James Bowen & Brian MacNeice, Managing Directors, Kotinos Partners & Authors, Powerhouse – Insider Accounts into the World’s Greatest High Performance Organizations
By governance we mean the model by which an institution is run. Thinking about governance is the “stuff” of management and one of the tasks to which leaders look forward the least. In a high-performance context, however, governance is where the rubber hits the road.
While governance model design is complex and multi-dimensional, in our research we observed similarities of approach that are instructive for leaders to understand, with institutions thinking about three categories of governance:
- Strategic governance relates to the sharing of information, the framing of choices and/or the taking of decisions. The scope of strategic governance is broad, ranging from strategy development and deployment at one end of the spectrum to engagement and communications at the other.
- Regulating governance relates to ensuring things are happening as they should. Every institution has an amount of this that they have to implement – to meet their own requirements or those, for example, associated with legislation or regulatory bodies.
- Accommodating governance caters – explicitly or implicitly – to individual or collective dysfunctions. Examples of accommodating governance include meetings to get individuals up-to-speed with status information because the reporting systems for making performance visible are absent; decision-processes that happen in parallel across multiple functions because neither the appetite nor the mechanisms for cross-functional engagement are in place; meetings to take decisions that have been escalated but that should really have been taken at a lower level; or crisis management that comes about as a result of unnecessary people or process failure.
By and large, strategic governance is “good” governance, and many high-performance organizations – such as Toyota and Southwest Airlines – deliberately overinvest in aspects of it (for example by having more people than necessary participating in particular processes) to ensure their teams are informed, aligned, focused and motivated to deliver.
Regulating governance is also “good” governance, however unlike strategic governance, institutions should always target to have the minimum amount possible. The problem with regulating governance is that the amount required is a function of the extent to which the institution is in control – that is to say that the less an institution is in control, the more governance effort is required of its leaders simply to keep track of what’s going on.
Unlike the other two categories, accommodating governance is definitively “bad” governance, and its existence in high performance organizations always provokes a strong allergic reaction among their leaders.
Many top practitioners, academics and strategists argue that an institution’s scarcest resource is the management time of its leaders. However the reality of normal business life is that most of this time is spent engaging in governance processes of one form or another. We come across many more examples of calendars that are double, or triple-booked than we do of calendars with “white spaces” for thinking or doing work. When this reality unfolds, the norm is for regulating and accommodating governance to be squeezed in, while strategic governance gets squeezed out.
So what have leaders of high-performance institutions done to make sure their organizations are different? Well first, they have taken ownership of the problem and recognized that governance is something to be proactively designed and managed as an explicit means to a performance end. They have affected the type of transformation shown below, implementing models that connect directly to their high-performance ambitions, and that are dominated by strategic governance, supported by the minimum amount of regulating governance, with zero presence of accommodating governance.
Second, as illustrated in the same diagram, they have implemented a design standard of “just enough process”, enabling a situation whereby the volume of governance activity – the amount of time it takes – fits comfortably into leaders’ working days/weeks/months, with space to allow for thinking, lunch, and other activities. The key to doing this is understanding the interdependency between leadership behaviors and the volume of governance process required.
This interdependency centers on the fact that, to minimize risk, governance processes must align with the lowest common denominator of leadership behaviors. In practice, if left unmanaged over time, governance typically evolves on its own to the point where this equilibrium is reached. Leaders, therefore, who want to minimize the overall volume of governance, do this by implementing improved leadership behaviors at the same time as they re-engineer their processes. This is both a design challenge – identifying and articulating the required “behaviors to win” – and also a development/enforcement challenge. Organizations like Netflix, Southwest Airlines and the US Marines, that put values at the heart of their competitive advantage, “get” this interdependency and push for high standards of behavior in everything that they do, in part as a means to reducing their need for process.
Finally, leaders of high-performance institutions have viewed governance design as a holistic organizational design challenge. In addition to process and behavior, they have proactively pulled other organizational levers to facilitate effective governance. For example they have designed structures and roles to ensure clarity of accountability and decision-rights; they have designed information systems to ensure the right data is in the right place at the right time to allow particular decisions to be taken; and they have set up their physical environments to ensure the right people are in the right places and/or the right conditions are present.
Viewed in the round, leaders of high-performance institutions understand that governance is complex, but recognize that it gets to the heart of their performance and how it is delivered. Most of all they understand that it is one of the key factors that differentiates enduring high-performers from the “also-rans”.
About the Author
James Bowen and Brian MacNeice are co-founders and Managing Directors of Kotinos Partners Limited, a niche advisory firm working to help CEOs and their teams achieve sustained high performance. They are also co-authors of Powerhouse – Insider accounts into the world’s leading high-performance organizations, published in October 2016 by Kogan Page.