For the last few weeks I have been posting about general principles of governance. Let’s turn to a practical example: How do those principles apply to programme management? There is of course no one ‘right way’ – it depends on the context. However, there definitely are ‘wrong’ ways, and they are all too common!
Most programmes have a Programme Director, and most have a Programme Board. What are their roles, and how should they be related?
Programme Board
The Programme Board should be a fundamental part of the governance structure. There would be no point in it being there unless it makes decisions. To do that, it must be given authority by some other body, which must itself have the authority to do that. Programme Boards typically have as part of their role resolving cross-functional issues for the programme. Consequently, they will normally be set up to report to a committee within the governance structure which itself has cross-functional representation. If the Programme Board is unable to resolve an issue which comes to it, normally its parent will need to. If a Programme Board were to report to an individual, it would be hard to see how that individual could more effectively resolve any cross-functional issue that had to be escalated.Programme Director
The Programme Director’s role will vary in detail between programmes, but fundamentally he or she is the person accountable for making sure that the expected outcomes of the programme are delivered within the constraints agreed. That leads us to two further points. First, if they are accountable, who will hold them to account? That is another part of the role of the Programme Board. The Programme Director will present progress reports, papers for decision, etc to the Programme Board, to enable them to do that. A corollary is that the Programme Director should be appointed, or at least confirmed, by the Programme Board, which will also delegate authority. If things are not going well, it is the Programme Board that must decide whether a change of Programme Director is required. Second, what is the nature of the relationship between the Programme Director and the Programme Board? Essentially it is like a contract. The Programme Board is the customer for the programme, approving the programme requirements. The Programme Director represents the delivery team - the contractor, if you will - and needs to make sure that sufficient time and resources are allocated to the programme to deliver the requirements. Clearly making the two join up may require negotiation. If there are subsequent changes to requirements, agreeing how to accommodate these – extra resource, recognising more risk, delay or reduced quality – will require a further negotiation. Remember, accountability and authority need to go together. Just as with the CEO and a company Board, it is clear that the Programme Director has a fundamentally different role to that of the Programme Board, and to blur these distinctions will introduce conflicts of interest. Of course the Programme Director will normally attend Programme Boards, although that does not mean that they have to be a member (and the different roles are clearer if they are not). Either way, though, they should never be the Chair: they would have a clear conflict of interest. At best they would be tempted to steer the agenda away from certain issues, and it would become impossible for the Board to be effective in holding them to account. No-one should be asked to mark their own homework! It follows that the members of the Programme Board should not normally be junior to the Programme Director, and certainly should not be his or her direct reports. Of course there is a place for meetings of the Programme Team – but those are progress meetings, not Programme Boards. Do your Programme Boards follow these rules?
So, seven articles later, where does that leave us? We have talked about 15 principles for designing your internal governance, and I have listed them all together for you below for convenience. However, I do want to re-emphasise one thing I said at the beginning:
“What good governance is NOT about is bureaucracy, box-ticking and delays. It requires finding balances – between control and practical delivery; between the risks of delegation and the cost of control; between wide ownership of decisions and strong accountability for them; between a simple structure and efficient decision-making; between minimum overhead and an effective audit trail – which provide the optimum basis for success. Every organisation has different arrangements because the optimum trade-offs depend on the context.”
The principles for internal governance are just the things you should have in mind when you design your system. That does not mean that the result has to be complicated. It should be ONLY as complicated as you need it to be in your particular circumstances. If you are a large public sector organisation, it may be necessary to be at the high-control end of the spectrum. If you are a small development company, you probably need something much lighter-weight and more flexible – but that is not a reason for not thinking about it. Some principles are good-practice rules which are likely to apply everywhere. Others are choices you need to make. The important thing is that the choices you make should be deliberate, and should be consistent. By deciding exactly what principles for internal governance you are going to work to before you start, you give yourself the best chance of success.
15 Principles for Internal Governance
- Authority and accountability must go together.
- No-one will have authority to ‘mark their own homework’ (i.e. conflicts of interest will be avoided).
- Collective and Individual Authority are different. What will their respective roles and interfaces be in the structure you will create?
