we'll delve into the multifaceted nature of director induction, encompassing the functional story, the unwritten history, the dynamics of relationships, and the value of ground-level insights. Discover why director induction is a pivotal step in the Director Lifecycle From Recruitment to Retirement, and how it contributes to effective planning and governance.

Steps for Director Induction Snippet

The Functional Story: A Solid Foundation for Governance

In the director lifecycle, induction often starts with the functional aspects of an organisation. It involves familiarising new directors with the nuts and bolts of the business: its products, services, revenue streams, organisational structure, and governance procedures. These fundamental elements provide a solid foundation for directors to understand their roles and responsibilities.

Unearthing the Unwritten Story: Context for Informed Governance

Beyond the functional aspects lies the unwritten story of an organisation. This narrative explores the evolution of the organisation, its past experiences, and the scars it may have accumulated along the way. Understanding this context is essential because it sheds light on why the organisation operates as it does today.

Past successes and setbacks shape an organisation's culture, influencing its decision-making and strategic approaches. Acknowledging this history empowers directors to make informed decisions that align with the organisation's unique journey.

The Art of Relationships: Navigating the Board Ecosystem

Boards are intricate ecosystems within organisations, with their dynamics and relationships. Director induction involves grasping the different working styles and communication preferences of fellow directors. Building strong relationships with the executive team and understanding how to communicate effectively with the chair are crucial components of a harmonious board environment.

By mastering the art of relationships, directors can navigate the complexities of the board ecosystem, fostering collaboration and synergy among board members and senior executives.

Ground-Level Insight: Getting Hands-On with the Organisation

While board meetings provide a top-level perspective, true understanding often comes from experiencing the organisation at ground level. Directors benefit from spending time in the field, whether it's in a retail store, on the factory floor, or in a healthcare facility. This ground-level insight offers a unique perspective on the organisation's operations, challenges, and opportunities.

Director Induction as a Vital Part of the Director Lifecycle

In the Director Lifecycle From Recruitment to Retirement, director induction holds a pivotal position. It equips directors with the knowledge, context, and insights needed to excel in their roles from day one. This comprehensive induction process contributes to effective planning and governance by ensuring that directors are well-prepared to make informed decisions, build robust relationships, and contribute meaningfully to their organisations' success.

By investing in a holistic director induction program, organisations can elevate their governance practices, enhance board effectiveness, and empower directors to lead with confidence throughout the director lifecycle. Discover the transformative potential of director induction in the ongoing journey of planning and governance.

Join Fi Mercer & Jo-Anne Moorfoot (Executive Director, Australian Centre for Healthcare Governance) as they discuss how to using induction to drive a culture of contribution. 

An effective induction program sets directors up for success – Fi & Jo-Anne explore the many elements required to support new directors to feel engaged and confident to contribute faster to minimise your governance risks. 

Driving a culture of contribution in Local Government 

Join Fi Mercer & Lisa Mahood (Director, Reltuc Consulting) as they discuss how to using induction to drive a culture of contribution in Local Government. 

An effective induction program sets directors up for success – Fi & Lisa explore the many elements required to support new councillors to feel engaged and confident to contribute faster to minimise your governance risks. 

A key factor for building high functioning boards that have the ability to lead successful organisations is for the board to have the right systems, processes and supports in place to empower a group of experts to become an expert group. 

An effective induction is an essential process that enables directors to be ‘on boarded’ in a timelier fashion, allowing them to contribute their expertise better at the board room table, to feel more confident about their knowledge of the organisation and its risks, and ultimately to improve their ability to govern. 

However, our research shows that boards across multiple industries consistently identify effective director induction as a critical gap in their governance processes. While effective induction is actually quite a straightforward process to achieve, many boards are missing the mark, with the result being directors who lack the understanding, expertise, engagement  and confidence required to properly govern the organisation. 

What does an effective director induction process look like? 

An effective induction process provides new directors with information about their role so that they quickly become useful, integrated and satisfied members of the board, and are able to contribute effectively. 

It is important that the induction process is relevant to each director’s skillset, and is an engaging process. This is a shared responsibility for imparting and gaining knowledge about governance requirements as well as the organisation and its top risks. 

A quality induction process should include a well thought out combination of: 

1. Knowledge about the director’s skills and experience, with corresponding supports & information: mentoring/buddying, board online systems and supports tailored for their gaps. 
2. Information about the organisation and director roles, including strategy, services provided, top risks and tolerances, directors’ roles and responsibilities, board processes, governance policies and procedures, board resources and training, as well as tours of the organisation and social events. 
3. Information about the industry/sector, including key information about the sector and its unique requirements, frameworks, legislations and legal structure 

When should the director induction process begin? 

Induction should commence in the recruitment stage, before election or appointment, to ensure that directors with the necessary strengths are appointed. The Governance Evaluator Director Development & Skills Matrix is invaluable at this stage in identifying the current skills, experience or cultural gaps on the board that will inform the recruitment process as well as explain the board’s priority areas to potential new directors. 

The induction program itself should comprise a stepped process that includes actions before, during and after the first board meeting. New directors should start by completing the Director Development & Skills Matrix and their results should inform key elements of their induction plan prior to commencement on the board.  For example, a director may be starting on the board of a healthcare organisation, but their Development & Skills Matrix results show that while they have high finance and legal skills and experience, they have low clinical governance and data analysis skills. This will therefore inform the most suitable director to be their mentor, as well as the educational resources on which they should focus. 

