Tag Archives: Stakeholders

Governance processes and terminology

Signpost "Governance"Governance uses a number of terms, this blog is designed to provide a set of referenced definitions for the different terms and suggest a hierarchy for use by an organisation’s governing body.

 

Defining Organisational Governance

Governance:  The use of influence or power to direct, control and regulate the actions and affairs of others. Organisational Governance, developing systems and using influence to direct, control and regulate the actions of the organisation’s management and staff (see: Defining Governance).

Governing: The action of using authority to direct, control and regulate an organisation; and taking responsibility for the performance and conformance of the people within the organisation.

Governing body: the person, group or entity accountable to the organisation’s owners, and the wider stakeholder community, for the performance and conformance of the organisation they govern (eg, a corporation’s Board of Directors).

Conditions Precedent

The conditions needed for developing and implanting an effective governance paradigm are for the governing body to determine the objectives of the organisation and understand the concepts of good governance.

Objective:  A specific result that the organisation aims to achieve within a time frame, using available resources; a goal or target to be achieved. The organisation’s objectives are derived from its vision and mission statement; apply to both the organisation and its governance, and underlie its strategic planning activities. Objectives should be specific and measureable.

Concept:  An abstraction or generalisation from experience or the result of a transformation of existing ideas.  The concept is reified (made real) by all of its actual or potential instances, whether these are things in the real world or other ideas and mediates between thought, language, and referents.

The members of the governing body need to reach consensus on their view of ‘good governance’, in the context of their organisation’s purpose and objectives before being able to move to more concrete developments. Implementing ‘good governance’ requires the creation of an effective framework within the organisation supported by the documentation of the organisations governance objectives.

The Governance Framework

Governance Framework: The system through which the organization’s governance arrangements operate including the management structures, enabling factors and interfaces through which the work of the organisation’s management is directed and controlled and regulated.

Whilst the governing body retains overall accountability for governance, some of the functions required to implement governance throughout the organisation may be delegated to managerial staff or organisational entities under the supervision and control of managerial staff. These delegated governance roles, their responsibilities, authority and interrelationships must be clearly defined; as well as the decision making, oversight, and points of involvement and intervention retained by the governing body. (see: Governance Systems & Management Systems)

Functions: The purpose the system has been created to fulfil or undertake; the purpose of the system.

The function of governance is to establishing the organisation’s objectives, ethics and culture; develop a framework that can implement these factors and require appropriate oversight and assurance processes (see: The Functions of Governance).

The function of management is to use the organisation’s human and other resources to achieve its objectives; working within the parameters set by the governing body (see: The Functions of Management).

Governance functions and management functions may be performed at different levels and in different parts of the organisation, but everyone involved in governance and management have a shared responsibility to work proactively towards achieving the objectives of the organisation; and the governing body remains accountable for the performance and conformance of the organisation.

Documenting governance objectives

The objectives, the governance framework is to implement, need to be defined and documented. The starting point is the concepts of ‘good governance’ agree by the members of the governing body. The concepts need to be ‘made real’ in the form of a set of principles that encapsulate the values, ethics and cultural objectives the governing body intend the organisation to embody (see: Ethics and Leadership). These principles are the further refined and defined in a set of policies, procedures and methodologies.

Principle: A fundamental truth or proposition that serves as the foundation for a system of belief or behaviour or for a chain of reasoning.  These are the fundamental propositions that define the way the system of governance will operate, and acceptable behaviours for the organisation.

Policy: A document describing what is to be done in particular situation that has been agreed by the organisation’s governing body and management. Policies are clear, simple statements of how the organisation intends to implement its governance principles, and are intended to influence and determine decisions, actions, and other matters.  Policies will frequently link to externally imposed obligations such as laws preventing the bribery of foreign officials. In addition to the policy statement, guidelines may be issued to assist in the implementation of the policy.

Guidelines: A recommended practice that allows some discretion in its interpretation, implementation, or use, intended to assist in achieving a policy outcome or streamline a particular processes according to a set routine or sound practice.

Procedure: An established way of doing something, a series of actions conducted in a certain order or manner.  Procedures document and describe how each policy (or element of a policy) will be put into effect within the organisation. Each procedure should outline:
–  Who will do what
–  What steps they need to take (see: The value of Standard Operating Procedures).

Each procedure may require specific practices or processes to be used to ensure a consistent outcome.