- The governance structure should be strictly hierarchical. All bodies which have Collective Authority must have a place within that hierarchy.
- Individual Authority is delegated through the line management arrangements, but it forms part of the overall governance structure and must join up seamlessly with the rest of it.
- The design should start by establishing those areas where the Board should make delegations (starting by noting the matters already reserved to the Board), and how they should be grouped.
- What (if any) dual-key approval arrangements are desirable?
- The authority grid should include qualitative as well as quantitative delegation limits, and should not be restricted to areas where a financial limit can be set.
- Escalation levels will be set to provide an appropriate volume of requirements to escalate, decided on the basis of business need and practical delivery.
- Decisions about committee membership should be made in the light of the delegation levels set, not the other way round.
- The list of staff (or roles) to be included as members of the Collective Authority bodies will balance the need for ownership of decisions with minimum meeting membership.
- Clear rules for meeting attendance will be agreed and maintained.
- What formal documentation (e.g. Terms of Reference, Letters of Appointment) will be mandated?
- In what circumstances will formal authorisation and/or acceptance of documentation be mandated?
- How widely will the arrangements be communicated?
- The Midas Touch - what is Governance for?
- The Midas Touch again - Starting to build Internal Governance
- The Midas Touch again - Authority and Accountability in Internal Governance
- How many ways can you design a tree? - Hierarchy in Internal Governance
- Snakes and Ladders - Delegation and Escalation in Internal Governance
- Why are YOU here? Choosing members of Internal Governance Meetings
- What's in a word? Documentation for Governance
This is article 7 in my series on designing internal governance.
As we discussed at the start of these articles, the need for governance arises because we want to be able to exercise the degree of control we need over our organisation. In the previous six articles, the structures we may establish to provide this have been discussed at some length. However, we might as well not bother unless we communicate clearly and effectively what we have set up, why, and how it helps everyone! This article considers what documentation is required in order to support good internal governance.
Talking people through the way the governance is intended to work is always a good idea. People listen when you tell them stories – and I know I often stop listening when there isn’t some kind of story – because story is how we make sense of things. Talking about how it should work allows you to weave in stories about why it is the way it is, as I have tried to do in these articles, which may maintain interest and help people to see the benefits as well as the irritations.
Documentation for governance
However, talking alone is not enough. The story people hear is not always exactly the one you told. If it was not written down, who is to say whose memory is right? Documentation is there to make sure that there is a definitive reference point to go back to when disagreements arise. There is a good reason why, although verbal contracts are legally binding, people generally prefer the written sort!Governance as a contract
Think of governance as a form of contract: we specify what authority we are giving, to whom and under what circumstances, and what accountability we are getting in return. The documentation records the terms of the contract, shows that it was agreed, and provides evidence that it was complied with. The documentation required for governance should balance the need to avoid unnecessary bureaucracy with the need for documents which can resolve later differences of opinion, provide traceability and auditability, and also (depending on circumstances) meet the need for transparency. Authorities delegated should be clearly set out in Letters of Appointment (Individual) or in Terms of Reference (Collective), signed as issued by an authorised person, and signed as accepted by the person being authorised. You don’t want to hear "I never received that", or "that's not what I understood". Where Collective authority is granted, as a minimum there must be a written record of all decisions made, and of those present at the time (to demonstrate that the quorum was present, so that the terms of the delegation were satisfied).Words matter!
Documentation is about communication, not just about record keeping. The language used matters. This is difficult: clearly where important decisions are made, accuracy is essential, but it must not be at the expense of intelligibility by all. Old-fashioned legalese may have been very precise in its meaning, provided you understood the code, but was almost as unintelligible as a foreign language to most people. If you want people to stick to what you meant to authorise them to do, and to accept accountability for what you expect, there is no room for ambiguity. Woolly or opaque language makes it easy for people to say “Oh, that’s not what I thought you meant”. Use plain English, short sentences, simple constructions, and not convoluted prose, as far as you can. Don’t use several words when one will do! Even better, use diagrams where appropriate. But however hard that is, write it down somehow: however it is written, it is always better than nothing!Principles to be established:
- What formal documentation (e.g. Terms of Reference, Letters of Appointment) is appropriate
- The circumstances where formal authorisation and/or acceptance of documentation will be required
- How widely the arrangements will be communicated
This is article 5 in a series about designing internal governance.
