Wednesday, July 28, 2021

Innovate Governance

In an organization with agility, the effectiveness of governance is to encourage, actually orchestrate change, and enforce accountability.

Upon the digital paradigm shift, we are experiencing at the moment, with the new characteristics such as hyper-connectivity and interdependence of the digital world we live in.

 The shift of governance is to focus on enterprise change. More organizations will make a bold step—reengineer or redesign the old fashioned governance control, focus on encouraging meaningful changes and nurturing innovation in a structural way. Top leaders should ask insightful questions and embrace multiple perspectives.

Can today’s governance encourage change by “loose control” with a blended combination of governance styles? Change management is a balancing act of 'sustainability' - finding, enabling and facilitating the best path forward for the changing context - the organization, community, economy, culture or whatever the change is for. Change is not for its own sake, governance is the complementary discipline to ensure change management effectiveness. The desire for proactive change and radical innovation will make governance issues more “loose control,” and cross-disciplinary. Without it, the law of entropy takes over and any orderliness disappears. There are too many different types of change management initiatives, so there are different styles of governance approaches needed to take place for improving the success rate of change, as “over-controlling” governance perhaps stifles change, and decelerates business speed.

In an organization with agility, the effectiveness of governance is to encourage, actually orchestrate change, and enforce accountability. One point of struggles is governance taking away liberties that are essential to people doing their jobs in a creative way. The style of governance depends on the management style and business culture. If there's a problem with trust then governance will suffer, because motivations are not aligned across organizational boundaries. There needs to have both top-down and bottom-up (consensus) approach to governance for it to be effective and accepted. If governance is all top down or even dictate, you'll have a revolt on the ground and foster a culture whereby people look to bypass governance. If it’s consensus from bottom up only, perhaps you lose the big picture view and create decision blind spots that compromise governance effectiveness. Thus, there is no “one style fits all” governance approach.

Is it possible for an organization to be highly decentralized, interdependent, and precisely synchronized via “loose control” governance discipline? In large enterprises, change management has a purpose in assuring that the operation of the business is not disrupted by a single change or a few change efforts. Business synchronization occurs on multiple levels, but it presupposes the ability of each link to articulate their strategic intent. Limited hierarchy works best in a creative environment where the free flow of ideas and their prompt implementation is a key element of success. The purpose of the governance is to support budget, security, regulatory issues, safety, etc. To operate a hyperconnected and highly decentralized organization, the classic control based governance needs to be upgraded towards the “loose control” to ensure business can take cohesive management effort to drive changes in a structural way.

The long-term management optimization will require lowering maintainability, lowering overhead, increasing scalability and risk intelligence. If you don't just look at management and governance as a continuum (increasing value increasing risk), it could be argued that maximizing business value from prioritizing business objectives actually lessens a number of risks so the two are lock-stepped together. There are varying factors that decide governance effectiveness; though you can't automate human judgment or decision making, you can certainly automate a lot of the mechanical activities in GRC to improve its efficiency.

Isn’t the ecosystem loosely controlled by governance activities with both internal and external factors? Companies operate within ecosystems to deliver value to their customers, the principles of ecosystem management suggest that rather than managing individual pieces, resources should be managed at the level of the ecosystem itself. However, for many, the ecosystems have evolved without much attention or planning. To proactively respond to the new dynamics, companies must begin thinking about ways to broaden their ecosystems and revenue streams while becoming more responsive. Corporate governance activities include setting principle guidelines, grounding rules and policies, and helping to manage collaborative business results and best practices that view the organizational objectives holistically with the correct strategy lenses/focus.

In practice, overly controlled governance perhaps decrease the natural balance of business ecosystem; whereas the “loose control” governance practices can strengthen ecosystem alignment - align the different parts of the ecosystem to adopt more points of integration and incorporate the use of "stacks"— modular, layered, industrial designs topped by a peering community with the digital infrastructure, loosely coupled modular capabilities. There are different types of governance needed depending on where the piece of work sits on a spectrum. 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 potential risks unearths an opportunity.

Governance complements the management approach. When companies become bigger and bigger, they try to control processes and performances with practices and administrative procedures that make it difficult to disguise the real goal of the company. In a high mature organization, governance must be viewed and assessed at the enterprise level, applying different styles properly, developing innovative governance practices and achieving governance holism.


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