The Importance of Governance
Many modern business leaders look at their commercial activities through the filter of environmental, social, and corporate governance (ESG). The importance of ESG factors is a powerful theme for both managers and investors in evaluating a business’s prospects and value added.
In a vast majority of organisations, significant effort and resources are now devoted to demonstrating compliance with ESG requirements. It is intuitively obvious to most people that in an age of climate change and finite natural resources, environmental factors are integral to running a successful business in both the short and long term. The same applies to social factors in a period of high inflation and perceived economic inequalities.
Perhaps the most interesting and important factor, governance, is the one that is least featured in the public discourse on ESG.
So what is governance? Put crudely, it is the way organisations are run, and how things get done. It involves the 4 P’s:
People
Process
Performance
Purpose
A striking feature of most discussions about governance is that it tends to focus on the senior management of a company or business. It is about the board and the senior leadership team and how they behave. Corporate governance rules are about ensuring strategic decisions are taken with due process and any views are not dominated by one person and so on. They are also about having the “right” arrangements with board committees and independent directors. What is often missing are any views on governance beyond that level.
As experienced coaches, we know that corporate governance is an issue that runs through a business at every level and also that many senior people fail to grasp this very important point. We regularly encounter clients who struggle to achieve their business goals or projects, not because of poor performance on their part, but because of poor governance arrangements in the business or for the project.
Take the sales function; something that is vital to any business, whatever its size. Sales is often seen as a separate area of activity with limited connections to operational areas. Salespeople are often paid by their own personal results rather than by the performance of the business as a whole. This can create a sense of detachment or even conflicts of interest if it is not managed effectively. Whilst many sales teams have agreed financial and volume targets which they may be accountable for, if those targets are missed, who measures sales performance and who discovers what may be going wrong?
It should not just be the salespeople themselves, who may have missed commission payouts, to reflect on missed targets. It is also the responsibility of senior management to understand what is going wrong. The typical management response to poor performing salespeople is to get rid of them and then bring new personnel onboard in the hope that they will produce better results. This rarely solves the problem however.
This is where good governance really matters. It is not just the performance of people, but their process and purpose.
As coaches, we often see intelligent salespeople fall into the trap of “credentialising” their company to clients, perhaps boasting how big or successful their company is in order to impress the client. Instead, they should be asking the clients what their challenges are and, as importantly, listen attentively to their answers. When was the last time a senior manager accompanied their colleague on a sales visit? If they did, it is likely that they would quickly discover the real reasons why that salesperson is failing to hit target, whether it was poor preparation or a questionable sales process.
Another vital element of good governance in sales is ensuring the coordination between sales, marketing and brand management and, most specifically, how is the service or product promoted or portrayed by sales? Does the client’s experience match the brand promise? We all know that it’s no longer just about producing snazzy Powerpoint presentations.
Do the senior management know what customers are being told about the company? Do they even care what is being said? Obviously, they should, but what feedback loops and mechanisms have they put in place to ensure they know. This is where process and purpose are invaluable.
I can recall working at a bank where they operated a double signature system for every letter that was sent to clients. The purpose was mainly a security measure but it also ensured that anything promised to the client was checked by another person: a simple but vital process which improved governance and reduced errors and provided consistency of service. This need for good process holds true today as it did over 30 years ago. In the digital world, it is even simpler to effect this kind of process. But how many senior managers regularly examine their governance arrangements and try to improve them?
Finally, it is vital to note that good governance also creates far greater agility in a business. This is because good governance and good process enables people to perform to the best of their abilities as they have greater understanding of their purpose within the organisation
In a commercial world where busy executives have to cope with the daily data deluge, allocating time to reflect on governance may at times feel like a luxury. However, as coaches, we would firmly state that such reflection is an organisational necessity.
https://www.linkedin.com/pulse/importance-governance-modern-organization-how-agility-giles-nfnae/