Friday, June 4, 2021

The Essence of Governance

With increasing pace of changes and continuous disruptions, governance reflection and enforcement takes a new meaning such as agility, intelligence, and creativity.

Governance is steering. Governance, risk, and compliance are not a single process, but a continuum via a collection of cohesive processes and mechanisms. It isn’t just about putting restrictions on what you can do, it is also about monitoring and knowing when things are not going to plan so that you can take appropriate action at the right time.

 The essence of governance is:

Not as constraint, but an opportunity: Overall speaking, business strategy management has a very low success rate, The business management in those lagging organizations need to ponder: What’s holding us back from building out a holistic strategy? What’s needed to close the gap? Etc. Thus, governance is an important discipline for the business to reach its vision by defining the "perception" of the organization for steering the business in the right direction without “getting lost” at the myriad of daily busyness, the multitude of silos, tensions, or constraints. For any company to succeed, to either accelerate performance and unlock business potential, it’s essential for the entire company to be pulling in the right direction, breaking down silos, leveraging governance practices or mechanisms for soothing tensions, or overcoming constraints in a structural way.

It is important to set rules for safeguarding the status quo and it’s crucial to enforce strong governance discipline to steer the organization in the right direction. The problem with governance is that the people who enforce governance normally have a frame of reference based on their own experiences and a view of the existing business capabilities. This is all a matter of perspective. It requires the stakeholders to open their perspectives or framing on what they are observing, and embrace cognitive difference to close blind spots. The enterprise risk management has to be expanded into enterprise opportunity management, so the management understands that there is possibly a different scenario in which the identification of negative risks unearths an opportunity, and business can take cohesive management effort to drive changes in a structural way.

Not as control, but value-added achievement: Unlike traditional companies with overly rigid structural hierarchy, digital organizations are the mix bag of physical and virtual, formal and informal structures old and new, visible and invisible. So there is significant difference between traditional management which expects command-control and digital management which demands engagement with embedded GRC mechanisms, so organizations can approach such a flow zone when people are ready to move to a fluid structure, and digital leaders are eager to set stages to drive a frictionless, immersive, and relentless digital transformation. With a set of governance disciplines and practices, organizational development can manage the conflict between classic style and digital style of management smoothly.

In practice, most companies fail at execution because they have no clear process, nor understand a holistic management approach. Without strong GRC disciplines, organizations and their leaders often become so preoccupied with bottom line performance that they lose sight of the human factors that account for it. To shape a people-centric organization, it’s important to look at trust in humans, trust in processes. Much of the current leadership literature seems to suggest that modern, high performance organizations are moving away from controlling, but leaning towards a more humanistic model by enforcing GRC disciplines for putting emphasis on enhancing accountability, building a trust-based work environment, encouraging learning and professional growth.

Not just for setting rules, but for improving decision-effectiveness: Rules can either protect or restrict business operations; encourage or demotivate certain human attitudes or behaviors. Too few rules perhaps lead to dysfunctional behavior or even chaos. But too many rules will stifle business change and information flow. Progressive organizations or society will love to break the old or hidden rules, establish the right set of principles to encourage desired change in order to move forward. Because of classic management with a silo mentality or strict rules, the business units often do not work in collaboration. Ideally, by setting good policies, the digital organizations should be a complex, but flexible social system starting to appreciate business attributes such as readiness, ownership, decision effectiveness, and innovation.

In reality, every business is different with its own set of issues, problems and concerns regarding its strategic and inherent risks. “Loose control” rules can be fully supported, with an architectural footprint, empowerment over control, engagement over command, dynamic over static; autonomy over mandates, heterogeneity over homogeneity, etc. So democratic processes will overtake hierarchical control, and that flexible digital culture will become a more fundamental organizational asset.

With increasing pace of changes and continuous disruptions, governance reflection and enforcement takes a new meaning such as agility, intelligence, and creativity in the dynamic era of digitalization. By enforcing strong GRC, delight is the high stage of the business maturity achieved through creating the synergy of collaboration, experimenting with initial concepts, grasping opportunities for growth, advocating aesthetics as trends in public taste, and making practical implementations.


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