Practice: A method or rule used in a particular field or profession.

Process: A series of actions or steps taken in order to achieve a particular end. Each process takes a set of inputs, and applies defined tools and techniques in a methodological way to the inputs to create outputs.

A series of procedures (plus practices and processes) can be grouped together into a workflow, or methodology.

Methodology: A sequenced series of procedures for delivering an outcome (see: Methodologies). Methodologies describe:
–  What should be done;
–  When it should be done;
–  Who should do the work; and
–  How the work will be accomplished.

In a well governed organisation, it governance principles will influence the design of every methodology, process and procedure used in the conduct of its business.

Governance and ethics

Lost valueBack in June I posted on Governance and Stakeholders focusing on the damage institutions were doing to their stakeholders through on-going governance failures.  Two of the organisations discussed (not for the first time) were the CBA Bank’s ongoing financial advice crisis and FIFA’s corruption, both on-going scandals.

Press articles over the last few days show neither of these problems is being well managed from either the institutions’ perspective or their customers’/stakeholders’ perspectives. The on-going sagas suggest the root cause of the problems is very much a governance failure, but in areas not previously discussed.

The Six Functions of Governance are:

  1. Determining the objectives of the organisation;
  2. Determining the ethics of the organisation;
  3. Creating the culture of the organisation;
  4. Designing and implementing the governance framework for the organisation;
  5. Ensuring accountability by management;
  6. Ensuring compliance by the organisation.

This post will demonstrate the importance of functions 2 and 3.

Starting with FIFA: the stated objective of FIFA is to further the development of soccer (football) world-wide. A noble objective!  However, to a large extent the culture and ethics within FIFA have become focused on individuals obtaining and retaining personal power for the benefit of the ‘powerful person’ – they may believe they are the best possible person for the job, but the evidence suggests otherwise! The use of FIFA’s resources by people in power to achieve this end has already been well documented and whilst of themselves these actions are not necessarily wrong, they have certainly led to a number of high profile prosecutions for corruption. I would suggest the ethical breakdown was driven by the toxic culture focused on achieving and retaining power.

This type of problem is well understood in many similar organisations that I’m familiar with, where there has been a focused effort by the governing body to create a culture of service to the membership / stakeholders.  This has been achieved by placing strict limits on the amount of time any one person can occupy a position of power. Generally there’s a ‘leadership chain’ of one or two ‘vice presidents’ and then the president.  People on this chain have one year terms in each position and move up the ladder progressively (elections are for the lowest ‘rung’ on the ladder).  Similarly, members of the governing body can serve a maximum of two terms of two years and a minimum of 25% of the ‘board’ positions are up for election each year.

This type of governance framework provides both continuity and renewal, and discourages people seeking power for themselves.  Anyone interested in seizing ‘power’ for 10 to 20 years will go elsewhere and find another organisation to participate in. This continual renewal process ensures there are always new ideas and new sets of eyes to ‘see’ any problems that are emerging, balanced by experience to maintain the longer term objective of the organisation. Ethical standards, competency and other matters remain important within a governance framework focused on facilitating the organisation’s objectives.

It will be interesting to see if the inevitable changes in FIFA will move in this direction and then if they use their funding power to drive similar changes through the regional and national organisations. If there’s no structural change, there will be no lasting change in the governance culture and consequently in the culture of the whole organisation.

CBAThe second focus is the CBA bank. Culture is also an issue in the way the CBA bank is treating the people damaged by the toxic culture it encourages in its wealth management division.  The basic rule for dealing with a failure (particularly of this magnitude) is ‘own-up then fix-up’. You need to acknowledge the error and take appropriate actions to rectify the mistake.

The causes of the problems were structural, and are discussed in The normalisation of deviant behaviours, but it took a Senate enquiry to drag a reluctant acknowledgement of the error.  To avoid sanctions, the CBA also agreed to set up a ‘high profile’ unit to compensate the victims of its wealth management advice.  After many months virtually no-one has been compensated and the bank’s approach would appear to be parsimonious at best.

The ‘fix-up’ part of dealing with a problem requires quick and generous restitution as far as is possible. This is relatively easy where then primary loss is financial but runs counter to the bank’s demonstrated culture of not really admitting error accompanied by short-term monetarism.

