Governance is Only Management Coupled with Good Sense

Good day!

Last week during 2 intensive days of Governance certification training on the concepts and responsibilities of a Board of Directors in governing an organization, I found myself reflecting on all the current media rhetoric regarding the way businesses have let the world down. Their conclusion: The abused world must have more government intervention and regulation to protect us in the future.

I realize that much of the world blames the business world for the economic debacle.

Yet the message from our trainers was loud and clear. Directors are the most viable and informed protection for shareholders and stakeholders, regardless of the regulatory dictates. We spent considerable time going over Governance and the role of the Board as a whole along with the roles and responsibilities of various Board committees. We explored various actions that were considered good versus bad under varying scenarios.

What I came to realize was that while the management focus rang true, the methods were not rolled deeply enough into root concepts. No matter what the focus of an organization – for-profit business, non-profit or philanthropic organization, professional association, etc. – the Directors guide and tweak the organization’ strategy and assure the stakeholders that the organization is served well. Long ago I learned that the Directors assurance role is much linked to what I know about Quality.

A total system of Quality Management contains three elements: The Product or Service, Quality Control, and Quality Assurance.

The Product or Service is the responsibility of the entire organization. The organization’s Management is responsible for guiding and controlling the organization sufficiently so as to not denigrate the organization’s primary responsibility for Quality Control. Directors have responsibility to see that there are procedures or processes in place to fulfill the Quality Assurance control function: to measure quality and measure actual performance. If concepts of Governance had been put in these terms, I might have learned many of my life "lessons" more rapidly.

Upon further reflection I realized that the root causes of the current global economic woes was not a total lack of Quality Management. Maybe there could have been better definitions of Quality, Quality Control, or Quality Assurance, and more adequate tools or metrics. But Quality Management was in place.

The failure occurred because we did not see the elephant in the room and tip-toed around it. I was taught this about Quality: you cannot define it, but you know it when you see it! If the actions of the financial industry were, for example,“too good to be true,” then as Directors, we were blissfully tip-toeing around the elephant when instinctively we knew that there was no sustainable quality there.

We did not bring our “street smarts” to bear, and management let bliss lure us all into a false sense of security.

That is what Governance is all about. As directors we should not let a new regulatory regime lull us again into thinking all will be well. We cannot assure our organizations that we are creating a quality product or delivering a quality service merely because everyone is in compliance, that the procedures and processes in place are being implimented. We can not ignore the elephant in the room merely becasue all is being done according to the management systems that are in place.

Governance is about applying what we as directors have learned throughut our careers, and metrics are as important as instinct, intuition and experience. If our instincts tell us that something smells even if our metrics are good, we have a duty to assure all parties on behalf of the stakeholders who entrusted us with their success that the smell is bad.

KRN