At Sheffield we have spent the last year deep in one of the most demanding areas of public sector leadership in New Zealand - water. The Local Water Done Well reform programme has asked councils to stand up entirely new entities, bring multiple organisations together and rethink the governance model. Around New Zealand, Sheffield has worked hand in hand with Mayors, Councillors, Stakeholder Representative Groups and Joint Shareholder Committees as we navigate the journey of standing up new boards from scratch.
Our role has been to facilitate these panels in collaborating together, agreeing the skills matrix and guidance on what good governance looks like. This is a once in a lifetime opportunity to lead governance across a multi-year transformation that will bring together people, systems, technology and services into single, future-ready organisations serving their communities for generations.
What follows is some of what we have learned. Whilst much of it is specific to ‘water governance’, a surprising amount of it travels well beyond this sector.
Experienced Chairs are essential
These are genuinely novel, high-stakes entities, highly regulated and operating under new legislation, with some taking on $billion+ in assets and debt. When establishing a new entity, the Chair's responsibilities extend well beyond the operational. They are setting the culture before there is a culture to inherit, navigating relationships with shareholding councils and iwi partners, as well as giving a new CE someone credible to test their thinking against. There’s an inherent political balancing act. CCO’s sit at arm's length from councils but are still publicly owned, ratepayer-funded, and intensely scrutinised. And importantly an experienced Chair will give councils, regulators, the public and other key stakeholders increased confidence that a multi-million-dollar asset transfer is being overseen competently.
Which seat comes first: Chair or Chief Executive?
One of the first sequencing questions any establishment faces is who to appoint first. There is strong argument for appointing the chair early so they can help shape the brief for the chief executive and be part of the selection process. The chair/CEO relationship is critical to success. There is equally real risk in leaving the executive seat empty too long when these organisations need operational momentum now.
We do not think there is a single correct answer that fits every establishment. Sometimes there is interim leadership already in place. Our preference is to appoint the Chair first, followed by a staged Board recruitment, with the CEO role following a few weeks later. This overlap means the Chair is involved as early as possible in subsequent appointments.
Engage your new board early
Establishment boards face a question that settled boards rarely think about: how quickly can the board start working? There is often a gap of a month or more between a board being selected and then being formally ratified at the next official council meeting. Left unmanaged, that gap is dead time at a time when momentum matters most.
We have seen value in bringing the new board together for an initial meeting before everything is official (in an unofficial capacity), enabling directors to begin building relationships, understand the issues and align on priorities. When ratification does come through, the board is ready to hit the ground running.
Directors Fees and Time Commitment
This is a governance environment of unusual complexity: directors must simultaneously stand up a functioning organisation, manage major asset and liability transfers, build relationships with regulators from scratch, and begin delivering services to communities all within a compressed timeframe. Setting board remuneration appropriately is therefore not simply a matter of applying standard benchmarks, but of recognising the materially elevated demands placed on directors during both the establishment phase and the first full year of operation.
The EDB (Electricity Distribution Business) sector is the obvious comparator because no other sector simultaneously combines regulated monopoly status, public/community ownership, Part 4 Commerce Commission oversight, multi-decade infrastructure assets and a community service obligation. Water CCOs share these characteristics. Consideration should be given to annual fees being calibrated against a steady-state baseline average workload of 50 days per year for chairs and 30 days for directors (IoD workload survey data). This may be materially exceeded during the establishment and first full year of operation for a water CCO. The IoD survey points to the workload of chairs in high-complexity governance roles in establishment phase being 65-75 days per year and directors as 38-45 days. We suggest that an uplift above steady-state fees is defensible for the establishment phase of these CCO’s and that these could be milestone-gated.
Our governance and executive database and networks
Establishing new entity’s, amalgamating organisations, shared service arrangements, strategic stakeholder engagement, leading through change, ambiguity and reform: these are all current and core capabilities for directors and CEOs. Our focus at Sheffield is appointing the right leaders and building the right board at a moment when the stakes are high and the structure is still forming.
These capabilities will transfer between sectors. The questions that a water entity wrestles with in its establishment phase are the same questions a merged health provider, a new CCO or any amalgamating business and their board will face. The sector may change, but the governance and leadership fundamentals do not. Sheffield has the largest executive and governance database in New Zealand; we know the talent and their skills, and we are ready to support your business needs.
How we can help
Sheffield brings executive and governance search, board review and leadership assessment together under one roof, which means we can support an organisation across the full journey of establishment, from the chair and executive appointments through to reviewing how the board is performing once it is up and running. If you are building something new, bringing organisations together or leading through reform, we would welcome the conversation.
Contact us