I once worked in an organisation which needed to procure many large construction projects. Nearly all of these were subject to European Union procurement rules, which make specific steps in the procurement processes mandatory, and which create some short deadlines despite lasting months overall. It’s a bit like a game of Snakes and Ladders (but without the ladders): if things go wrong you may have to start all over again. Consequently, inability to control the processes well is a serious risk. This article is about how to get delegation and escalation right.
Unfortunately, the general level of authority delegated to the local Board was a fraction of the contract value for most of the procurements, meaning that awarding these contracts needed the approval of the main Board. They normally met only about every 2 months, and had little knowledge of the issues. Control of that process was out of our hands. Very careful planning (and significant extra work) was required to minimise the risk of failing to get properly-authorised approvals at the necessary times, and so avoid the ‘snakes’.
Fortunately, once we were able to demonstrate that we had well-managed internal governance, more appropriate delegations were granted. Nevertheless, the example illustrates the problems that can arise when the level of delegations is not appropriate to the required decisions.
Note that it is normal for Boards to have ‘Reserved Matters’ which are not delegated at all; the same principle will apply at lower levels as well. Just because there is a box on the authority grid does not mean it has to be filled!
Principles to establish:
Delegation and escalation levels: getting the balance right
Deciding what authority to delegate requires balancing the need for control with the need for practical delivery, which includes the need for timely decisions. The place to start is the levels of authority to be delegated. What will meet the business need, taking account of the volume of decisions are required, and which it is practical to make in the time available at different levels? The membership of the bodies to which delegation is made then follows: it should be chosen to ensure that the members have the competence they will need. If you start with the membership, and then decide what decisions they can be trusted with, the result may not deliver what the business needs. A delegated authority generally consist of two parts: a subject and a value or scale limit. The subjects will probably be the same at different levels in the hierarchy, but the scale limits will vary. A decision which exceeds the limit at one level must be escalated up the structure, perhaps with a transition from Individual to Collective Authority part way up. It is convenient to articulate both the subjects and the authority limits in an authority grid or scheme of delegations. Obviously there will normally be one or more columns for financial and budget matters. A programme organisation might also require columns such as changes to delivery time, changes to scope and requirements, and quality assurance (see example grid below). Obviously, other kinds of organisations will have other requirements. How will you decide what the authority levels should be? This is another question of balance, this time between the desire to encourage ownership and accountability at lower levels, and the need to retain senior accountability for the bigger decisions. While this can never be a precise science, limits should generally be set so that the proportion of all the decisions which come to a body (or indeed an individual) and which must be escalated to a higher level is expected to be fairly small – perhaps 10-20%. This pattern, repeated at each level and interpreted intelligently, ensures that the Board (and each level below it) sees what it needs to see, without being overwhelmed by volume or delaying decisions unnecessarily. Equally importantly, each lower level feels it has the trust of its superiors and is empowered to do its job.Authority grid
While setting such limits for financial decisions is straightforward because the escalation levels are easily quantified, it is not quite so simple (although just as important) in other areas. However, in these cases practical qualitative tests can work perfectly well. The illustrative authority grid shown includes examples of tests which are still sufficiently objective to be useful.| Category | Requirements | Financial/Budget | Time | Quality | Control |
| Level A | Set overall strategic direction | Budget including contingency Larger budget changes | Approve third line assurance | Appoint Level B Cancel a programme | |
| Level B | Approve programme scope & requirements Approve changes to scope & requirements | Change allocations within portfolio contingency | Changes which delay benefits delivery | Approve second line assurance, commission third line assurance | Appoint Level C Initiate programme and approve business case Close programme on completion |
| Level C | Approve design and outputs as meeting requirements Approve design or output changes which meet requirements | Change allocations within programme contingency | Changes with no impact on benefit delivery | Approve first line assurance, provide/ commission second line assurance | Appoint Level D Options selection Approve stage gates, output acceptance & readiness to proceed Accept key milestone completion |
| Level D | Change allocations within project contingency | Changes with no impact on key milestones | Commission first line assurance | Accept project milestone completion |
- That the authority grid should include qualitative as well as quantitative delegation limits, and should not be restricted to areas where a financial limit can be set
- That escalation levels will be set to provide an appropriate level of filtering, decided on the basis of business need and practical delivery
- That decisions about committee membership should be made in the light of the delegation levels set
This is article 3 in my series on designing internal governance.
