Open eyes under water reforms

The boards of our prospective new water entities will need traditional governance skills such as financial literacy and industry knowledge, but these should be underpinned by curiosity, an ability to manage complex stakeholder relationships, a willingness to agree – and work to – a purpose, and agility in an environment of transition.

A thick skin may also help. 

That’s according to an expert panel on ‘the governance path required for New Zealand’s water reforms’. The panel convened at a public event in early March hosted by KPMG, Dentons, Water New Zealand and the Institute of Directors (IoD). Facilitated by IoD President Jackie Lloyd CFInstD, it comprised New Zealand Infrastructure Commission Chair Raveen Jaduram CMInstD (a former CEO of Watercare Services), Watercare Services board member Julian Smith CMInstD, Dentons public law and dispute resolution team leader, and TVNZ board member, Linda Clark MInstD, and KPMG Infrastructure Advisory – Major Projects and Infrastructure Partner Mair Brooks.

The panel highlighted it could be very rewarding work in such an interesting and socially vital area but stressed that prospective board members should not underestimate the complexity.

If you are a director interested in joining one of the new water entity boards, the comments below represent views shared across the panel, and are not unique to the person quoted. 

Water is a very “sophisticated” business, said Jaduram, encompassing a range of sectors that directors will need to get their heads around.

“It’s a public health business. It’s an environmental business. It’s a customer-focussed business. It’s a sustainability business. It’s a construction business. It is capital intensive,” he said.

Prospective directors should understand there will be learning to do for all members of the boards and accept there is a risk that complexities in specific areas will not be well understood by the board. 

“I think an important characteristic of those directors will be to have a curious mind and to ask questions,” said Jaduram.

Clark added that, as they will be leading new organisations, the boards will need to quickly establish a common purpose and ensure everyone around the table is working in the same direction.

“When you join a board, generally speaking, you have the luxury of having other board members sitting around the table with institutional memory and relationships with the senior executives,” Clark said.

“Those existing board members would probably have a little bit of scar tissue from things that have gone wrong in the past and they can give you the benefit of that expertise and experience.”

On new boards, all directors will need to guard against misunderstandings and quickly come together as an effective unit, she says.

“The single biggest challenge will be finding common purpose and actually understanding what that purpose is. What I see in groups of individuals is, even when they use the same language, they're meaning different things. It takes a while to shake that down.”

Smith raised an area of expertise which, based on his experience at Watercare Services, will be required on all of the new boards – asset management.

“The directors will need a clear understanding of what an asset plan is, how it works, how it's funded, how it is prioritised,” Smith said.

“And the plan will need to provide certainty in terms of how you might approach funding infrastructure deficits.”

In the post-reform environment, it is likely every new board will face an infrastructure deficit, Smith said.

For Brooks, another key skill required will be cultural – a commitment to transparency and accountability. 

“Promoting a culture of openness these next three years will be important,” Brooks said. 

“During this transition, you should be asking lots of questions and be prepared if the information that comes up is not what you want to see. You're going to have to think about how you can manage and, at the same time, be aware you are going to be regulated. Be prepared for a high level of scrutiny, transparency and accountability. It's going to be a rollercoaster.”

Part of the public-facing challenge of the role will be tensions that may arise between councils and new entity boards. As in other public sector roles, there will be media scrutiny when things go wrong, with consequent risk of reputational damage to directors. The panel noted political flashpoints could include blame for problems, pressure to return dividends or rebates to councils or consumers (at a risk to long-term financial sustainability), debates about decisions being made by unelected boards, and new councillors seeking to halt, or alter, the course of multi-decade infrastructure projects and strategies. 

These issues are not new in council-controlled organisations or other public sector roles, but will include a particular public health context in the governance of the new water entities. Director independence and competence will be critical to the success of the reforms and if you don’t have a commitment to that public health mindset, as Jaduram put it: “You can kill someone.”