Doing things the right way is most often looked at in terms of whether a desired result predictably arrives. Those results make sense for "share" holders as performance, but "stake" holders are different.
The broad outlines
Governance is for stakeholders. Policies protect stakes.
The business function of governance is to continually optimize the balance between adherence to policy and achievement of benefits, such that both reach acceptable sustained levels.
In the face of near-constant change from innovations and resource evolution, a proactive, systemic assurance of constrained opportunity draws benefits under risk. (Value capture)
That perspective must prevail over a reactive imposed accounting of restrained production hitting targets under cost. (Performance control)
The Circumstances of Governance
Stakeholders decide to take an interest in an organization by investing in its ability to create benefits.
A stakeholder presumes a right to expect the organization to protect and maintain opportunity for a return on the stakeholder’s interests.
Governance is responsible for implementing that protection and maintenance.
That is, by default, governance is concerned with current and future opportunity regardless of outcomes.
The Difference of Governance
Active organizations may be ungoverned (omitted), badly governed defective), or misgoverned (erroneous).
That fact applies regardless of whether the organization is a classroom, a neighborhood club, a sports team, or a corporation.
The behavior of insufficiently governed organizations is able to cause effects where, regarding a stakeholder’s rights, the causes are inappropriate, or the effects are inappropriate, or both.
Governance works to preventloss of opportunity, whether immediate or eventual, due to detrimental side-effects of organizational behavior. In that context, its contribution to risk management helps to fortify the availability of useful opportunityby protecting investments.
Proactive, systemic influence
In the same way that education and training work, governance is most likely to succeed when it is systemicin the organization, bringing activity (as behavior) to a level of reliability that can be used as a building block for directed progress in operations.
Governance helps the organization to:
•Clarify priorities as objectives shared cross-functionally
•Reduce unanticipated and costly need for remediating disagreements or compensating for infractions
•Avoid erosion of stakeholder confidence in the protection of their investments
The most important word in the arena of governance is POLICY.
Stakeholders declare intents and the purposes of their intents.
Policy is a statement of priorities aligned with stakeholder intents. The alignment is about Proprietyversus risks to the invested stakes.
Respectful of risks, business organizations must routinely resolve challenges in their surrounding conditions, through appropriate, manageable behaviors.
“Performance” can measure the productivity of current behavior patterns, but productivity (benefit@cost) and propriety (benefit@risk) are completely different.
Constraints versus Restraints
Ultimately, effective governance, unlike conventional “management”, is not about outcomes under restraint.
Instead it is ultimately about impacts within constraints.
Constraints are characterized by factors strongly reflecting preferences, such as:
•Design and Models
These same factors are applicable at every level, bottom to top, of the business architecture (resources, platforms, processes, objectives, relationships). Each level supports the level above it.
Not surprisingly then, effective governance “engineers” the organization for producing an expected probability (creation and maintenance) of opportunity.
Preferences, at minimum, may be cultural, legal, logical or some combination of those influences. Preferences lead to priorities. Priorities lead to policy.
Investments (prioritized stakes) presuppose attention to certain behavior issues that determine the opportunity for resolving competing conditions to get and keep the desired type of return.
Behavior alignment requires decisions, custodianship, and audits for each of four major types of stakes. Custodianship includes transparency, administration and change management.
The focus of governance, as shown here from left to right, increasingly becomes both more operationally specific and more internal.
Ethics & Conservation
Engagement & Development
Direction & Performance
Stakes at Risk:
Conditions to resolve: