Conformance vs Performance in effective boardroom deliberations
Performance in the context of board deliberations refers to the proactive role boards play in shaping the strategic direction of the organisation. It involves setting goals, driving innovation, managing risks and monitoring outcomes to ensure growth and relevance. Conformance, on the other hand, entails the board’s responsibility in ensuring the organisation operates within established frameworks such as adherence to laws, regulations, governance practices and financial integrity leading to reduced risks of non-compliance and reputational harm.
Performance is inherently forward-looking, focusing on future goals while conformance is more rear oriented, emphasising compliance with established standards, past practices and regulatory requirements.
During boardroom deliberations, human nature’s preference for the “known” over the “unknown” often drives a shift towards conformance as it provides a sense of comfort, control and predictability. However, this focus on the familiar can come at the expense of performance, which requires embracing the uncertainty of innovation, strategic risks, and ambitious decision-making. Striking a balance between the comfort of the “known” and the potential rewards of exploring the “unknown” is critical for Boards to foster sustainable growth and long-term success. Overemphasis on performance may result in ethical lapses, regulatory violations, and short-termism whereas overemphasis on Conformance can stifle innovation, cause slow decision-making, and lead to missed opportunities.
The challenge lies in achieving a dynamic equilibrium where boards can drive strategic growth while maintaining robust governance standards. Best practices for balancing performance and conformance include, but are not limited to:
- Diverse Board Composition: Include members with varied expertise to address both strategic and governance needs.
- Regular Training and Development: Equip directors with knowledge of emerging trends, regulations, and best practices.
- Clear Roles and Responsibilities: Define distinct, yet interrelated, roles for the board and management, especially when it comes to strategy to avoid micro management.
- Continuous Evaluation: Periodically assess the board’s effectiveness in balancing performance and conformance.
- Board Agenda: Include a strategy segment in every meeting, and cover one aspect of the business. Strategy is dynamic and should not be limited to an annual retreat but rather is a component of every board meeting.
- Board Packs: Ensure board packs include concise and relevant strategic information that will help drive discussions towards the future planning of the institution.
- Strong Chair: The Board chair is key in guiding discussions to ensure they are balanced and aligned with organizational long term goals as well as ensuring compliance.
In conclusion, the dual mandate of performance and conformance underscores the complex nature of board governance. By maintaining a deliberate focus on both aspects, boards can ensure their organisations achieve sustainable growth while upholding the highest standards of accountability and integrity
This is a guest blog and therefore does not necessarily represent the views of the Institute of Directors.
About the author
Kahumbya is a chartered director and a seasoned professional in governance, development finance, fundraising, commercial banking and corporate finance.
She is an elected member of the Council of the Institute of Directors, a body that acts in an oversight and advisory capacity of the Board to ensure the delivery of the objectives of the Institute. She is also an Independent Board Member and Chairperson of the Audit Committee of CRDB Bank Burundi S.A. and sits on the Advisory Board of SESDCorp. She has extensive international experience having worked for four different multinational institutions namely Citibank, Deloitte and Touche, African Development Bank and Shelter Afrique.
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