What Is Governance Anyway?

Governance

Imagine that you’re CIO of a supermarket chain. Feels good, huh? All that power. Now imagine this: it’s the middle of January and a snowstorm has wiped out half the transport links in the country.

Your distribution network is shot to pieces. Staff can’t get in to work. Customers are trying to find out which stores are open and what food they’ve got, so they’re driving website traffic through the roof. Your servers are running hot and starting to fail. The communications team is demanding that you get a bunch of information out to the press, onto the websites, to the store managers, to staff mobiles, etc.

The last thing you’re thinking about is governance. You don’t have time to be talking about compliance, policies and approval processes. Right? Right.

Yet this is precisely the moment when you need good governance. You’ve got a huge number of decisions to make. And if you don’t make them quickly and effectively, the situation is going to blow up. That’s what governance is about: making good decisions.

I like this definition of governance, from the Institute on Governance (www.iog.ca): governance is “the process whereby societies or organizations make important decisions, determine whom they involve and how they render account”. So governance addresses four things:

1. Knowing which decisions are important

We all make hundreds of decisions every day. Most of them are trivial – what socks to wear, which emails to delete, etc. Only a small number have a big impact on organisational goals. Good governance ensures that we know what those important decisions are, and that we focus our energy on them.

2. Involving the right people in decision-making

Go back to the snowstorm: this isn’t the time for disputes about who has authority to order new server capacity. Lines of authority need to be spelled out clearly so people can act. If they need to consult more widely, then they need to know who to talk to and how to contact them. There isn’t time to make it up as they go along.

3. Following the agreed decision-making process

Because there’s a pre-agreed process, people don’t need to spend time defining decision criteria and suchlike. They can start immediately to gather the necessary data, analyse the options and make the decision. And because people can see that you’ve followed the agreed process, they’re less likely to challenge the outcome. So you don’t waste time revisiting decisions as people challenge their legitimacy.

4. Accounting for the outcomes of decisions

Accountability is about feedback, not blame. No-one can make perfect decisions all the time, especially when data is limited and time pressures are great. But we can build in feedback loops to monitor outcomes and hence adjust decisions as more data comes in. Likewise, we can monitor the overall effectiveness of our decision-making processes and refine them as we learn from experience. Good governance creates an environment where this will happen.

That’s what governance is about: enabling people to make effective decisions in as efficient a manner as possible, then tracking the outcomes of those decisions so we can learn and steer towards our desired goals.

On the other hand, when governance is weak or poorly defined organisations tend to degenerate into one of two states:

  • Adhocracy: People waste time defining bespoke processes for each decision. They argue about who needs to be consulted. They fail to inform key players of what’s going on. They apply different policies and priorities to similar decisions in different parts of the organisation. This leads to delays, inconsistent decisions, duplication, rework, and so on.
  • Bureaucracy: People apply the same policies and processes to every decision, regardless of its importance. This generally means applying the processes necessary for important and complex decisions to every decision, even the simple or inconsequential ones. It also means involving a wide range of people in every decision, regardless of what value they can add or what effect it has on them. So again we get delays and increased costs.

It’s also possible to fall into both states at once – a bunch of adhocrocrats in permanent guerrilla warfare with the bureaucrats. Decision-making becomes essentially a random process. Sound familiar?

Whichever state the organisation falls into, the result is the same – simple decisions consume too much time and energy, robbing important decisions of the attention they deserve and ensuring that people won’t have time to monitor outcomes and hence learn from experience.

The ironic truth is that organisations that don’t address governance end up spending a lot of time on it. They discuss it over and over again as they argue about decision rights and due process for each decision. This leaves them with little energy for the decision itself, so they make bad decisions.

Let’s go back to the snowstorm. You need to decide and act quickly. That’s as true in day-to-day operations as it is in a crisis. That’s what governance is about.

Dr Graham Oakes is a highly skilled systems engineer and project manager with over 20 years’ industry-proven experience backed by a track record of delivering highly innovative and effective solutions. Graham helps people untangle complex technology, relationships, processes and governance. As an independent consultant, he helps organisations such as Sony Computer Entertainment, The Open University, the Council of Europe and the Port of Dover to define strategy, initiate projects and hence run those projects effectively. Prior to going independent, he held positions including Director of Technology at Sapient, and Head of Project Management for Psygnosis (a subsidiary of Sony). His book, Project Reviews, Assurance and Governance, was published by Gower in October, 2008.