A quick and generous solution would be to frame a simple calculation and make an offer. The CBA knows how much money was ‘brought to the table’ by their victims, they can easily calculate what that would be worth now if the bank had advised the people to invest in bank term deposits and  they know the value of the money actually returned to the people. A couple of weeks with a decent spreadsheet and everyone could have received a reasonable offer.  There may be a need to add in some costs incurred in fighting for the victims rights and for other losses and damage but the whole problem could be largely resolved by now.

The cost of this type of option will be insignificant compared to the less obvious but real costs associated with the wages and costs associated with the bureaucratic monster the bank has created, the massive on-going damage to the bank’s reputation and ‘brand capital’ and the contingent liabilities for further legal actions and/or government action driven by the bank’s approach to this problem.

I’m not sure how the logic of the bank’s assessment processes are structured but a report in the press this week that some people had only been offered a fee refund highlights an approach focused on minimising payouts rather then solving the problem.  If advice was so bad a refund of the fees paid for the advice is warranted, the advice was bad and liability for the damage it caused would appear to sit with the bank??

How you change the culture in an institution as big as the CBA from a parsimonious focus on paying out money to maximise short-term profits is a challenge of the CBA Board, but if they fail, sooner or later the CBA will fail because its stakeholder community will decide to do business elsewhere.  Just because you are big does not mean you are invulnerable.

Conclusion.

The first three elements in the six functions of governance are there for a reason.  Obviously the objectives of the organisation are its reason for existing and have to come first. Then the governing body has to do the hard work of developing the right set of ethics and the right culture within the organisation’s (making sure its governance framework supports the desired culture) before anything else can really occur. As FIFA in particular demonstrates, failure in these critical aspects of an organisation tarnish everything else is touches.

It is impossible to achieve a ‘customer centric’, stakeholder aware organisation if the culture is focused on power or short-term profits!

Defining Stakeholder Engagement

Two earlier posts have discussed the concepts of stakeholder engagement.

Stakeholder Engagement GroupThis post builds on these foundations to look at the tools and techniques of proactive stakeholder engagement. Effective stakeholder engagement is a mutually beneficial process designed to enable better planned and more informed policies, projects, programs and services.

For stakeholders, the benefits of engagement include the opportunity to contribute as experts in their field or ‘users’ of the deliverable, have their issues heard and participate in the decision-making process. This should lead to:

  • Greater opportunities to contribute directly to the development of the outputs from the work;
  • More open and transparent lines of communication, increasing accountability and driving innovation;
  • Improved access to decision-making processes, resulting in the delivery of better outcomes;
  • Early identification of synergies between the stakeholders and the work, encouraging integrated and comprehensive solutions to complex issues.

For the ‘organisation’, the benefits of stakeholder engagement include improved information flows, access to local knowledge and having the opportunity to try out ideas or proposals with stakeholders before they are formalised. This should lead to:

  • Higher quality decision-making;
  • Increased efficiency in and effectiveness of delivery;
  • Improved risk management practices – allowing risks to be identified and considered earlier, thereby reducing future costs;
  • Streamlined development processes;
  • Greater alignment with stakeholder interests – ensuring outputs are delivered in collaboration with stakeholders and provide outcomes which meet their needs;
  • Enhanced stakeholder community confidence in the work being undertaken;
  • Enhanced capacity to innovate.

As with any stakeholder management process, ‘not all stakeholders are equal’ some stakeholders should be engaged because they are important to the work being undertaken, others simply need to be kept informed by appropriate levels of communication (for more on this see The three types of stakeholder communication).

The various levels of stakeholder communication, management and engagement are:

  • Inform: You provide the stakeholder with an appropriate level of communication, generally either PR or reporting.
  • Manage: You direct your communication to achieve a desired change in the attitude of the stakeholder or to manage an emerging situation.
  • Consult: You invite the stakeholder to provide feedback, analysis, and/or suggest alternatives to help develop a better outcome.
  • Involve: You work directly with stakeholders to ensure that their concerns and needs are consistently understood and considered; eg, the business representative involved in an Agile sprint).
  • Collaborate: You partner with the stakeholder to develop mutually agreed alternatives, make joint decisions and identify preferred solutions; eg, typical ‘alliance’ and ‘partnering’ forms of contract.
  • Empower: You place final decision-making in the hands of the stakeholder. Stakeholders are enabled (but also need to be capable) to actively contribute to the achievement of ‘their’ outcomes.

