To Guide or Oversee?

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Future Directors Founder, Paul Smith

ONE THING is for the busy (speak of the devil) Future Director, in which we pick just one thing Future Directors oughta know or do or stew on for the next month. We hope you get something (at least one thing) out of it.

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Now that my time writing about stakeholders is over, let’s turn our attention to the relationship between two of the most important - the Board and the Management (or executive) team. 

Boards often wrestle with how much latitude to give senior management, and that tension was flagged by a Future Directors’ member:

“Would be interesting to hear your thoughts on the balance of oversight versus guidance that a board can provide to senior management. I could see how a board might prioritise governance experience when recruiting for a director, but management teams - who are very capable - could prefer to bring in directors with domain expertise in a specific area, or someone who has contacts that could be leveraged, rather than board experience.”

Thanks for the prompt Doug Bruce! 

These questions cut to the heart of the board–executive relationship. On one hand, directors are recruited / elected to safeguard stakeholder interests through robust oversight and strategic direction. On the other hand, a high-calibre team might chafe at high levels of supervision, preferring directors who can enhance their thinking with industry know-how, networks and functional expertise. 

Are they mutually exclusive? And, how do you strike the right balance, especially when recruiting new board members?

Here’s one approach: start by choosing (or adapting) a governance model that clearly maps the territory between “what boards decide” and “what executives deliver.” Then embed practical tools to keep boundaries visible, flexible, and fit for your organisation’s context.

Here are some different models from the usual things like Tricker* 

Please note. I do not endorse any of these approaches…so please read to the end.

1. Policy Governance: Clear fences, big fields
   Under Carver’s Policy Governance, the board defines only two things: the Ends (desired outcomes) and the Executive Limitations (must-not-do rules). Everything else like strategies, tactics, and daily decision-making, belongs to management.The upside of this is CEOs know exactly where they can roam The board is focussed on setting the parameters and results, not methods. However, if a talented management group spot an opportunity outside those limits, they must come back to the board for permission, and this slows agility.

2. German Two-Board System: Distance and discipline
   In this model, a Supervisory Board appoints and dismisses a Management Board but rarely dives into operations. Regular reviews focus on strategy, finances and compliance, while the Management Board executes. It’s not really that different from the traditional model but there is more formal structures. On the plus side, directors stay strategic and independent; executives enjoy freedom of execution. On the flipside, strong personal ties can blur lines, and “friendly advice” can slip into managerial meddling. Hmm.

Bridging theory and practice

Why do I share these two models specifically when there are more to choose from? As I mentioned, my preference is to start from and adapt models that fit around your particular circumstances. I call this “fit-for-purpose”.

There’s no perfect recipe. Only one that fits your strategy, culture and stakeholder expectations. If you do not have a model that you use, or you do but haven’t really discussed it, start by workshopping what you have, and what you want. What is working, where are the stress points for board and management. Keep the dialogue open, revisit, test assumptions, and reset

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