“It is clear that good corporate governance makes good sense. The name of the game for a company in the 21st Century will be conform while it performs.“ -Mervyn King, Governor of the Bank of England
As a result of the banking crisis and current global economic recession we hear a lot of talk about “governance”. Was the banking crisis a failure of governance? Where was the governance process around the Madoff companies? What about the governance process of BP leading to the Deepwater Horizon explosion and the resultant oil spill in the Gulf of Mexico?
It is obvious that the term governance has a much broader and deeper usefulness inside of modern organizations than just the traditional focus on compliance to government and legal requirements.
In my experience consulting on turnarounds, culture change and strategy execution, governance is a useful term if properly understood and exercised with good leadership. I see governance as having, like an onion, several important layers.
The first layer of this particular “onion” is the most obvious, I call it Governance with a capital “G”. This is the compliance and conformity to legal and governmental requirements. Timely and accurate business reporting is an example of Governance. As are accurate minutes of Board of Director meetings, regular filing of various legal and tax forms, and reporting of bank and insurance company reserves. Big G governance is usually the responsibility of a few key individuals in the organization, notably the CEO, CFO, Chief Legal Consul and head of the Tax Department, among others.
If good governance were really that simple, we wouldn’t have all the scandals, bankruptcies and lawsuits that abound in today’s business world.
But there is more to good governance, much more. This is what I call “little g” governance. In this case it is the effective exercise of leadership and the governance of self.
Leadership governance has an outer and an inner layer. The outer layer deals with the effective governance of business and management processes that are critical in the performance of the organization. Such processes as staff meetings, strategy reviews, performance reviews, operational reviews, project and programme reviews are critical to effective business performance and unless carried out with good leadership and governance, can waste time, energy and resources.
The inner layer of leadership governance deals with behaviors. Do leaders respect the corporate culture and role model the stated behaviors or do they say one thing and yet behave as if they are exempt? Do they coach or criticize? Do they accept accountability or point fingers and pass the blame? The effective governance of leadership behaviors has proven to be instrumental in either superior performance or corporate demise.
That brings me to the last of the little “g” governance principles. The governance of self. The governance of self is perhaps the most important and in many ways the core of all other governance. Those who fail to exercise self governance will have a very difficult time adhering to other governance requirements. After all, governance in any situation requires discipline.
The discipline of self governance applies to each of us in the ways we set our own personal goals, how well we keep agreements and commitments, and the degree to which we actually live our espoused values. Without disciplined self governance it is difficult to face the challenges and pressures of organisational and business governance. Good governance requires discipline and leadership, not just in name, but in day to day practice.
If we want better governance in our social and business institutions, then we need to elect and promote those who display disciplined self governance.
Tight Lines . . .
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