Stakeholder CollaborationThe first three bullets above are Stakeholder Management activities, the last three various levels of Stakeholder Engagement. Deciding which level of interaction is appropriate is a key driver of success, in any project, program or other work, some stakeholders will be best managed by simply keeping them informed, whereas the higher levels of engagement such as collaboration and empowerment require stakeholders with sufficient skills and knowledge to be able to actively participate in the endeavour, and importantly the desire to be involved!

The Stakeholder Circle® methodology provides the foundations needed to understand your stakeholder community and decide on the appropriate level of engagement for the ‘high priority’ stakeholders affected by the work. When you get to ‘Step 4 – Engagement’ the additional questions that need answering include:

  • What is the purpose and desired outcomes of the engagement activity?
  • What level of engagement is required to achieve this outcome – consult, collaborate, empower?
  • What method of engagement will you use?
  • What are the timing issues or requirements?
  • What resources will you need to conduct the engagement?
  • Who is responsible for engagement?
  • What are the risks associated with the engagement?

Finally, as with any stakeholder management process, the success or otherwise of the overall process needs to be reviewed regularly and appropriate adaptation made to optimise outcomes (step 5 in the Stakeholder Circle® methodology)

Summary:

Stakeholder engagement is not a ‘one-size-fits-all’ solution to managing stakeholders and needs to be planned into the overall development of the work:

  • Some of the questions outlined above need asking at the very earliest stages of a project or program during the ‘strategic planning phase’ and will affect the way the whole of the work is planned and undertaken.
  • The culture of the organisation undertaking the work will determine how open it is to inviting stakeholder collaboration or engagement, a degree of ‘culture change’ may need to be planned into the work.
  • Stakeholder engagement is always a two-way process, the skills, capability and culture of the key stakeholders will also be a constraint on what is feasible or desirable. You may need a strategy to ‘get the stakeholders on-side’.

Overall time and effort spent on stakeholder engagement will pay dividends (see: Valuing Stakeholder Management), stakeholder engagement is simply the most proactive way of helping your stakeholders to help you deliver their requirements successfully.

The Elements of Stakeholder Engagement

Effective stakeholder engagement is a two-way interactive relationship that encourages stakeholder involvement in the organisation for the benefit of both the stakeholders and the organisation.  The trend is increasingly clear; organisations that effectively serve the needs of their stakeholders outperform those that do not.

However, what is also apparent is confusion on the part of many managers as to precisely what stakeholder engagement is, and what systems facilitate effective stakeholder engagement.  This post suggests there are three basic systems that together form the foundation for effective stakeholder engagement in most organisations, but the foundations are just that, necessary underpinnings, stakeholder engagement itself rises above the foundations to create an entirely new way of engaging with stakeholders. Let’s start with a look at the three basic components:

Stakeholder Engagement

PR = Public Relations

PR is probably the oldest of the three foundations (particularly if you include advertising within the overall ambit of PR).  For thousands of years people and organisations with something to sell to ‘the public’ have recognised the need to tell potential customers about their offering and suggest there is a good reason for the potential customer to become an actual customer or client.

Camel Market

Smart merchants realised they needed to give potential customers a reason for doing business with them (rather than someone else) and that competing on price alone was not a good move in a crowded market place.

The role of advertising is in part to make potential customers aware of your offering and in part to create a desire for the type of goods or services you are providing. Effective advertising creates a ‘call to action’ which the customer heeds.

Public Relations (PR) has a different focus.  Good PR is built around creating a positive image of the organisation in the minds of its wider stakeholder community. PR is not directly aligned to sales in the way advertising is, but does seek to make the organisation appear to be one that most stakeholders in its target audience will want to be associated with.  This may be because of exclusivity, or status, because the organisation is seen to be ‘good’, or for any one of a dozen other reasons.  Effective PR has many purposes including:

  • Underpinning its advertising by creating a ‘good first impression’ of the organisation, thereby allowing the stakeholder to take note of its advertising.
  • Explaining the value of the organisation to a wider community minimising resistance to the functioning of the organisation and facilitating its operations.
  • Making the organisation appear to be a desirable ‘citizen’ within its community; etc.

Good PR is of course authentic and reflective of the true nature of the organisation, in the modern age ‘spin’ is easily uncovered and can be very damaging.

