In our first post about organizational governance, we concluded that there were three primary focal areas of governance:
- Identification of goals – aka purpose and vision
- Pursuit of those goals – aka strategy
- Social structure – how the team must be arranged to accomplish the strategy
We also concluded that these three core areas also sound confusingly similar to the core actions that management is responsible for. Today’s post will explore the interplay between governance and management in greater depth and tease out where the difference in focus may lay.
Most importantly, governance is not management. Let’s first consider how management is structured and emerges within an organization. As a leader moves up the hierarchy of an organization, they become further and further removed from the actual work being done. Many organizations have four primary levels of operational seniority:
- Senior management (CEO/COO, EVP)
- Divisional / Functional leadership – aka middle management (VP or SVP level)
- Departmental or Team Leadership (Manager)
The first promotion point, often referred to as manager, oversees the completion of actual tasks by front-line workers. The leader here often serves as more of a coach. At successively higher levels, leadership is more and more responsible for leading other managers. At the highest level, senior management works on aligning incentives with goals, but ultimately must let others down the hierarchy translate big ideas into specific action. This necessity for delegation arises both from the volume of work to do, combined with increasing levels of technical expertise required to solve a problem.
At it’s simplest form then, an organization may function something like this:
- Senior management – We want to take this hill
- Middle management – To take this hill, these various teams will need to tackle these various parts
- Department management – we will do these things to take our part of the hill
- Staff – marches up hill
Where then does the board fit then?
Boards then are most effective when they serve as a thought partner / sparring partner to help those in the C-suite as they develop strategy and identify key objectives. Boards are not close enough to the action generally to originate strategy, but are better served to help validate a strategic thesis. This is analogous to senior management not being close enough to the action to determine most of specific front line actions. Boards can also serve as sources of competitive intelligence and industry information gathering through their relationships and access. Finally, boards serve in an accountability role to hold management to their goals
Consider then our three core focus areas:
|Strategy||Develop strategy to win in market place||Validate strategy, ensure robustness|
|Goals||Set clear, measurable goals to achieve strategy||Thought partner to in goal specification, sequencing, help with solving obstacles|
|People||Design org structure, hire/fire key roles||Hire/Fire CEO and hold accountable for organizational results|
As you can see, the two functions are highly related. Done well – management and governance often have a back / forth character to their work. But they are still distinctive in their focus and mandate.
Governance often goes awry when these boundary lines are not clear, and a board member may overstep lines into an operational line of action. Similarly, management may come nowhere near realizing the potential of their board if they do not see the value of the Board’s perspective, or how best to utilize the horsepower of the Board members.
Done well – the two are mutually additive and can lead to an organization to greater effectiveness and ultimate success.