Governance Bites #13: board processes, featuring Dauniika Puklowski.

Dauniika Puklowski is a professional company secretary, and a Chartered Member of the Institute of Directors, with her own business called Board Administration Services Ltd. She is company secretary for NZ Health Group, Unitec and Auckland Grammar School. She also has experience as a director. 
Mark Banicevich asks Dauniika about the process of running a board of directors, how to turn an ineffective board around, and a few details about board tools such as the board charter and the workplan. He also asks about governance generally, for-profit compared to not-for-profit, and NZ compared to governance overseas. Dauniika also has great advice for new directors, and provides insights into inducting new board members.
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Transcript

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[Mark Banicevich] Hi. Welcome to "Governance Bites"! It's my pleasure today to spend some time with Dauniika Puklowski, who is actually an experienced company secretary, and has now got a career in her own company, being a company secretary for a lot of different organisations, as well as being on a couple of boards. So, a company secretary is, if you're not aware of the role, they drive the board of directors. So in many cases, know more about governance than most directors. So a wonderful person to have a conversation with! Thank you very much for your time, Dauniika. Thank you, Mark. Thank you. Okay, I'm going to start then, as somebody who actually knows how a board of directors runs, with the most important question: how do you run an efficient board? Okay, well an efficient board is based around having strong processes in place. So every board needs to have a Constitution, which is the defining document that describes how the board of directors operates. You can also then have a Board Charter, a code of conduct. You need to have an interests register, with every board member's conflicts of interests. You want to have really clear meeting schedules. So know how often you're going to be meeting, and have those scheduled in advance so everyone can plan for the meetings. You need to have board papers for every meeting so the directors need to come to the board prepared for what they're going to be discussing, so that they know in advance any questions that they're going to be having. You need to minute every board meeting, so it needs to be a clear and accurate record of the conversations that were had at each meeting. And those minutes need to be approved as a true and correct record of the meeting by the board of directors. It's also good to have clear, and kind of attainable, actions that come out of meetings, and tracking those, so that you know what's going on, and you can close the loop with any actions that come out of board meetings. Right. That ties it all together really well and I wish I'd done this interview first. It would've given me some great questions to ask in future interviews! One of the things you mentioned was a Board Charter. Can you tell me a little bit more about what a Board Charter is? Yeah, sure. A Board Charter is kind of, it defines the how that you operate as a board. So it doesn't necessarily need to be a legal document. It can just be around your meetings. How often they're going to operate. What the quorums are going to be. You might have rules in there around how quickly minutes get turned around, and when they're approved, and how they're approved. Things like that. So, it's kind of like your your recipe for how the board's going to operate. Right. So your Constitution becomes kind of your why and your what, and then your Board Charter takes it down to the next level of kind of the how. Yeah, right. Precisely, yeah. Oh, excellent, cool. So putting all that together, in the experience that you've had on a number of boards, if you were appointed to a board of directors where, you know, we have schools and things in New Zealand where potentially the people that come onto the boards don't have the background. Don't have the skills. So an inefficient board, maybe has got weak delegations, or poor governance. What would you do to try and turn  that around? To try and get things going well? It's a tricky one, because as a board, you're a team, so you do need to kind of have everyone on board to improve. You need to identify that, as a team, you want to have that growth mindset and you want to be improving. So if you've got people that aren't of the same opinion, that the board needs Improvement, it can be a bit more difficult. But a good place to start is with policies. So looking to the policies that are there. Looking to see if they're fit for purpose. Looking to see when they were last reviewed. Seeing if there's any improvements that can be made around the way that those are operationalised. And the ones that affect the board. And that the board approves how they can be improved. Definitely, if the rest of the board is in support of it, doing a self-evaluation as a beginning. Or if we've got the resources to do so, an external evaluation, when someone comes in and looks at the board, and looks at the skills matrix of all of the members. Looks at areas where you might need some more expertise. Can recommend places to go for education. And then, I think, just as individual board members, yourselves, just having that constant self-education mindset, and going and listening to the podcasts, reading the articles, understanding what governance is. Learning the job. Yeah, learning the job. Learning the ecosystem that your board operates in. Understanding who your stakeholders are, and your customers, and really doing your due diligence in terms of what it is that's expected of you as a board. Yes. And then as you said before when you defined the process, if you put a strong process in place, that I'm sure will help significantly, as well. Yes, absolutely. Then you can get momentum. If you know that you've another board meeting coming up, and you've got a