Lovely day at The Shard!

best practiceI went to a fascinating talk by Adam Hoyle, Managing Director, Tradax Group Ltd, on Corporate Best Practice in Public Sector Bidding. I thought there were a number of lessons that apply more generally to running all kinds of projects that would be worth sharing.

Seven best practice tips

  • Don’t start projects unless they align with your overall strategy
Obvious, but I’ve often seen it ignored in the heat of the moment, too!
  • Make sure you have thought through exactly what decision-making authority each person involved should have, and that this has been clearly communicated and understood
In my experience the latter are frequently neglected, even if the former is not. Too many people think governance is boring, so don’t bother. It should provide the rock that success is built on
  • Give everyone involved a clear written briefing pack at the start, providing them with all the basic information about the project that they will require
Saves a lot of repetition, and makes sure everyone has a single reference point they can go back to, so things are more likely to join up later. It saves you time in the long run
  • Standardise what you can – but everything that is standardised needs an owner who takes their ownership seriously
We all know how fast most of the stuff on our intranets goes out of date, but still sits there. The corollary may also be true: what you can’t find an owner for, you probably won’t be able to standardise effectively
  • Think hard about what information would really make a difference to your performance if you had it, and work creatively (legally of course) to get it – for example using FoI requests
I think the key is identifying what information would lead to specific and worthwhile improvement actions if you had it. Too often, people ask for information without having thought about what they would do with it. When they get the answer, they realise it is interesting, but not actionable
  • Use the information you have intelligently – there is probably much more that you can learn than is immediately obvious, if you put it all together
E.g. draw graphs of trends across projects, and work out what they are telling you. And don’t ignore what you see because you don’t like the message, as people often do!
  • Transitions between teams – for example on winning a bid, or starting to operate an asset – are high-risk boundaries, which need careful planning to make sure they go smoothly
I recommend running readiness reviews for these. It is not the review that counts – by then it may be too late – but the knowledge that that discipline will happen Do go and listen to Adam talk and hear his views on best practice first-hand, if you get the chance! He’s an inspiring speaker.

15 principles for internal governance

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

  1. Authority and accountability must go together.
  2. No-one will have authority to ‘mark their own homework’ (i.e. conflicts of interest will be avoided).
  3. Collective and Individual Authority are different. What will their respective roles and interfaces be in the structure you will create?
  4. The governance structure should be strictly hierarchical. All bodies which have Collective Authority must have a place within that hierarchy.
  5. 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.
  6. 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.
  7. What (if any) dual-key approval arrangements are desirable?
  8. 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.
  9. Escalation levels will be set to provide an appropriate volume of requirements to escalate, decided on the basis of business need and practical delivery.
  10. Decisions about committee membership should be made in the light of the delegation levels set, not the other way round.
  11. 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.
  12. Clear rules for meeting attendance will be agreed and maintained.
  13. What formal documentation (e.g. Terms of Reference, Letters of Appointment) will be mandated?
  14. In what circumstances will formal authorisation and/or acceptance of documentation be mandated?
  15. How widely will the arrangements be communicated?
The full articles in this series can be found at these links:
  1. The Midas Touch - what is Governance for?
  2. The Midas Touch again - Starting to build Internal Governance
  3. The Midas Touch again - Authority and Accountability in Internal Governance
  4. How many ways can you design a tree? - Hierarchy in Internal Governance
  5. Snakes and Ladders - Delegation and Escalation in Internal Governance
  6. Why are YOU here? Choosing members of Internal Governance Meetings
  7. What's in a word? Documentation for Governance

Don’t throw out the baby!

complexity Reading reports on the meeting on complexity in organisations that took place in Vienna last week, I started reflecting on my own experiences of complexity. As a lapsed physicist, I know that it is a fundamental law of nature that disorder (which is often much the same as complexity) tends to increase with time. The only way to reverse this trend is to do work – and even then the reduction in disorder is only local. I can’t think of any experiences that suggest that this is not just as true for organisations as for nature in general! Most managers focus mainly on what their own areas need. They seek to improve their areas by doing work (designing and introducing changes of many kinds), and often succeed – but frequently the local success may be at the expense of making the joining up with neighbouring areas worse: overall, complexity may have increased as a result of their work, just as the laws of thermodynamics say it should!

