Most companies and HOAs strive to appoint a board of directors that will be competent and effective in providing leadership and good governance but, in my opinion, vested interests and limited stakeholder perspectives often reduce the long-term effectiveness of their efforts.
Directors are meant to provide strategic direction; make major decisions; exercise oversight and ensure good governance (statutory requirements, company constitution and fiduciary duties) and put in place policies while acting honestly and exercising reasonable care and skill.
A constructive approach to appointing effective directors is to consider their ‘maturity’ in the context of the vision, goals and culture of the company. The maturity of a director can be seen as consisting of two components:
- The technical capacity (qualifications and experience) to perform the role. This applies particularly where directors are expected to chair portfolio subcommittees of the board. For example, it is best to appoint a director with financial management qualifications and/or related experience to chair your finance committe.
- Maturity of the perspective they hold about stakeholders. Community Living / Directors and Trustees Technical capacity is self-evident, but stakeholder perspective is more subtle, interesting and difficult to measure. One way of describing stakeholder perspective is to see the stages of awareness as a continuum from ‘no idea’ to transformational leadership.
Maturity Level 1
This person has no or little experience, tends to be passive, without views on most issues, and often volunteered to serve as director because of ‘the barking dogs and speeding on the estate’.
Maturity Level 2
This person joined the board to promote and protect their own personal interests on the estate. They plan to start construction on their property, so they join the board to try to influence matters in their favour (like building rules and restrictions). They have strong opinions, always favouring their personal interests, and little interest in estate issues affecting others.
Maturity Level 3
This home owner understands that there are a number of other home owners with similar interests or issues to theirs so they claim to represent other members. For example, they could be dog owners who object to the number of dogs permitted or the barking restrictions. Or perhaps they own a small property, and now request to pay a lower levy, claiming to represent this class of owner.
Maturity Level 4
Those who make an effort to understand the needs and issues of all the major stakeholders on the estate and other external parties with power to disrupt the smooth running and general ambience of the estate. They understand the demographics in the estate (age, gender, children, sporting interests, club membership, etc.). They also understand that there are other parties who can influence the quality of life on the estate, like management and staff, affiliated clubs, neighbours, other estates close by, the municipality or other local authorities, the provincial authorities (roads, etc.), even Community Schemes Ombud Service (CSOS)!
They try to serve all stakeholders by taking their collective interests and issues into account, and they seek balanced decisions when deciding on matters that will affect those stakeholders. They strive for win-win solutions and avoid zero-sum games where one wins and others lose. They will not be influenced by internal pressure groups but strive to be fair to all. They subjugate their own narrow interest and needs in the interest of the majority.
Maturity Level 5
Once in a while an estate is fortunate to have a director who can take the board and the estate to favourable places that they would not have imagined or would not have got to on their own without him/her. This is the transformational leader who has achieved Maturity Level 4 and holds a long-term focus and strives for best practice and visionary leadership so that everybody involved ends up in beneficial positions not previously imagined or understood.
Transformational leadership is a style of leadership where a leader works with teams to identify needed change, creating a vision to guide the change through inspiration, and executing the change in tandem with committed members of agroup.
Development of directors
The challenge is to develop technically competent directors by increasing their understanding and awareness of the needs of all relevant stakeholders – for example, by conducting a formal stakeholder analysis – and then encouraging balanced decisions with a long-term focus that will benefit all the relevant stakeholders.