board work plan, and you know what's going to be addressed at each meeting, then you can really get momentum going as a group, in terms of actions that you're taking. The work plan is another thing you mentioned there that is a very valuable tool to get the board operating. So having your strategy, and your purpose for the organisation, what you're trying to achieve. Setting that down into a plan, and then breaking that down into the annual work plan, and the different tasks to do it each month. Yeah, yeah. It's really helpful both for the board to be able to see, with the long-term view, what's coming up, and for management, to be able to plan for what kind of things they're reporting on, and if they need to do any deep dives, and what's coming up. It's good for both management and the board to really keep a track on what's coming up and what they're working towards. Right. Now on the range of organisations you work with, which is right from financial services corporations, through to large schools, what sort of cadence are you used to for board meetings? Yeah. So traditionally it's a monthly board meeting. It's what we're seeing in corporate, and in some of the bigger schools. Smaller schools tend to be two meetings a term. Charities and not-for-profits can be more of a six, every six weeks, or even a quarterly board meeting. But then they might delegate down to board subcommittees to meet more often and look at things more frequently. Right. Having subcommittees deliver a large portion of work and feed it back to the board. Correct. So we're generally thinking, considering that New Zealand's closed in January, by culture, of eight to ten, eight to eleven board meetings a year. Yeah, eight to eleven. A lot of corporate boards will have a break in July, as well, because people tend to take holidays during July. Right, because we want to get away from the wet weather. We want to get away from the wet weather, and then people take holidays in January. So people have just given up on having meetings in January and July. They tend to plan meetings around the operational things during the calendar year. So when your budget's due, when you need to approve the annual report, those kinds of things. When you're doing any kind of phasing. If you're doing any kind of reporting through to regulators, that might be a quarterly thing that needs approving. All of those kinds of things. The point of the budget - and I'm sorry to throw this question on you, but I know you'll be comfortable with it, because of what you do - how far in advance of the fiscal year do the board tend to work through the budget and get it approved? I would normally see in corporations the budget coming through for initial discussion three months in advance of when it needs to be approved. So you'd probably get it two months out, if it's approved in June, you'd get it two months out as a draft to look through, and then you'd relook at it in May as a final draft, to do any tweaking and then it comes formally for approval at the June meeting for the following year. Right, yeah. So your talking three meetings in advance. In the first meeting it's fairly draft, and the board at that point I'm sure will be throwing some fairly significant challenges at it and really ripping it apart. Yeah, yeah. And then when it comes through for the second one, it should be massaged into much better shape, and the board will just be identifying little things that need to be corrected. That's right. And then the third meeting, then at that point they're ready to approve it. It's ready to approve. Right, right. That's a strong and effective process. Yeah, yeah. So that initial draft budget process will be when big big budget bids come through, where you get that kind of "big sky thinking" stuff that comes through, and you talk and debate, whether you can make that work, whether you can afford to do it, whether you can afford to stop doing some things to make it affordable. Then it gets, it goes away and gets put into a structure that can - Right, right. - really be done. And then you come back and go, well, the board will look at it and say,"That looks good, but have you thought about this, or have you thought about that, or." Yeah, right. And then of course you want to align it to strategy. You need to make sure you continue your BAU [business as usual]. You've got maintenance, and so forth, of existing tech, and... Yeah. Yeah, absolutely. Everything to fit together. Okay, so some general questions, then. What is governance? And what is the role of the board of directors? Governance is around having the policies, and processes in place, to effectively run a company. It's about setting strategy for the company. It's about ensuring compliance with regulations and law. And it's about holding management to account. So, it's a collective responsibility, the board. The board of directors are collectively responsible for oversight of the company. They employ the CEO[Chief Executive Officer]. Yes. Yeah. They have a helicopter view of what's going on. Yeah. And so generally when we're talking the corporate world, and also in the not-for-profit world, you've got a separation between the activities that happen, and the owners or the interested parties, being the members or the shareholders. And the board are that group in the middle that says,"We'll take responsibility for making this happen." Yeah, yeah. That's right, that's right. Right. Now you've got experience on both not-for-profits, and state sector, and for-profit entities. And your core competence, really, is this process of running a board. Is that different for a not-for-profit and a for-profit? Yes. Fundamentally, governance is the same. But you get a big difference in resourcing for not-for-profit and in corporate entities. So, governing in a not-for-profit tends to be a lot more hands-on. Right. When I talk about resourcing, you don't have marketing teams, and finance teams to produce beautiful board reports for you. So you might need to do a little bit more hands-on, deep-dive, kind of