Boards must look through a stakeholder lens

The people served by human service organisations and their staff are key stakeholders, and should be viewed as such by boards, argue Alan Hough and Joe Zabar.

Late last year, the first ever international standard on governance – applying to all organisations, including not for profits, large and small – was published, replacing the old Australian Standard 8000. 

The new standard (IS037000) embraces two key concepts. Firstly it takes a stakeholder view of organisations and their governance, and secondly it adds a purpose-driven approach.

The stakeholder view of organisations forces them to answer three questions: 

1. Who are our key stakeholders? 
2. How do we know their views? 
3. How do we govern with their interests considered?

In some ways, these are simple questions, but profoundly important.

For human service organisations, this means that boards must govern in the interests of stakeholders, including the people the organisation supports, and its staff. The three royal commissions on human services – child sex abuse, aged care and disability – have all questioned whether boards are governing in the best interests of the people their organisations support.

Historically, staff have been seen as an input into the operations of the organisation – not key stakeholders. But, the labour market in Australia today is tight. This is particularly problematic for human service organisations grappling with high turnover levels, and a projected shortfall in the staff numbers needed to meet ever-expanding demands of the aged care and disability service sectors. 

To meet these workforce challenges – and those of the future – boards and management will need to re-orientate their thinking towards their workforces, seeing them as stakeholders of the business, rather than a cost of doing business. This re-orientation of perspective involves a deep and genuine consideration of the organisation’s values and how they apply to staff. It will require boards to have visibility of workforce related issues beyond that of turnover statistics and remuneration.

The new standard’s other key focus lies in organisational purpose – or mission – and values. Indeed, the standard’s very first principle reflects that board directors should ensure that organisational purpose and values are clearly defined, and enacted. So, these mission statements need to be more than mere posters on a boardroom wall. They must be the very basis for governing and managing the organisation.

The new standard provides boards and management the opportunity to think differently – to ask questions. In organisational performance terms, what does “good” look like?  We know from research and anecdotes, that some boards focus on financial performance or compliance with government requirements. While financial performance is an enabler of mission, it is not “the mission”. Similarly, compliance with standards helps in achieving quality, but it does not in itself deliver excellent services.

Boards should also envision “good” from the perspective of the people they support, and their current and potential staff? The answers may give rise to very different understandings of the organisation’s goals, especially if questions are asked directly of the relevant stakeholders. We only achieve a true sense of what “good” looks like, when these key issues are considered via a stakeholder lens.

An example: early research on hospital boards identified a very interesting phenomenon. When asked if their hospital’s performance (in quality and safety of care terms) was better, the same, or worse than the typical hospital, 66 per cent thought their hospital performed better than the typical board – just one per cent thought they were worse. 

Boards appear to have a tendency to believe that their organisations are performing better than they really are, in vital areas. Boards and management would benefit from developing and acting on performance measures that directly relate to stakeholders’ experience of their organisation’s support, thus helping in having tough and respectful discussions about organisational performance. 

Answering these vital questions raised here is not a once-only task to be documented and then ignored. Rather, the questions are frameworks for understanding all issues that come before a board and management, and thus involve an ongoing process of reflection, decision and action.