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

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