I remember when I was a kid and my sisters and I would complain about the rules and order my mother set in our house. We did not understand why the household needed rules and regulations, like doing the dishes or walking the dog. It was almost a form of punishment for us. Looking back, I’m sure we all realize now that these chores were essential for the household to succeed…and that a strong governance (or my mom, the head of household) was necessary to ensure this success. Your business can be seen in the same light.
First and foremost, you need to set up a strong governance model. The one we consult the most is the one known as COSO, Committee of Sponsoring Organizations. This was developed in 1992 for internal controls evaluation, has been recently updated, and has been widely adopted as the standard for organizations to measure the effectiveness of their systems of internal control. However, it truly can be extrapolated and adjusted for any governance framework, including in solution-design implementations.
We learned from COSO that governance starts with the organization’s vision and mission, and that it is about the structure in place to ensure they are achieved. A good place to start is with a solid definition of governance. We like COSO’s definition that defines governance as the “act or process of providing oversight or authoritative direction or control,” and concludes the definition discussion by stating that “an effective governance ensures accountability, fairness,
There are some keywords in this definition: oversight, accountability, fairness, and transparency. Companies need a balance of power. Authoritarian governments rarely succeed, and the same can be said of businesses. Yes, of course, you need a strong leader, but we would argue that you need multiple strong leaders. It’s just that these strengths should highlight different areas and create a well-balanced team. You need to be a passionate innovator, the even-keeled moderator, a decision maker, plus someone who can lead the organization, as well as someone who can crunch numbers and bring in investors. It’s all about creating a winning team that keeps itself in check and helps each player bring their best to their field. Within this team of all-stars, you also need to make sure that each player is held accountable — that they’re bringing their best to each and every game.
Fairness and transparency go hand in hand. If your company is transparent with its actions and decisions, the issue of someone being treated unfairly can usually be taken off the table. When you are clear and honest with your decision-making, you can explain your actions behind the decision.
And when you have a solid foundation that includes oversight, accountability, fairness, and transparency, many of the distractions that hold your company back from achieving their best bottom line will be erased. You will set a clear path and method of how to get to the best end result—just like my mother did with my sisters and me, by ensuring we had a clean and effective household.
For more information about how a strong governance boosts your bottom line, visit embedded-knowledge.com.