Process And The New World Of Risk Management

Deloitte AftershockThis week’s report from Deloitte and Forbes Aftershock: Adjusting To The New World of Risk Management maps the changing landscape in enterprise risk management (ERM).

ERM is now a C-Suite issue according to the 192 execs surveyed. But ERM effectiveness depends upon company-wide engagement.  In the words of one CFO quoted in the report:

“There is always a concern that if you set up a large ERM team, they somehow own risk. It can’t work that way. People that manage the day-to-day business need to own risk”.

It’s worth noting – and some visionary Nimbus clients are already moving in this direction – that many of the top ERM challenges identified in the survey are addressed directly by a business process management platform.

ERMRelated Posts

27 Jun 2012    What Do We Even Mean By Governance?

What Do We Even Mean By ‘Governance’?

iStock_000012210065SmallThere’s a swirling fog of confusion around what ‘governance’ means in the context of business transformation and process improvement – and it’s hampering progress.

Two examples:

Last week’s PwC/HfS report highlighted governance as a critical issue in Global Business Services. It offers no definition of ‘governance’ but seems to mean something like ‘a central organization or business unit’.

In the Hammer and Company Process Enterprise Maturity Model (PEMM), the concept of ‘governance’ is both broad and specific, covering the extent of the enterprise process model, whether there is clear process ownership and accountability, and whether the ‘Chief Process Officer’ is coordinating all process improvement projects and driving integration with customers and suppliers.

Both of these may be plausible definitions of ‘governance’ – but they are also quite a long way from what many people mean. ‘Governance’ has become a very elastic term. These two definitions may be outliers but there’s a formidable spectrum of meaning, from something as simple as version numbering to something as specific as segregation of duties.

Arguably, ‘governance’ has becoming so elastic that it’s no longer useful. Even its most obvious practitioners usually take it as understood. GRC vendors and consultants focus (for instance here) on risks and controls, with very little on governance (beyond Board issues).

‘Governance’, in short, is in danger of going the way of ‘sustainability’. It’s becoming motherhood and apple pie, a term to be liberally used (and abused) as required.

Which is more than an etymological shame, because it matters. Governance is a critical enabler for sustainable performance improvement. Without it, any program will fail [and there’s plenty of evidence how difficult it is to make cost cuts stick].

So what’s a useful definition of this essential thing called governance?  Starting at the highest level, the simplicity of this definition is compelling:

Governance is.. how an organization controls its actions.

Deloitte spells out a helpful distinction between corporate governance and operational governance:

“Operational governance is very different from corporate governance, which focuses on oversight by a company’s board of directors and shareholders…

In contrast, operational governance is a management activity that centers around key operating decisions by company managers and executives. Major elements include effective decision making through clear organizational roles, responsibilities and ownership… and continuous improvement through effective practices, policy setting, and knowledge sharing.”

So what does ‘operational governance’ translate into, in the real-world context of a Finance transformation program, or a global business services initiative, or a sustainable performance improvement program?

See it through the lens of the principal actors and an operational governance framework comes to life:

For the COO, it’s about visibility, accountability and ensuring the capability to design and execute performance improvement. Functions and end-to-end processes, the warp and weft of the operating model, are visible and integrated. Ownership and accountability are clear. Roles and responsibilities for the design of new target operating models, and their ongoing implementation, are explicit. And the whole organization has the means to get involved in continuous improvement.

For the CIO, it’s about a collaborative framework that can nurture a rich dialog to ensure complete IT alignment with the business, and fully leverage IT’s capabilities for the business.

For a Global Process Owner, it’s about end-to-end visibility and ownership, with clear roles and responsibilities, with real-time KPI metrics and analytics, and the means to collaborate effectively with all the process stakeholders – including customers – on performance improvement.

For a Process Stakeholder, it’s about visibility and accountability across the enterprise, within their particular dimension. For the Chief Risk Officer, for instance, it’s about understanding risks and controls, and ensuring compliance, within the context of ‘live’ end-to-end processes, not as something lodged in a document repository, divorced from operational realities.

For the Process User, it’s about making it easy to understand what to do, how and when – and to have the means to provide feedback and process improvement ideas.

So at the heart of good governance is structured and effective communication at all levels. HfS and the LSE presented survey evidence on a webinar last week High Performance BPO which illustrates just how much it matters.

Asked about the reasons for outsourcing failure in their organizations, the respondents were clear that it wasn’t for lack of budget for change management. They highlighted instead ‘communicating ineffectively with the business’ as the #1 reason for failure. And in almost 40% of cases, ‘not adequately planning for the full engagement of stakeholders’ had a significant negative impact.

How to make it happen? How best to enable an operational governance framework that will drive successful business transformation and sustainable improvement? That’s where the business process management platform comes in.

Related Posts

20 Jun 2012    Process – The Emerging Global Business Language

29 Feb 2012    Why Process Improvement Projects Fail

© Text Michael Gammage 2013

Why Governance Teams Are Not The Answer

HfS PwC - The Future of Global Business Services - June 2012It seems to me that there’s a fundamental flaw in the conclusions that HfS and PwC draw from their survey The Future of Global Business Services published this week. And that their recommendations would lead organizations down the wrong path.

