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"SYSTEMIC GOVERNANCE": quick assessment of all governance processes in light of systemic and market-based principles"Governance" means all the processes that coordinate and control an organization's resources and actions. Its scope includes ethics, resource-management processes, accountability, and more. Overview of systemic governance.... Governance can be implemented in a narrow and potentially harmful way: as oversight through committees and auditors. The results are generally bureaucratic, imposing convoluted approval processes on already-burdened organizations. Heavy-handed top-down controls squelch entrepreneurship, bog organizations down, and drive administrative costs up. As an alternative to oversight, leaders can adjust the signals within an organization so that people automatically do the right things in the first place. This systemic approach creates an environment where staff are empowered and entrepreneurial, yet behaviors and resources are controlled and well coordinated. More details on systemic governance.... Corporate governance has many facets, some of which may already be in place. This quick assessment of your current practices provides the basis for a practical action plan to implement systemic corporate governance. Culture is all the beliefs, values, attitudes, rituals, and behavior patterns that people in an organization share. Ethics is a subset of culture, as are integrity, customer focus, entrepreneurship, empowerment, interpersonal relations, and teamwork. By defining, teaching, modeling, and measuring tangible behaviors (rather than values and feelings), organizational culture can be changed quickly and it becomes a practical tool of governance. Structure includes both the organization chart and cross-boundary work flows. You can't change the organization chart without affecting work flows. A well-designed organization chart defines jobs based on lines of business, i.e., it defines accountability for products and services. Clear individual accountability for results is a key component of effective governance. Of course, the more people focus on excellence in their respective lines of business (their professional specialties), the more they become dependent on teamwork (work flows). High-performance work flows are not fixed assembly lines. Rather, teams form dynamically, involving just the right people at just the right time. 3. The Internal Economy (Resource Management) Money is the lifeblood of an organization. The "internal economy" controls spending, and channels resources to the most strategic uses. It comprises all the resource-allocation and investment-decision processes that determine the funding for each function, what specific products and services are produced, and who within the company gets them. An effective internal economy is based on market economics, not hierarchical controls or bureaucracy. More on resource-governance processes.... Methods and tools guide the professional practices and the processes within groups. For example, training staff in project-management methods and tools may preclude the need for detailed management oversight of projects. Thus, introducing new methods and tools is part of a holistic system of governance. Metrics and rewards are the "feedback loops" that allow people to monitor results and adjust their behaviors accordingly, and the incentives that cause people to care about those metrics. If the other organizational signals are poorly aligned and encourage people to do the wrong things, metrics and rewards only cause people to go the wrong way faster. Thus, metrics and rewards are best designed within the context of the entire system of governance.
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Benefits of Systemic Governance
A systemic approach to governance has the following advantages:
* Less costly: Systemic controls take less time and less paperwork. Time savings are especially felt by senior executives who otherwise would have to spend innumerable hours in committee meetings and reviews.
* Empowering: Systemic governance sets up the "rules of the game" and then leaves staff free to act independently within those constraints. This encourages individual initiative, creativity, and entrepreneurship. It engages everyone, maximizing performance.
* More comprehensive: Organizational signals influence everybody all the time, so the matters they address are comprehensively controlled. Thus, they're far more effective than oversight which can only review a limited subset of an organization's decisions.
* Flexible, not rigid: Instead of tight controls and predefined answers, staff respond to each unique situation as appropriate, within the bounds of the systemic controls.
* Highly responsive: There's no waiting for the next committee meeting. Adjustments occur quickly because everybody is making decisions without having to seek permission. Thus, an organization can respond to opportunities and changing business conditions in real time.
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Governance Without Bureaucracy and Disempowerment:
RESOURCE GOVERNANCE: The Internal Economy: how to apply market principles within organizations to make sense of budgeting, rate-setting, project-approval, and accounting processes.
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