Since the word “governance” is so variously understood (and misunderstood), I will start by defining it: simply, governance is the structures, roles and processes by which decision-making is accomplished. Governance exists anywhere decisions are made by groups of people – whether in organizations, governments, even families.
Okay, you might be thinking, but what about power? Isn’t governance really about power? That is a common way people think about governance, and it’s understandable because, think about it, decision-making is considered power. “I am the decider” and all that. But what I hope to convey and focus my clients on is not the power grab that governance discussions so often devolve to (not a very evolved modality, to be sure), but rather consideration of how best to design governance so that decision-making in an organization is effortless, effective and clear.
The idea here is that decisions should flow like water – they should be the product of decision-making made easy by optimally designed governance. The same kind of optimization we want in an irrigation system or healthy watershed. We don’t want water impeded, stagnating, or flowing in too small trickles (or too big floods) because all this leads to bad water quality. The same principle applies to decisions. Decisions are, after all, the life blood of the organization. All action is driven by them, and if decisions are made badly (without the right input, at the right time, on the right subjects), the resulting action is likely to be ineffective.
So, governance is like water pipes, or an irrigation system, or a watershed of rivers, streams and cascading waterfalls, all engineered to deliver clean, abundant water. Good governance creates optimal decision-making, which results in desired decisions.
It is surprisingly easy to know if an organization’s governance is effective or not. When governance is well-designed, it works; when governance works, decisions hold, drive effective action, and make for institutional resiliency. When governance isn’t working:
- decisions don’t hold (they are second-guessed or ignored)
- there is duplicative decision-making – different entities addressing the same decisions (causing not only extra expense, but also confusion: a key source of low morale)
- and lack of trust develops between decision-making fiefdoms, causing institutional weakness
In my 20 years of work with executive leadership teams, most clients initially seek my expertise in strategic planning and high level problem solving. Out of these processes, I noticed early on that many organizational problems originate with a lack of clarity and agreement around decision-making. I also found that there is a nearly universal short-coming in leadership capability regarding governance, i.e., how to talk about it effectively, understand how it works, and know how to design it so it works optimally.
Governance is generally equated with either the org chart or an architecture of rules (the area of information technology, being newer than most other business support areas such as HR or finance, deals more explicitly with governance as a result). Both the org chart and the rules are indeed part of governance, but only represent a small portion of the total governance picture. And, interestingly, this fractional approach to governance can be a bigger problem than little to no governance awareness at all because in this case, governance is built in a lopsided manner, with loads of detail in some areas and next to nothing in others. This leads, not surprisingly, to confusion. To help organizations surface governance, if it is indeed a problem, my strategic planning model includes an evaluation of it as part of an overall organizational capacity assessment.
A cornerstone of the governance approach I take is starting with a strategic evaluation of the types of decisions being made and how the organization currently groups decisions into specific “decision sets.” The way decisions are grouped is a simple but profound element of governance that often gets little or no attention, when, in fact, it is the originating governance element. This is so because we only need all that governance spells out to produce a decision. It is the decision that is the product of governance, not the power of the person(s) making it.
Decision sets are so part of the fabric of an organization that they can become invisible. More often than not, it is the way decisions are grouped that has become outmoded and/or so entrenched that stagnation and stove-piping is the result. This may seem too insignificant an issue to make a real difference, but in fact, the way decisions are grouped affects every part of governance and decision-making in an organization. The review of current decision sets prompts a rethinking of how decisions could be more optimally arranged to foster the type of analysis, in the right timeframe, with the expertise needed to produce robust and lasting decisions in the organization.
A simple yet illustrative example involves decisions about money. Many organizations group decisions about how to allocate financial resources together in the same governance process; however, if annual budget decisions are made in the same environment as long-term investment decisions, budget decisions will generally trump those pertaining to long-term investment. The general principle here is that in addition to the type of decision being made (funding), the timeframe it relates to should also be considered when grouping decisions. Putting decisions with vastly different timeframes together can cause the shorter-term to overshadow the longer-term (squeaky wheel syndrome). The idea of developing governance structure that considers the timeframe of decisions is a simple one that can have a substantial impact on improving decision-making in an organization.
This approach to governance evaluation and redesign can be considered strategic governance, as opposed to what is normally done: start with the org chart and shuffle people (and budgets) around. (“Reorg fever” is often a symptom of a lack of leadership understanding and capability around governance.) My approach to governance does address the org chart, because ultimately decision-making needs to reside with chartered entities that have clear authority and accountability. However, doing the higher level definition and structural work early on keeps the governance conversation from devolving into a power grab, and makes selecting the most appropriate decision-making entities much more obvious (based on expertise and stake in the decision set, as opposed to mere position inside the organization).
The result is governance that serves the organization, rather than a few well-positioned individuals. Sound like a good idea?