One of the most stressful times I can remember in my career as a manager resulted from lack of clarity about authority. I had a big job, and it was reasonably clear what I was accountable for delivering. A few days in, I asked my boss to clarify what authority I had to make decisions. His answer? “I don’t like talking about authority.” I never did get more clarity, and it became clear that whatever authority I did have, it was not commensurate with my accountabilities. This article is about authority and accountability in internal governance.
Authority and Accountability
Matching authority and accountability is a key requirement in any governance structure. If you give someone accountability but not authority, you also give them perfect excuses for failing to deliver (and so in practice for not being accountable): for example, “well, if you had listened to me when I said that was too novel, it would all have been fine.” At best, it results in delays and frustration while decisions are referred. Similarly, if you give someone authority but not accountability, they can make extravagant promises about what will be delivered, and lay the blame for the resulting failure on the person accountable. The blame for the failure really lies with the person who set things up like that in the first place. At the opposite extreme is giving too much authority to the accountable person. This is the case where there is no external holding to account. Very few organisations these days would allow even the CEO to approve their own expenses. But other similar situations are sometimes found, for example, a Programme Director chairing his own Programme Board. While most of the time the situation is probably not abused, it does nothing to remove the temptation to approve a pet project regardless of the business case, or to hide bad news in the hope that things will improve later. It is much wiser to avoid setting up conflicts of interest in the first place than to hope that everyone will be able to resist the temptation to benefit from them. These examples show that deciding what authority to delegate requires balancing the need for control with the need for practical delivery, which includes the ability to hold people to account effectively. Deciding to whom to delegate it brings in a new problem: it requires balancing the desire for decisions to be owned by all those affected directly by the consequences with the desire for a named person who can be held to account. Suppose we need to let a major contract. Perhaps an operations team will have all the day-to-day interactions with the contractor, and they are convinced that Contractor A is going to be best to work with. Should the Operations Director have the final say? At least then we know who to blame if it goes wrong. But the Procurement Director may know that the contractor’s resources are going to be very stretched if they take on this work. The Commercial Director may not be happy with the terms of the contract that can be negotiated. The Finance Director may not be happy with the performance bonds or guarantees they can offer. How do we make the best decision?Collective and Individual Authority
At this point we need to recognise that there are two sorts of authority: Individual and Collective. Collective Authority means that the decisions are made by a specified group of people; no individual has the authority to make those decisions on their own (hence the need for a quorum to be specified in the Terms of Reference (ToRs) for the group). The group must be established by the delegating body – no decision-making body has authority to create itself (or appoint its members, or approve its ToRs)! Individual Authority means that the decisions are made by one individual, even if that individual appoints a group of people to advise him/her. An advisory group can of course always be set up by the individual holding the authority; it is not part of the governance structure, having no authority, so it does not need terms of reference (it just does whatever the decision maker asks of it), and a quorum would be meaningless. That does not stop the members of such a group being confused about its solely advisory nature if this is not explained. Designing the governance structure requires deciding what to use where, but how do you decide which sort of authority is appropriate? The choice between Collective and Individual Authority must balance the possible need for wide ownership of and support for decisions against the preference for Individual accountability which goes with Individual authority. Generally Collective Authority will be desirable at the most senior levels and for the most complex decisions, where the best outcome will result from contributions from people with different backgrounds, knowledge and experience, or where it is important that several people at the same level, typically across functions, feel they are committed to the decision because they helped to make it. Many (perhaps most) of the strategic decisions the company needs to make will be of this kind. On the other hand, Individual Authority will be preferred where the issues are more focused, and typically fall clearly within one functional area rather than spanning several. This kind of authority is just what line management structures are about. It is normally granted through Letters of Appointment and Schemes of Delegation. We will have little more to say about it here. The further down the governance structure you go, the less the diversity that Collective Authority brings to decision making is likely to be needed, and the more likely it is that line management provides all the ownership that is needed. At the same time, each additional layer of Collective Authority tends to make accountability more diffuse, which is unhelpful. Consequently, one or two layers of Collective Authority below the Board is the most that would normally be appropriate. As a general rule, the lower the level of a Collective Authority body, the fewer different interests need to be represented, so the fewer members it will need to have.Principles to establish before starting design:
- That authority and accountability must go together
- That no-one will have authority to ‘mark their own homework’ (that conflicts of interest will be avoided)
- That Collective and Individual Authority are different; and what their respective roles and interfaces will be in the structure you will create.