The fundamental nature of both PR and advertising is ‘push’ communication – the organisation pushes its message out to the wider community, hopes someone listens, and then measures its impact after the event with a view to improving the ‘message’ and the effect.

 

CRM = Customer Relationship Management

CRM is focused on providing a great experience to every customer.  The commercial driver for CRM is in part the generally accepted fact that it is far cheaper to retain an existing customer then to attract a new one and in part from a win-win view that the ability to quickly and efficiently service the unique needs of each customer reduces the transaction costs for the organisation.

Customers or clients are clearly stakeholders with a significant interest in the organisation, so focusing effort on providing them with the best possible level of service, delivered quickly and efficiently is a win-win outcome. Happy customers are more likely to recommend an organisation to their friends and colleagues as well as becoming regular clients of the organisation.

Unfortunately the concept of CRM seems to have been hijacked by software systems, overseas call centres and ‘big data’; bought with a view to ‘reducing costs’.  There’s nothing wrong with any of these concepts provided the outcome is improved customer service. Where the outcome is a reduction in service, any cost savings are likely to be offset by reduced business and the cost of attracting new customers to replace the ones lost by poor service.

Whilst CRM at its best is interactive and focused on a win-win outcome for both the organisation and its stakeholders, the stakeholders directly affected by CRM are limited to the organisations customers and clients.

 

Stakeholder Management

Stakeholder management is process focused; it involves planned interaction with a wider stakeholder community, both to manage the consequences of any crisis as well as providing information and facilitating two-way communication with key stakeholders.

Good stakeholder management is a proactive process, focused on facilitating regular communication and anticipating needs, issues and problems that are likely to arise within the stakeholder community. Tools and methodologies such as the Stakeholder Circle® are designed to facilitate efficient stakeholder management. Stakeholders are identified, there needs assesses and their relative importance determined. Based on this assessment, communication and other interactions are initiated to gather the support and assistance needed by the organisation and to head off or minimise any threats or problems.

The focus of stakeholder management tends to be ‘defensive’, and is aimed at creating the best possible stakeholder environment to allow the organisation to do its work efficiently   The process is interactive, seeking to engage constructively with the organisations stakeholders and looking for win-win outcomes that benefit the organisation and the stakeholder, but is driven by the organisation, from the perspective of the organisation.

 

Stakeholder Engagement

Stakeholder engagement builds on these three foundations (particularly ‘stakeholder management’) to create a different paradigm.  Stakeholders are encouraged to actively engage with the organisation and contribute to its growth and development whilst at the same time the organisation and its staff engage with their community through Corporate Social Responsibility (CSR) initiatives and the like. These engagement processes build a strong, two-way relationship in which the stakeholders and the organisation work together to build a common future that is both mutually desirable and beneficial.  I will be writing about stakeholder engagement in a future post.

 

Conclusion

The three foundations of Stakeholder Engagement: ‘Stakeholder Management’, CRM and PR are quite different processes focused on achieving different outcomes.  In a well managed organisation all three functions work together to crate a supportive stakeholder environment and a successful organisation. However, whilst the systems need to be aligned and compatible they are very different and should not be confused.

In particular CRM and Stakeholder Management systems have very different objectives, focus on quite different stakeholder groupings, need significantly different information sets, and have very different measures of success:

  • CRM focuses on customers (or clients). Whilst customers as a ‘class’ of stakeholder are important, generally an individual customer is not. The focus of a CRM system is managing large amounts of data to provide ‘all customers’ with a generically ‘good’, potentially ‘tailored’ experience.
  • Stakeholder Management focuses on indentifying the key stakeholders ‘at this point in time’ that require specific management focus as well as the wider group of stakeholders that need to be engaged (or at least watched). In most situations very few individual clients or customers would be sufficiently important to feature in this list, but there will be lots of stakeholders who are highly unlikely to ever become ‘customers’, for example suppliers and competitors.

The shift to ‘stakeholder engagement’ does not add new systems but does require a paradigm shift in thinking. The key element of stakeholder engagement is opening up to the ‘right stakeholders’ and either inviting them into the organisation, or reaching out to them, to help create a mutually beneficial future – more on this later.

