Thursday, August 12, 2021

Corporate Principles

Principles are certainly there to guide the organization for long term prosperity. It takes transformational leaders to repeatedly address that future regularly.

The organizational environment today is constantly changing and forcing the business to “adjust” its speed and improve its agility accordingly. The corporate board leadership is supposed to be the guiding force for the adventure to explore the unknown, have confidence and insight to navigate the business on the right path consistently.

 They co-set corporate principles that are time and change tolerant statements about how an organization will behave, and advise the management on the continuous improvement of the multidimensional shareholder’s value wisely.

Principles are statements of belief that reflect the values, culture and real-world concerns of the organization: There is often a difference between what organizations say and what organizations do; what management wants and what employees’ needs. The principle is usually based on business value and strategy. In fact, principle, purpose, and progress are inter-related with each other. Clearly defined principles with specific expected behaviors by top management provides a framework in which the organizations operate (strategy, structure, people, processes and rewards) that encourage fitting mindsets, attitudes, and behaviors.

Purpose and principle clearly understood, articulated, and commonly shared, are the genetic code of any healthy organization. Corporate boards as one of the most crucial governance bodies have a responsibility to co-make business policies and set principles as the guidelines that help the business make progress and fulfill the purpose. They delegate authority downward with responsibility for investment, risk, compliance, finance, compensation, architecture, etc. So a set of good principles is to improve business effectiveness - doing the right things, and connecting the right dots - (people dots, awareness dots, policy dots, regulatory dots, lessons-learned dots, information dots, process and capability dots. etc.) to the degree that you hold purpose and principles in common among you, you can dispense with command and control for leading transformative changes.

A set of good principles provide a guideline of harmonizing decision-making across a distributed organization: Decision is about the future, and the future is full of uncertainty. Decision principles are statements of belief that reflect the values, culture and real-world concerns of the organization. Enterprise principles provide a basis for decision-making throughout an enterprise and inform how the organization sets about fulfilling its vision and goals. In the digital era, here are strategic decisions for the long term and tactical decisions on a daily basis. There is fuzziness in the decision because there is fuzziness in conflicting criteria.

The principles set by senior leadership to make decisions should be consistently applied by an organization, allows all -from top-down within the organization to make decisions in the same fashion as these executives, and as a result, are broadly supported and are seldom misdirection. They normally have a longer shelf life than objectives, strategies, etc. All company’s performance is directly related to the decisions people make every day. In reality, poor decision making is, unfortunately, pervasive and caused by quite a few factors and the variety of biases. It’s important to identify them, set good principles to deal with them intelligently. Human decision making becomes important and essential when there are multiple criteria; as in multi-objective optimization, and the decision changes according to which criteria have priority. Corporate boards co-set corporate principles that provide a common corporate "language," and work instructions to decide and take actions for either grasping opportunities or managing risks, allowing many people at different organizational levels to individually make their own decisions to run in the same direction to meet the same objectives in a consistent and rapid manner.

Principles can be used to guide teams to address key challenges that plague an organization and which are often overlooked, such as change resistance, culture inertia, etc: Management of any type is a complex interaction of cognitive systems and ecological systems to keep the organization function smoothly and solve problems large or small with continuum. In the knowledge society we live in, even though the management intends to follow their rational scenario to handle varying situations. In reality, there are ecosystem uncertainty and "human factors" such as irrational, cognitive, or behavioral aspects increasing the risk of complex problem-solving success. Thus, the purpose of setting principles is to streamline problem-solving logic, enhance business communication, and build an effective digital workplace where collaboration and sharing are the norms.

Inclusiveness and critical thinking, etc, are some common principles for running a contemporary organization. Always be careful about examining the potential points of engagement, rather than jumping to the “we'll fix this'' mentality. Always challenge your own thinking or conventional wisdom by embracing inclusiveness and collecting constructive feedback. Rapid change or frequent disruptions are some challenges facing organizations today. The problem is often the business talks about culture being too vital to business success, yet do not spend the right amount of time creating it. Principles are those core decisions values (not value as in benefit, but values as in beliefs) that shape behavior and define culture. It’s important to set the right principles for encouraging progressive change. 

Principles are certainly there to guide the organization for long term prosperity. It takes transformational leaders to repeatedly address that future regularly. Corporate boards must recognize the importance of principle-setting or policy-making, and to be effective, they must advise and delegate the management team to keep reinventing their organizations by improving problem-solving competency, enhancing multifaceted value propositions, overcoming cultural challenges and unlocking performance for achieving higher-than-expected business results.


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