Fundamentals of OE #8: Establish Governance that Improves Decisions

Summary:

• Governance is a critical aspect of a functioning, continuously improving organization
• Many companies take a one-size-fits-all approach to governance, which over-burdens some decisions and turns it into a check-the-box exercise
• Governance should be designed appropriate to the decisions being made, and placed as close to the information source as possible

Governance is one of those terms that makes many people cringe – it invokes images of long meetings, bureaucratic processes and red tape. Yet it is an unavoidable reality that effective governance is a critical aspect of a functioning, continuously improving organization. The key word is “effective”; governance only adds value if it is effective, and not all governance is effective.  

Many definitions for “governance” define it as the policies, procedures and rules put in place to control the business. In other words, it’s defined by the common methods utilized. Yet, those who have sat through all the meetings, created all the reports and filled out all the forms have, intuitively, questioned the value at some point. When governance is defined by a fixed set of methods, then those methods will eventually be ill suited and that’s when governance and bureaucracy become synonymous.  

This points to the root of the problem with governance structures – primarily that many companies take a one-size-fits-all approach to governance, and the single approach is quickly becoming ill-suited for modern organizations.  

We need to re-think governance for the modern world. This starts with simplifying the definition. The simplest way to think about governance is by its intended outcome, and that is better decisions throughout the organization.  

 

How did we get here?

Traditionally, one of the key challenges with decision-making has been limited information. Those on the front line or even low-level managers had a very limited view of the organization, which hampered their ability to fully evaluate the impact of any decision on the rest of the organization or on other stakeholders. The mitigation was for key decisions to be escalated and dispersed. This practice was based on the fact that information came primarily through interaction, and those higher up the organizational ladder had more interaction with the rest of the organization. Thus, escalation and dispersion typically led to better decisions.  

In the last few decades, this dynamic has shifted where now the front-line has access to far more information, and usually has more knowledge about any particular situation than their managers. As technology reverses the knowledge balance, the role of governance has shifted but many are struggling with finding the right fit. 

Governance as a hindrance to progress 

As companies attempt to adapt to this new dynamic, we’ve seen governance take on some roles that are counter-productive to progress and improvement.  

The three most common ways this happens are:

1. Using governance to give a false sense of control and certainty 

Our natural inclination is to trust decisions made by groups rather than individuals. We feel better having “run it by” others, even if the decision remains the same. Collaboration can be very beneficial for decision-making, but it can also give a false sense of security. Sometimes escalation or collaboration are used merely as a means of insurance against being the single point of blame for a bad decision. In these situations, governance is no longer about driving better decisions but about creating the illusion of a good decision. 

2. Using governance to slow-down decision making 

The right decision, made too late, is the wrong decision. Just like we associate decisions made by larger groups to be better decisions, we do the same thing with decisions that we have spent a long time on. Long, drawn out governance structures are sometimes tolerated or embraced because it matches the organization’s shyness towards making quick decisions.  

3. Using governance for assurance or check-the-box management 

Governance meetings can very easily digress into report-out meetings that play the role of assuring the work is being done rather than governing the work. After employees become accustomed to this as the norm, the repetitive governance meetings are little more than check-the-box exercises offering little value to the governors or to the teams doing the work.   

 

5 Steps for improved governance 

As we’ve previously discussed, Operational Excellence requires the agility to rapidly adapt to changing environments. Decisions need to be correct, but they also need to be made in a timely manner. Yet the fact remains that decisions aren’t all the same. Thus, an effective governance model won’t only look different for your company compared to others, it will look different for different decisions. Here are a few things you can do to make your governance structure more effective without becoming overly bureaucratic. 

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Governance does not have to be a drain on your organization. Taking into account the considerable amount of time employees spend in meetings, creating and delivering reports, and gathering feedback on their work, improving the productivity of this time alone is worth the effort. However, the value of improving the quality of your organization’s decisions through effective governance is worth getting this fundamental right. 

For help improving your governance, contact Endeavor Management today. 

 

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This post is an excerpt from the white paper “The Fundamentals for Transforming Your Organization Through Operational Excellence.” Download the complete white paper here.