No bells, No whistles, Just Plain Old Governance!
The conventional wisdom suggests, that to be successful, enterprises of all sizes must ensure that they have implemented an overarching system of governance, as part of their corporate strategy. This is done to facilitate and ensure, the achievement of their objectives, commercial or otherwise. Let’s pause for a second to think about the word ‘Governance’. What does it really mean? And does anyone person or organization own the absolute worldwide accepted definition for it? Stretching this a bit further, how is ‘governance’ related to ‘strategy’ exactly?
I did quite a bit of research on the subject and from what I’ve learned thus far, the answer is; well, not all that simple I’m afraid. Here’s the thing, apparently, anytime there is a breakdown in the system of governance within an organization, especially with the big names, the world media seems to go wild. Fresh in our minds is the story of the Barings Bank and Société Générale, where apparently, a breakdown in the monitoring of their internal processes led to their famous front-page splash! We also have examples like Enron and AIG. Of course, we now know, that their short-lived success was attributed to organized accounting fraud. More recently, many public and private organizations have invested in subprime-based toxic investments, for which the risk factor had not been identified or had been largely underestimated. We all know what happened after that.
You may wonder, how do we prevent such large-scale incidents from ever happening again, at least in our lifetimes? More regulations perhaps or, maybe we should try swift, and I mean really swift punishment for those caught with their hands in the cookie jar! It seems that human kind has tried all kinds of remedies, but one look at the aftermath of the consequences of our own actions, and one can perhaps conclude that we are nowhere near a solution. Perhaps it is an understatement therefore, to suggest that now, more than ever; there is an absolute and clear need for a more a grounded behavioral change program, one that feeds directly into our own system of values. The reasons I believe that the system of Governance in general continues to fail, at least in the way we’ve been going at it, is because we are dealing with an ancient trait, so deeply routed in the human soul. I’m talking about ‘Greed’ here folks. As long as greed is there, we human beings seem to be more than willing to pursue and exploit holes in our own control systems. Ironically, the very systems we designed to put us in control in the first place.
Of course, it gets even more complicated, when we consider that there are different types of stakeholders with very different issues or agendas to reckon with. Take for instance, Governance over IT (my next blog is about this), Enterprise Risk, Corporate Social Responsibility, ERM and alliance formation. These, and many other shapes of ‘Governance’ have become an increasingly critical component of enterprise success, and many astute enterprise leaders realized the need for effective and efficient governance around these issues and they are probably wondering everyday, if they had managed to effectively bake ‘governance’ into their own organizational strategy.
From a distance, it seems that the majority of the legislative acts that we know of today, have been designed to reinforce the already-existing focus on governance. But are those acts really bringing clarity to the topic or are they leading to an increased level of confusion and anxiety? Here’s the funny thing, I’m sure those who have spent countless hours budding their heads and sifting though piles and piles of documents and law artifacts, never set out to confuse the world and that they were genuinely thinking they were doing the world a favor!!!
Until my next appointment with you, I would love to hear about your views on ‘Governance’. What worked for you and what didn’t? Any advise to the world?