Insight Articles

Historic models of governance in the non-profit sector and in organisations providing socially-beneficial services such as education and healthcare often rely on the concept of the separation of powers. The intentional distribution of authority to distinct decision-making units, in order that the power held by each is held in check by the presence of the others, has been a hallmark of liberal democratic systems of national government for hundreds of years of human history – as is reflected, for instance, in the writings of several of the founding fathers of the United States of America in the Federalist Papers. In the late nineteenth and early twentieth centuries, the separation of ownership from control also became a norm for corporations, setting the stage for similar structures to become typical in community governance paradigms during the twentieth century. To take schools as an example, by the turn of the millennium it would be entirely conventional in many schools around the world that an appointed professional management would be required to liaise with one or more trade unions on labour issues, be accountable to local and national government on key policy issues, and report to a governing body comprised mainly of community and (often elected) stakeholder representatives on strategic and financial matters, among other things.

However, in many contexts, the prevalence of private involvement in the provision of services that have historically been associated with public management has increased steadily during the twenty-first century. This has had, and continues to have, a profound effect on governance paradigms – particularly in proprietorships where there is often little (if any) separation between ownership and management. Regardless of the socially beneficial nature of the services being provided, owner-operators of private companies operating schools, hospitals, transport networks, care homes, etc. have the same level of individual interest in the operational and commercial success of their enterprise as any other business owner would, meaning that typically they might expect to maintain a high level of personal involvement in day–to-day management as well as retaining control of high level strategic direction and making decisions on behalf of community stakeholders. As a result, governance in these settings may feel quite minimal in scope, very direct in impact, and less stakeholder-influenced in comparison to the historic models mentioned above.

This can lead to challenges. Managers may not feel that they are trusted to lead the organisation, and that the professional voice may not be being listened to. Community stakeholders may hold greater expectation than with other private enterprises that they would have an influence on the strategic direction of an organisation providing key services to them, and may be frustrated if this does not happen in reality. Minority voices can feel marginalised, and that their interests are not as visible because they do not apply to the majority of clients and therefore do not have a significant bearing on commercial matters. In such circumstances, partnerships with the community can quickly break down.

What can proprietorships providing socially-beneficial services in a community setting do to ensure strong partnerships through their governance actions? Regardless of being ‘owner-operators’, with the right governance approaches proprietors can still draw on the concept of the separation of powers to navigate the challenges they may face. This might involve:

• • Drawing on insights from stakeholders. Giving thought to how members of the community can be present in, and offer perspectives on, discussions on key strategic issues (e.g. through advisory committees with direct access to key decision-makers) helps to secure the confidence of the community.
    

• • Agreeing clear lines of responsibility between governance and management. Proprietors should appoint managers they can trust, and then go ahead and trust them to run the day-to-day. Adopting a ‘results orientation’, and leaving the management to determine how they achieve the results needed, keeps these lines clear.
    

• • Inquiring into issues affecting minority voices. Making, and following through on, an organisational commitment to equity involves adopting a learning mindset on topics (especially ethical issues) affecting minority voices, and prioritising the long-term vitality of the community in relation to these issues over short-term commercial considerations if the two ever come into conflict.