Governance and the Magna Carta

On the 15th June 1215 the Magna Carta (Latin for “the Great Charter”), was sealed by King John of England at Runnymede, near Windsor. Drafted by the Archbishop of Canterbury to make peace between the unpopular King and a group of rebel barons, it promised the protection of church rights, protection for the barons from illegal imprisonment, access to swift justice, and limitations on feudal payments to the Crown, to be implemented through a council of 25 barons.

Magna carta

Unfortunately, neither side stood behind their commitments, leading to civil war with the rebel barons receiving active support from France. After John’s death, the regency government of his young son, Henry III, reissued the document in 1216, stripped of some of its more radical content, and at the end of the civil war in 1217 it formed part of the peace treaty agreed at Lambeth, where the document acquired the name Magna Carta.

The 1297 version of Magna Carta

The 1297 version of Magna Carta

Short of funds, Henry reissued the charter again in 1225 in exchange for a grant of new taxes; and his son, Edward I, repeated the exercise in 1297, this time confirming it as part of England’s statute law. But as important as this document is in English history, it was not ‘unique’ – the Magna Carta is based on a long Anglo-Saxon tradition of governance.

The 1215 Magna Carter was based on The Charter of Liberties, proclaimed by Henry I a century earlier. Henry I was King of England from 1100 to 1135; he was the fourth son of William the Conqueror and came to the throne on the death of his bother in a hunting accident. The Charter of Liberties issued upon his accession to the throne in 1100, and was designed to counteract many of the excesses of his bother William II and shore up support for Henry.  Among other things the Charter of Liberties restored the law of Edward the Confessor one of the last Anglo-Saxon kings of England.

Anglo-Saxon law itself has a long history; the Textus Roffensis currently held in the archives at Rochester, Kent, documents Anglo-Saxon laws from the 7th Century. These laws and practices suggest the rights of individuals were fairly well protected and the King was responsible for governing within the law (see: Arbitration has a long history).

The Norman Conquest of 1066 brought a more imperial style of governing that flowed from the Roman Emperors (post Julius Cesar), based on ‘the divine right of kings’ and a feudal system that placed the King at the top of a hierarchy of power based on the control of land – the King owned all of the land and granted it to Barons in return for allegiance and taxes.  The only limitation on the King’s power was the willingness of his barons to accept the King’s rule and if they did not, rebellion was their only option. This type of ‘absolute’ power was wound back a little by the Magna Carta which guaranteed the rights of Nobles and the Church but did little for ordinary people.

However, during the course of its repeated ‘re-issuing’ the Magna Carta did pave the way for Parliamentary government and stood as a powerful counter to attempts by monarchs to assert the divine right of Kings as late at the 17th Century. By the end of the 17th century, England’s constitution was seen as a social contract, based on documents such as Magna Carta, the Petition of Right, and the Bill of Rights. These concepts were taken to the Americas by the early colonists and formed part of the underpinnings of the USA constitution.

The governance message from the Mana Carta is the need for the ‘governor’ to respect the rights of the people being governed. The closer a governor gets to absolute power the greater the tendency to despotism and corruption. Effective governance systems balance the needs and rights of the governor and the governed, operate within an open framework, incorporate checks and balances, and adapt to changing circumstances. ‘Absolute systems’ are almost incapable of changing progressively, the usual course is the governors apply more and more coercion to stay ‘in power’ until eventually the whole system is destroyed by revolution or catastrophe; damaging everyone.

Following Magna Carta, the English constitution evolved and adapted to change and certainly since the restoration of the Monarchy after the English Civil War and Commonwealth of Oliver Cromwell has been designed to adapt and change. Corporate and organisational governance has followed a similar trend and evolved from its inception in the early 17th century into its modern form (see: The origins of governance).

However, whilst the concept of governance has been evolving and the purpose of good governance is to balance the needs and expectations of all stakeholders to the common good, governance failures remain commonplace.  Our last blog post Governance and stakeholders highlighted three recent governance failures; the discussion on FIFA in particular highlighting the danger of concentrating nearly absolute power in the hands of one person.

There are some interesting parallels, eight hundred years ago on the banks of the Thames an embattled King John met the English barons who had backed his failed war against the French and were seeking to limit his powers. The sealing of the Magna Carta, symbolically at least, established a new relationship between the king and his subjects. Eight days ago, Sepp Blatter met his advisors near the banks of Lake Genève and sealed his fate by announcing his resignation from FIFA. If FIFA survives, it is highly likely the powers of his successor will be similarly limited by a new ‘charter’.