We all like to feel we are in control, don’t we? Especially when we have been told that there will be consequences according to how well we deliver the task we have agreed to do. We feel pretty confident in our own ability to do the job – probably we would not have agreed to take it on otherwise – but what if we can’t do it on our own? I remember the first time I had to promise to deliver something knowing that I would have to rely on other people to do substantial parts of it. While I still felt the confidence of youth that it would all work out, I also remember the frustration and discomfort of finding my instructions were misunderstood or ignored; of having to let someone else try, and sometimes fail; of not being able to control all the details. As managers, we all find our own ways to deal with this; at the company level, we need to be a bit more formal. This article is about where to start to build internal governance to address this need.
It all starts with the Board
The Board is accountable to the shareholders for delivery of the objectives of the company (public sector and non-profit organisations will have equivalent arrangements even if they are called something different). However, unless the company is very small, the Board does not have the capacity to do more than make a very small proportion of the decisions required to achieve this. It needs to retain enough control to monitor and steer the delivery of the objectives, but it must delegate the authority to make other decisions. Internal governance is the framework that it sets up to manage this. Its objectives may include the following:- To balance the Board’s need for control and assurance of delivery with its practical need to deliver through others, in a way which optimises the balance between the risks it takes by more delegation, and the costs (financial and otherwise) it imposes through more control;
- To have a secure underlying logic so that the framework is self-consistent;
- To ensure that conflicts of interest are avoided as far as possible for those with delegated authority, as these tempt people to behave in ways that are not in the best interests of the organisation;
- To make sure that those people who will have to live with the consequences of decisions made feel ownership because they have been involved in making them;
- To ensure that decisions are escalated when, only when, and only to the level necessary for them to be made effectively, so that interventions are appropriate and timely;
- To ensure that everyone in the organisation has clarity about the decisions they can make, about where to go for those that they can’t, and about decisions made by others which affect them;
- To ensure that stakeholders have enough visibility of the decisions of the organisation to have confidence and trust in its management;
- To ensure that the governance structure is scaleable and adaptable (within reason) to allow for possible requirements for future change without major re-design.
Build internal governance
So where do you start? First, you need to remember that governance necessarily works top-down. The owners of what you design will be the Board members (or equivalent), and they are likely to have strong opinions – that’s almost synonymous with being a Board member! If you start your design at the bottom and work upwards, there is a high probability that some or all of the members will object to at least some aspects of it once they see how it will affect them. Trying to make modest changes to accommodate their concerns will probably undermine the essential integrity of the system, resulting in you having to start again. If bottom-up does not work, what does? The best place to start is to agree the main design principles with the Board members, before even beginning on the design itself. It is much harder for people to object if you can demonstrate that your design is consistent with the principles that they all agreed earlier, and it is much easier to keep the discussion rational when the specific outcomes are yet to be defined. It also helps to ensure that the whole design is self-consistent. It is also worth noting at this point that because governance exists to define flows of authority and accountability that need to run seamlessly from top to bottom of the organisation, a governance design project should take a joined-up top to bottom view too. A project that looks only at the top (or bottom) end is likely to require compromises which will reduce its effectiveness. The next few articles will discuss the principles which you will need to agree at the outset, under the headings listed below. Remember that governance is about finding the optimum checks and balances for your organisation. Because that depends on context, it will be different for every organisation. The way you express the logic and the principles in your own project needs to be right for your context. One size does not fit all!- Authority
- Hierarchy
- Escalation
- Ownership
- Documentation and language