The board must have an appropriate system of internal controls to enable it to monitor performance, track progress against strategy and address issues of concern.
- The organisation is more likely to achieve its strategic goals and be positioned to adjust when required.
- Enhanced stakeholder trust through transparent review of board and director performance.
- Better performing board and CEO due to professional development opportunities identified through performance evaluation.
- Early identification of issues which are likely to cause financial, strategic or reputational risk.
- How do we know if we’re on track to achieve our strategy?
- What information, evidence and data does the board collect and collate to make informed decisions regarding organisational performance?
- How do we know if we, as a board, are effective in our role?
- How do we act on the results of our evaluations to ensure the continual improvement of the organisation?
What should be the board’s internal controls?
The board is ultimately responsible for the ongoing performance and stability of the organisation. The board should have a system for regular evaluation and oversight of the performance of the organisation against its strategic goals. The board should also monitor the financial position of the organisation, the performance of the CEO, the effectiveness of its own performance, as well as the overall governance of the organisation.
The board should define measures, which can be both qualitative and quantitative, which provide meaningful insight for the board to act. Regular evaluation against such measures allows for oversight of the organisation’s current state and monitoring to safeguard the future of the organisation.
Why do we need a system?
By developing a system of internal controls, the board can assure itself that organisational performance and strategic progress are being regularly reviewed and done so in a way that can be compared over time. A system should include a collection of policies, schedules, measures, and reports which, when combined, provide the board with the tools needed to ensure continuous improvement.
Importantly, the board should not simply observe. Where a system of evaluation identifies gaps, deficiencies, issues, or other concerns, the board must act. As defined by policy, action could be as simple as getting additional information, but could also include reallocating resources, readjusting targets, and reviewing the responsibilities and deliverables of the CEO.
How does a board evaluate itself?
A process to review the contribution of individual directors, board processes, and interpersonal and group dynamics is important to ensure continuous improvement of the board. The process can and should involve members and stakeholders of the organisation.
There are many ways to evaluate board performance. At a minimum, at a board meeting once per year, boards should include an agenda item to formally discuss the board’s performance. A more in-depth process can include a formal evaluation by an external party. The evaluation process should consider not only the performance of the board as a whole, but also the performance of individual directors and the chair, and should put in place action plans for continual improvement.
Example behaviours and actions
A set of good practice suggestions, which should underpin the Board’s considerations in applying this principle.
Resources and tools to help
Below are some resources to assist with this Principle. For guidance, or to discuss how your organisation may best implement good practice in this area, please contact your state or territory agency for sport and recreation. For NSOs, email your query to SportsGovernance@ausport.gov.au and a consultant will contact you.