Is it ‘governance’ or is it just plain simple ‘business management’?
It should be straightforward. There have been many big debates around it. There have been laws developed about Governance for groups, organisations and larger corporates. Rules, guidance, codes and business practices have been published to help people deliver it too. People (usually, pointy finger professionals) use nouns such as, accountability, equity, fairness, inclusiveness, integrity, responsibility, sustainability, transparency, trust etc. when they tell us what it looks like. Believe me though, when I say that good Governance can definitely steer your organisation towards the best opportunities and help you miss the potholes in your journey too!
It’s strange that despite all this, each year the press provides us with lots of examples of big businesses who have failed in some way or suffered reputational damage because of poor governance. Why is that?
And why do we so often find that people go icy cold when a Risk Professional or General Counsel or some other likeminded soul brings up the subject of ‘Governance’ during business meetings? As well as this, reviews of a business’s Governance arrangements are often misunderstood or poorly addressed because of the limited attention this topic receives from its leadership team. Maybe the ‘reviewers’ are not taking business leaders along with them? Maybe they leave them feeling ‘out in the cold’ or as though the review has been imposed upon them (by the way this is something that we, at Operite would never do, because imposition creates opposition). Maybe for some teams, it conjures up the idea of an old-fashioned schoolteacher or the government or some form of authoritarianism? And people don’t want to “shackle” their business? It’s concerning that some organisations still just don’t get it right and begs the question “Is this about getting the oversight and reporting right or is it all about culture?”
Clearly we are missing something. What actually IS governance and what is it that really needs to be done?
Let’s start with the UK Oxford Dictionary which defines governance as ‘the action or manner of governing a state, organisation etc.. ‘ But hang on that’s our first difficulty. That definition is not really that useful is it? It’s like saying a banana is a banana shaped fruit. It doesn’t tell us much.
So, we need a different definition and luckily there is one. If we look back to about 200 / 300 BC and hop over to Athens you will find the origins of the word Governance and possibly the biggest clue to overcoming the difficulties businesses and organisations alike, face today. The word ‘governance’ is based upon a Greek Verb ‘kubernaein’ which means to steer.
Ah Yes! Governance is all about steering, so that means good Governance is all about good steering. Got it. You wouldn’t jump into your car and head out into the country if your car was missing its steering wheel because this would render you unable to steer away from hazards, towards opportunities and towards your ultimate destination. So why do some organisations and companies have difficulty even grasping the steering wheel? Let’s stick with the car theme …there may be some clues along the way.
Is it about responsibility too?
Nobody operating within the law would drive a car without insurance, an MOT, road tax and you would probably have some rules about the conduct of the people you invite to ride in it with you, wouldn’t you? Things like no muddy shoes, keep your feet off the back of my seat, don’t put the dashboard TV on while I’m driving. Then there are things that you could do to make sure your passengers are comfortable like, are you warm enough in the back, is the music too loud, you want to change the radio station, you want the music off? If you have children you would even fit a kite marked car seat, abide by the speed restrictions, pull over for emergency services (hopefully you would do this bit even if you don’t have children too ;-)).
And to be frank, like Governance, rules and guidance touch everything that we do, in just about every activity or space we enjoy. Don’t feed the ponies, walk on the left, queue over here ……… the list goes on.
So, can’t we adopt the same principles for steering an organisation or business well?
Good Governance requires that you steer your organisation well and it goes without saying that if you cannot steer your organisation well you are going to hit some obstacles along the way, affecting your long-term business sustainability. Steering well should be part of just plain simple ‘business management’. While there are more rules if you are a larger company, there are some simple to implement, basic checks and balances that can direct and support your organisation successfully whether it is small, medium or large.
To get Governance right you should collect all the laws & regulations your organisation needs and must comply with, the codes & best practices that govern your business, the guidance (policies and procedures) you use to direct and support your staff (including management), the values & ethics that together help set culture, behaviours and attitudes for your organisation. These things need to be embedded in everything that your people do. They should also be documented in such a way that they can be communicated to everyone who needs to see them and called upon for effective review whenever the need arises.
Communication is important. Good communication is key to steering well and how this supports your staff and operations in performing everyday tasks. So use all the methods of communication you have at your disposal to ensure that people know what they should be doing, when they need to do it and what the outcomes should be. Gather consistent data on progress, outputs and pitfalls along the way and discuss them with your decision makers as regularly as possible – we are all in this together. Together we are strong and when decision makers get involved, we have great leadership!
Example:
There is something extremely risky about letting key personnel carry everyday processes in their heads, instead of documenting and submitting them to the business. Even having simple, departmental ‘How To Guides’ lessens the risk of losing critical business intelligence to a key member of staff if they become temporarily or even permanently absent from work. These guides / processes are also a convenient ‘go to’ place if things go wrong. They are a means to look at the way we did things and show us the weak spots quite clearly. This is critical to designing better checks and balances to fill those weak spots and we can rest assured that everything we do follows a structure and consistency that all are happy with. This is the very minimum form of Governance that will help all types and sizes of organisation to thrive and grow. This also makes a natural home for your organisation’s controls. (Controls protect against loss because they mitigate risk.)
And ultimately how good the steering is and how well these checks and balances are adopted within your business depends upon the leadership team. It’s not about paying lip service to steering well it’s also not a box ticking exercise. It’s about doing the right thing because it is the right thing to do for the business. And Ahaaa! That takes us right back to accountable people who need to take personal responsibility.
So doesn’t steering well depend on all of these things joining up?
Yes, steering well is all about joining everything up and connecting the world in which you do business, purpose, culture, and strategy. These things need to be set at the heart of Governance so that your organisation can make the right choices and take the right decisions. We, at Operite Consulting have worked with many companies to help them navigate the journey which links the decisions they make about levels of risk taking to their original purpose and mission statement, then ties their operational needs to limits and triggers for action as they deliver their business strategy and plans too. This is how governance works. It sets boundaries and enables a mechanism for delivering your ideas, your choices your decisions and your performance.
Although formal Corporate Governance codes wont apply to many of the small and medium sized companies we want to work with outside of financial services; as professionals in our field we are keeping a close eye on ‘bodies’ particularly the FRC (Financial Reporting Council) as they prepare to become the new regulator– the Audit, Reporting and Governance Authority, because this means that they will have powers to engage with companies directly about their governance reporting soon. To this end you will find a list of the topics the FRC are currently debating in our road sign above.
And the London Institute of Banking & Finance, have recently published news and insights that could be an interesting read for businesses outside of financial services, who are considering their Governance arrangements. This is because they are calling out good Governance as a commercial imperative for all of tomorrow’s companies and telling us why.