Agree key principles to manage complexity

Avoiding that problem is not easy, and only partial solutions are possible – managers have to be trusted to manage. It can help, however, to provide a top-down framework designed to fix key principles organisation-wide, and then to allow managers the freedom to develop local solutions to problems within that framework. A self-consistent set of
  • Vision and values
  • Strategic objectives
  • Simple and clear structure for decision making
  • Delegated authorities and accountabilities
  • Key metrics
goes a long way to keeping things joined-up, by focusing on those aspects that really matter, but not worrying about controlling the rest. Probably all effective organisations do this at some level, even though the frameworks will not all be equally good. A jar of air contains zillions of molecules, all moving at high speeds, and it is impossible know the complex movements of even one molecule, let alone all of them. But that does not stop us being able to measure the key parameters of pressure, temperature and volume, which are the net result of all those movements. So long as we can define the things we really need to measure, the complexity of the rest does not matter. The challenge is to get that right – and not to throw the baby out with the bath-water in an attempt to over-simplify.

8 reasons to review your governance

[caption id="" align="alignright" width="300"]review your governance English: Corporate Governance (Photo credit: Wikipedia)[/caption] All organisations have to find an appropriate balance between central control and local freedom to act. Governance provides the framework and checks and balances within which this is established and managed. It ensures that the process by which decisions are made is appropriately managed. It allows them to be seen to have been taken in the best interests of the shareholders, taking account of all the demands on the organisation, the risks, and the information available at the time.

Review your governance

If several of the following statements are true of your organisation, it may well be a good idea to review your governance arrangements.
  • The governance structure (meetings and delegations) does not constitute a simple hierarchy underneath the Board, with clear parent-child relationships and information cascaded up and down the hierarchy
All authority derives from the Board (or equivalent), and no-one has any authority (including the authority to sub-delegate) unless given it explicitly or implicitly by the Board. Consequently all delegations and sub-delegations should form a tree structure with the Board at the top. Any structure which does not follow this rule will create confusion about where authority lies. Decisions and issues for escalation, and reports of lesser decisions taken, should flow up the tree. Policies, strategies, decisions made, etc, should flow down. This is not to say that the structure has to be complicated or bureaucratic – every organisation has to find the balance that is right for it.
  • The governance structure is not clearly documented (e.g. including a consistent set of Terms of Reference), communicated and understood
The governance structure exists to serve the organisation. It can only do this if people in the organisation understand it. Clear documentation that resolves any apparent ambiguities is an essential starting point, but this then needs effective communication.
  • People do not have clear written instructions as to the limits of the authority that they have been given, or these are ignored
This is part of the essential documentation of the structure. Without a clear statement of what they should decide for themselves and what they must refer elsewhere for decision, unhelpful deviations from intentions (in both directions) will occur. In one case senior time is wasted, in the other unintended risks may be taken. Naturally the limits specified need to be appropriate. Compliance must be monitored and enforced.
  • Committees are allowed to approve their own Terms of Reference and/or memberships
In order to ensure that the governance structure retains its integrity, any ‘parent’ body making delegations must retain control of the terms of the delegation. Approving ToRs and committee memberships are the primary ways it can do this. A committee approving its  own ToRs is like someone signing off their own expenses.
  • Governance meetings happen irregularly, or with papers which are poor quality or issued late
Unless meetings are irregular because they are only arranged when needed, irregularity makes it very difficult for those requiring decisions from the meeting to plan. That in turn leads to papers which are of poor quality or late, and so to delayed or riskier decisions.
  • Senior staff are allowed to ignore the rules which apply to others
Governance, like the law, only works properly if everyone plays by the rules. If the CEO believes it matters, he or she will be willing to set a good example by sticking to the rules themselves, and will expect other people to do the same. If the CEO does not think it matters, and is not willing to do this, it will be very hard to make other people do so.
  • Decisions are often taken late because of papers missing submission dates, inadequate information, wrong attendance, submission to the wrong meeting, unexpected need for escalation, etc
There are many reasons why a decision may be reached later than it was really needed. Sometimes the request may have been made to a meeting which did not have authority for that decision, perhaps because the value was too high, or because the decision was out of scope. Sometimes a critical expert is absent from the meeting. Sometimes the supporting paper does not contain, and the presenter is unable to supply, information the committee regards as essential. Mostly, however, these come down to poor planning, often driven by poor understanding.
  • There is a feeling that the governance process is too bureaucratic
If the system has been well-designed, this should be a rare complaint. Most commonly, it occurs for one of two reasons: levels of delegation have been set lower than the people concerned are comfortable with, or there is a reluctance to engage with the hard thinking required to make cases concisely but effectively. If significant, it probably indicates a mismatch - in either direction - in maturity between the staff concerned and the governance arrangements. Contact Ottery Consulting if you would like some independent help with to review  your governance arrangements.