Their individual induction action plan would therefore include standard organisation and sector components but also include individually tailored content to help them address their specific development needs to more quickly onboard and contribute. In addition, the process enables new directors to become more aware of their strengths, so they feel more confident to contribute in that area at the board room table. 

How long should director induction take? 

Being realistic about the time it takes to become familiar with an organisation is important. An effective induction process may take up to 6 months for the initial actions and is important to be ongoing. It should also include regular check ins between the chair, mentor and the new director to ensure they feel welcome, comfortable and confident to contribute.  Good practice is to have director induction and check in as a board meeting agenda item. 

What steps contribute to an effective induction process? 

As outlined in figure 1, an effective induction process consists of often concurrent steps that seek to optimise: 

• The culture of the board – promoting a welcoming, collegiate culture that values and appreciates the new director. Achieving this culture will result in directors who are engaged, passionate and have a long tenure. 
• The contribution of the director – educating and empowering the new director in relation to the organisation, broader sector and their governance requirements, but also in relation to their own skills and areas for development. Achieving this will result in directors who quickly make a meaningful contribution to the board and continue to improve throughout their tenure. 
• Continuous improvement – ongoing evaluation and improvement of the induction process to ensure that future new directors, and the organisation, will benefit. 

Fig 1: An effective director induction process. Steps are often concurrent. Read on for more details about each step. 

Getting started for your board 

As you can see, an effective director induction process is based on understanding the new director’s skills and experience, and working within a health board culture with a commitment to contribution and continuous improvement. The benefits of achieving this from the outset are significant, in terms of director satisfaction, tenure and contribution right from their first board meeting, as well as the effective governance of the organisation. 

The Governance Evaluator Director Development Program is the perfect place to begin, as it supports boards to achieve the key characteristics of effective governance, ensuring a consistent and high functioning level of the right skills, experience, and behaviours across all directors. 

Our expert conveners support boards to optimise their induction process, and guide directors to build and maintain their Individual Director Development Plans. 

Steps to an effective director induction process in further detail 

Culture 

• Welcome*: As soon as possible after the board has confirmed/been notified of the appointment of a new director, the chair sends a welcome and congratulations letter, inclusive of requirements for commencing the induction process prior to participating in the first board meeting. 
• Appointment*: The new director signs all relevant contracts, statements and disclosures. 
• Introductions*: The chair introduces the new director to existing directors (and senior staff, if appropriate) as soon as possible after their appointment and seeks to involve the director socially in board activities. 

Contribution 

• Development & Skills Matrix*: The new director completes a Director Development & Skills Matrix to identify areas of high strength/expertise and areas where development may be required. 
• Individual Director Development Plan*: The chair assists the new director in building a tailored development plan to guide their education, training and development priorities throughout their tenure on the board. 
• Chair briefing*: The chair takes the new director through the minutes of recent meetings, and briefs them on the issues the board is dealing with at the moment, or will be looking at in the future. The chair also draws the new director’s attention to the roles and responsibilities of the board in general, and the roles and responsibilities they will be expected to undertake as an individual, and discusses any concerns they may have. 
• Mentoring*: Based on the results of the Development & Skills Matrix, the chair nominates a more senior member of the board with differing skills and experience to the new director to act as mentor to the new director. The mentor supports the new director in a variety of mutually agreed and scheduled ways, such as taking the new director through board papers, sitting next to the new director in board meetings and regularly checking in by phone or face to face, accompanying the new director on a walk around the organisation. The chair is kept informed throughout the mentoring process. 
• Background reading*: The new director is provided with a copy of the organisation’s relevant governance manuals by the chair and/or board support person, which will serve as an initial introduction to the group as well as an ongoing reference. It should include:  
  • relevant organisational documents such as the mission statement, organisational purpose & strategic plan, constitution/rules 
  • financial information, including current year-to-date budget, financial position and funding model and the most recent annual report 
  • services provided by the organisation, their top risks and assurances, and the risk reporting strategy to the board 
  • introduction to the organisation’s operational and committee structure 
  • information about the organisation’s social media, newsletter and other communication methods for the new director to subscribe to and/or follow 
  • information about IT systems and networks used by the board for intra-board communication, with necessary logins 
  • basic biographical and contact information about board members, and staff (if appropriate) 
  • basic meeting schedule and board annual calendar 
  • roles and responsibilities of the board and its directors 
• Organisation tour: The chair invites the new director to take a tour of the organisation’s facilities and introduce them to staff, volunteers, members and the beneficiaries of the organisation. The chair and/or board support person also shows the new director where the board meets, and all other general housekeeping requirements, to ensure the new director feels comfortable. 

Continuous Improvement 

• Induction review: The chair and/or board support person surveys the new director regarding the induction process to identify any potential areas for improvement 
• Regular Check-ins: The chair and/or mentor meets with the new director each month for the first 6 months of their tenure to monitor their Individual Director Development Plan, address any issues and ensure they feel engaged and confident to contribute. 

*These steps should take place prior to attending the first board meeting. 

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