‘Mind the board!’: Board efficacy, managerial role dilemmas and performance in municipally owned corporations

Abstract

Globally, the corporatisation of local public services has gained substantive momentum over the past decades. However, there is a research gap concerning the functioning of governance bodies, particularly boards, in municipally owned corporations as hybrid organisations. In this study, analysing German municipally owned corporations, we investigate the relationship between supervisory board efficacy, as attributed by chief executive officers, and perceived organisational performance. We do not find a direct relationship; instead, we find evidence for a ‘catalyser’ relationship: board efficacy alleviates managerial role dilemmas, thus removing obstacles to organisational performance. The results imply that particular attention needs to be paid to the enhancement of competencies of board members and their collaboration. Limitations are outlined. Points for practitioners • ‘Good governance’ of hybrid organisations requires effective boards, which – albeit indirectly – ultimately result in better corporate performance. • Board efficacy alleviates managerial role dilemmas, thus removing obstacles to performance. • The results imply that particular attention needs to be paid to the enhancement of competencies of board members and their collaboration.