stuff. Yes. Obviously, the laws are different between for-profits and not-for-profits, so some of the regulations are different. But fundamentally governance is that looking after the organisation, managing shareholder and stakeholder interests. Yes, right. Setting direction, making sure that's being achieved. Setting the strategy. The board's role in anything, no matter what it is, is setting the strategy, and ensuring effective compliance / holding management to account. Those are the two main roles of the board. Yes. Yeah. Okay, great, thank you! Well, you know, we've got a lot of New Zealand experience, and I know in the studies and stuff that you've done, as a Chartered Member of The Institute of Directors, it's bigger than New Zealand. Are there any significant differences between governance in New Zealand, and governance in other parts of the world? Are we kind of this, "superpower of governance", or is everyone, kind of, doing the same thing? No, well, again, the overall philosophy of governance is the same whether in New Zealand or overseas. The biggest difference is you're operating in different environments so, you know, there's different laws, there's different regulations. Different regulations, and so forth. Those are going to very much change the way that you govern in different countries. But ultimately, the role of the board is the same. Right. So the process of governance will be the same, but you have different rules of the game. That's right. That you have to make sure are being complied with in the organisation. That's right, that's right, yeah. Right, thank you. So in your, actually many years of governance, what is the best advice that you've been given? I think the best advice has been that the board is a team. It's not, you're not, as a director, an individual. Ultimately the decisions that you make as a board, become your decision as a director, whether you agree to it or you don't. So understanding that kind of collective responsibility is very important. That it's okay to disagree, and to debate and to... one of my mentors talked about generative conversations, which is, you know, it's about, you might have a healthy debate, but then you'll listen, and you'll build on that, and you'll listen to that, and you'll build on that, and you get an outcome and it might not be what your position was at the beginning, but that's what your position is as a board. So understanding that, I think is really important. Right. And you've alluded to something there that the directors will all come from different backgrounds, and have different thoughts and different approaches, so they'll bring different things to that conversation, and the idea is that your respectful conversation talking around these topics, you come to a synergistic strong solution, that everyone backs. Whether or not they agree to it, they all back it. That's right. You might even vote, and you might get six people voting in the positive and one person voting and the negative. Even though that person that voted negatively doesn't agree, they are still part of the board, and the board has decided that this is what's going to happen, and therefore, they need to stand behind that decision. Right. So everyone's individually responsible for getting involved in the conversations, doing their background preparation, understanding what is going on, and then collectively you stand behind this decision. Yeah. So no-one gets a free ride. No-one gets a free ride. And you need to come to these meetings open-minded, and willing to have those conversations, and willing to discuss. And you don't necessarily need to come in deciding that you're going to have your mind changed, but you need to be open to discourse, and open to that conversation, and open to generative thinking and conversation. So, being able to articulate your own views, but also being able to take on board other peoples', and seeing the bigger picture. Right, okay, thank you. Well, one final question for you. With the years that you've got behind you in the governance space, what's the key piece of advice that you'd give to a new director? A new director? I'd say, understand what you're getting yourself into. Yeah. It's not a walk in the park. You know, it is a responsibility. And you do have liability that you need to be aware of. And you are in charge of an organisation, you know. No matter how big or small it is. Yes. So, you know, understanding that and coming in with your eyes open, I think, is... Do your homework. Yeah. Right. I did say that was my last question, but there is one other thing I want to ask you, actually. And that is around induction of new members. Because that's something, as a company secretary, you'll also be a heavily involved in. Yes. How does that work? So, I like to run quite a good, structured, process for new directors. So I would give them access to at least the last three months of board papers, and minutes. I would send them copies of the constitution, charters, the structure of the board, the biographies of the other board members, any subcommittees, and the members that sit on the subcommittees, structure of the executive team, and the bios of the executive team. And then I would set up interviews for them with key members of the exec team that they'd be, kind of, interacting with in a day-to-day. Right. And invite them to come to the first board meeting, probably as an observer, before they're officially appointed. Okay. Yeah. That's great. I'm glad I asked you that question! As well as doing, you know, all the background checks. Making sure they're fit to be a director. Yeah. And following policy that your company might have around, you know, any background checks, criminal checks, etc. Yes, yes, of course. Well, Dauniika, thank you very much for your time! That's been a great conversation! I've taken enough of your time. That's all right. I'd love to be able to get in touch with you again later. And that was just fantastic! So, I'll look forward to seeing you again! Cool, thanks, Mark. And see you next episode!