Organisations that avoid discussing governance end up spending a lot of time on it. They define it afresh for each decision. They argue endlessly about decision rights.
They end up with little time to actually make the decisions.
So they make poor decisions.
Organisations manage information poorly for a variety of reasons, such as fuzzy objectives, insufficient resources, inconsistent processes, etc. However, one root cause underpins many of these reasons: conflict.
People make conflicting decisions about what to prioritise, which standards to apply, how to deploy their resources, and so on. Resolving these conflicts diverts attention from more important issues. And, in the meantime, they create confusion, duplication and rework.
Resolving such conflicts is the realm of governance.
Good governance defines the decision-making process upfront. It defines clear roles and responsibilities. With these defined, people can focus on understanding the issues and identifying good solutions.
Without such focus, they waste time arguing about decision rights and suchlike. At worst, decision-making degenerates into politicking and indecision.
When establishing governance structures, consider these nine factors:
Governance is political
It addresses concerns such as who is empowered to make which decision, what process they must follow, and who they must consult.
These are political questions: they influence how power is exercised within your organisation. Some people have power through their rank in the hierarchy. Some have it because they control key resources. Some have it through expertise and charisma.
You need to ensure that the right mix is brought to bear on key decisions, both to make them and to make them stick.
Governance is not management
Governance sets the boundaries within which people operate. It identifies who is responsible for making which decision, and defines the process they use to make legitimate decisions.
Management is then about making those decisions – gathering information, identifying options, making trade-offs, etc. When governance encroaches on management, people either lose sight of overall priorities or they make decisions without understanding operational context.
If governance tries to replace people’s skills and judgement, it will fail.
Engage stakeholders at all levels
Good decisions often need to balance the interests of multiple stakeholders. You need to apply the right mix of expertise to them. They must align to overall strategy while still making sense to people at the coalface.
Budget and resource owners must buy in. To define effective governance structures you need to identify the relevant stakeholders, understand their perspectives, and win their commitment.
Establish clear roles and responsibilities
Once you understand the stakeholders, you can map out their decision rights. RACI models are a useful way to do this. They define:
- Who is responsible for a decision (gathering data, identifying options, making recommendations, etc).
- Who is accountable for the decision (approving and paying for it).
- Who must be consulted in the course of making the decision.
- Who must be informed about the decision.
Establish oversight bodies
Many decisions can be made through organisational standards and policies. Someone needs to define, approve, enforce and implement these standards.
There are many ways to do this: factors such as culture, regulatory environment and market dynamics will determine what works best for your organisation.
Some situations favour enterprise-wide consistency and efficient use of scarce or specialised skills. Centralised oversight works best here.
In other situations, local knowledge, short command chains and fast decisions are more important, so devolved oversight makes more sense.
Focus on what’s important
People make countless decisions every day, so let them. Governance that focuses on minutiae loses sight of the big picture and becomes bureaucracy.
Focus your attention on the small set of decisions that has most influence on overall performance.
Attend to details
Although the big picture is crucial, you also need to ensure that someone is looking after the details. The details often drive people’s perception of your organisation. They also have a habit of blowing up into big issues if they’re not thought about.
Conflict is a natural state. People have different goals, and there are never enough resources to do everything we want to do.
Different perspectives lead naturally to different opinions, and such conflict can become toxic if it’s not addressed. Think about potential stress points upfront and map out mechanisms to deal with them.
Then you can channel conflict into more helpful directions.
Build in feedback
You’re not going to get everything right. Even if you do, your organisation and its environment will change. Create feedback loops so you can learn from experience.
Ideally, these loops will operate at two levels. First, how will you monitor and adjust the outcomes of individual decisions? Second, how will you monitor and refine the decision-making processes?
At the end of all this, your governance framework should ensure that people know:
- Which decisions have most influence on your objectives.
- Who should be involved in these decisions.
- What decision-making process they will use.
- How outcomes will be tracked.
This maximises the likelihood that they’ll make good decisions.
Organisations that avoid discussing governance end up spending a lot of time on it. They define it afresh for each decision. They argue endlessly about decision rights. They end up with little time to actually make the decisions.
So they make poor decisions.