The report focusses again on governance (which featured heavily in their joint report last year).

This year’s survey shows, they claim, that

“centralized governance organizations create the best outcomes…every organization should organize a governance team and, despite internal resistance from IT and business leaders who do not want to lose control, organizations should seriously consider centralized teams.”

All that I have seen in working with clients over the last ten years suggests that a centralized governance team is a dead end.  If by ‘governance’ we mean clear roles, responsibilities and accountability for driving every aspect of performance improvement, then governance has to be embedded in day-to-day operations.

A small core group supervising governance policies and their overall implementation across the enterprise makes sense. But the meat and drink of governance is the relationships and behaviours of process stakeholders. It’s about regulating actions in the real operational world of end-to-end processes. That’s where it lives and breathes.

Quality management offers a parallel.  Most often it was seen as a silo, separate from operational realities.  It was a box-ticking activity, a cost of doing business. No-one went into Quality Management to further their career. Then organizations like Toyota demonstrated the value of a completely different approach. They embraced quality and tried to embed quality thinking into everything they did.  They realized that quality only comes alive when it connects with everyday operations and gets people doing real work involved.

In Toyota’s case, Quality begat TPS and Lean of course – but that’s another story. The point is that nowadays a centralized Quality Management team is as rare as hen’s teeth. Quality should be everyone’s passion.

The HfS/PwC survey results themselves, and the HfS/PwC conclusions, illustrate that centralized governance teams can’t deliver:

“Governance teams frequently accomplish their primary objectives, but struggle to create similar outcomes in areas outside of their key focus areas.”

In other words, a centralized governance team may be able to railroad through cost savings, but it can’t also deliver innovation or agility or improved customer service. Centralized governance teams are naturally project-focussed and single issue. They can’t deliver sustained operational excellence and continuous improvement because that comes from ongoing collaboration between all the process stakeholders and users.

What every GBS organization needs is a collaborative framework that enables ‘Toyota thinking’:

  • a rich, ongoing and effective collaboration between all of the stakeholders of each end-to-end process (including of course its customers)
  • an engagement with process executors and customer users that will ensure their continual feedback and so drive continuous improvement.

Governance is the framework for this collaboration, the rules of the road that underpin rapid and sound decision-making.

Governance is absolutely a critical success factor, and especially in GBS environments which are often complex and fast-moving, with many actors involved. But its value comes when governance is embedded into the everyday, not ‘managed’ from some corporate ivory tower.

© Text Michael Gammage 2013

 

Process – The Emerging Global Business Language

iStock_000014424853SmallAnyone working on business transformation in a global organization will recognize McKinsey’s assessment in research published this week:

“The structures, processes, and communications approaches of many far-flung businesses have been stretched to breaking point.”

In Organizing for an emerging world, the McKinsey authors set out survey results – from 300 executives in 17 major global companies – together with their ideas for coping with ‘the cumulative degrees of complexity’ that globalization entails.

Process, in one guise or another, is a recurrent theme. It’s further evidence that a business process management platform is coming to be seen as the essential infrastructure to enable effective and enterprise-wide collaboration on innovation and continuous improvement.

The McKinsey authors dismiss, quite rightly, the view that it’s as simple as global standardization. Benchmarks, standards and industry models are invaluable guides but, at the end of the day, it’s often a complex calculus. Every organization is on its own journey: “No company’s restructuring should be viewed as a blueprint for that of another.”

McKinsey’s respondents themselves identified process as one of the 3 weakest aspects of their organization (from a list of 12, so it’s serious).

McKinsey’s conclusions are sound, and, again, process is the leitmotif throughout:

Don’t standardise more than is necessary. Which makes it vital to have a platform to manage effectively the ongoing tension between global processes and local variants.

Fit technology to the process, not vice versa. Break out of thinking that automation and systems are, in themselves, the answer.  Which makes it vital to have a platform with an holistic and end-to-end perspective, capable of driving business-led global IT implementations.

Listen to all the voices involved. Worry about adoption and communication. Which makes it vital to adopt a process management platform that engages everyone – not just process owners and IT. It must connect with process stakeholders and, as well, support those who execute process and encourage their feedback.

Implement from the top. Make clear accountability and strategic direction, and don’t be afraid eventually to mandate a new process.  Which makes it vital to adopt a process management platform with a top-down implementation methodology, and a robust governance framework, capable of blending top-down command-and-control methods with bottom-up continuous improvement.

So perhaps it’s like this. Today, global businesses typically adopt a company-wide business language to ensure effective communication.

What we’re moving towards is a future where global businesses typically adopt as well a more advanced language to ensure effective collaboration. And the language that enables collaborative innovation, within a governance framework that makes clear roles and accountability, is end-to-end business process.

Nowhere is this more true, of course, than in Global Business Services, where the capability to provide end-to-end process perspectives within a complete governance framework, integrated with documents, real-time KPIs, risks and controls, is rapidly emerging as a critical success factor.

Related Posts

29 Feb 2012    Why Process Improvement Projects Fail

10 Jul 2011      Managing The Downside of Global Processes

© Text Michael Gammage 2013