The bigger question though, is how can these excesses be avoided in future? History tells us that transparency and good information is one of the keys to avoiding excess, as is making the ‘governors’ accountable to the governed.  Another is the affected stakeholders being willing to assert their rights before a situation gets out of hand and more desperate measures become necessary.

On two separate occasions I’ve been lucky enough to see one of the four remaining copies of the original Magna Carter, once at Lincoln in the UK, and once as part of an exhibition in Canberra. As we reflect on this document and its 800 year history its worth considering its key message, that good governance requires both limits on power and for the governors to consider the interests of their stakeholders; if these two elements are present, the likelihood of governance failure is going to be significantly reduced. This is equally true for national governments, organisational governance and the governing of projects, programs and portfolios.

Certainly, as far as the governing of projects, programs and portfolios is concerned, both the EVA18 Project Controls Conference in England and our local Project Governance and Controls Symposium are organised by people who believe one of the keys to good governance is having open, effective and robust reporting system in place that deliver accurate information to all relevant stakeholders. The challenge we face is persuading more organisations to invest in this key underpinning of good governance – hopefully we won’t have to wait another 800 years…

Governance and stakeholders

CrisisBoth stakeholder theory and the modern concept of organisational governance place importance on the organisation fulfilling the needs of all of its stakeholders. The older, generally discredited ‘stockholder’ theory suggested the primary purpose of an organisation was to maximise value for its owners – generally interpreted by those in power as looking after the short-term interests of ‘those in power’ or the few with a direct investment in the organisation.

Three on-going sagas demonstrate the fallacy of taking a short term ‘stockholder’ approach to creating value.

1. The FIFA Crisis: Ignoring the alleged criminality of many of the key actors, my view is the biggest ‘governance failure’ in FIFA for the last decade or more has been the perceived method of allocating development funds to national soccer authorities. The perception is that most of these funds were distributed at the behest of Sepp Blatter, and therefore if the associations wanted to keep on receiving their development funding they needed to vote for Blatter.

There is nothing wrong with funding the development of the game – it is one of FIFA’s primary objectives. The governance breakdown was in the lack of a robust and transparent process for allocating the money to soccer associations that could make the most beneficial use of the funds and requiring accountability for the expenditure. The $billions in largely unaccounted largess distributed on a less than transparent basis is I suspect the root cause of much of the evil besetting FIFA at the present time.

Its too early to determine the damage to both FIFA and the game of soccer (football) from the breakdown in governance but one thing is already very clear, the big loser over the last decade has been the game, its players and its supporters – ultimately the stakeholders who really matter.

2. The on-going Banking Crisis: The focus of banks on employing and rewarding greedy people focused on maximising their bonuses at the expense of the Banks customers and shareholders lead to the financial crisis and a series of other failures, reviews and prosecutions in the USA, UK and Australia at least.

In Australia, the governance failure was senior managers and the Board’s Directors putting short-term profits ahead of the long term development of the bank. Front line sales people were paid to sell inappropriate products to clients – they do not get bonuses for not selling product even if it is in the best interest of the client. Middle managers were paid to ignore potential problems – their KPIs and bonuses were driven by the sales volumes of their staff, etc.

The banks and their stockholders did very well for a while, now many of the problems created by this governance and cultural failure are starting to emerge, the short term stock speculators are taking their profits and dumping bank stocks. Trust in the banking system is at an all time low (financial advisers are deemed less trustworthy then politicians). Very few of the stakeholders in the baking industry, including employees, long term investors, clients or governments are on the ‘winning side’. I’m waiting to see what game changing ‘disruptive innovation’ emerges – anyone offering a viable alternative to the banks has a once-in-a-lifetime window of opportunity to start up in a market looking for a viable alternative to ‘big banks’.

3. The on-going Child Abuse Crisis: The Australian Government’s Royal Commission into child abuse continues to uncover major breakdowns in governance in a vast range of organisations. The thing I find most upsetting is the abject failure of the leadership in most of these organisations to uphold the values of the organisation. Abuse was ignored, covered up, secret payments made to ‘settle complaints’, etc. The focus of the various churches, school and other institutional leaders was always a short term attempt to protect the institution from ‘bad publicity’. Hide the perpetrators of the evil and diminish the claims of the abused children (causing even more distress and harm).

The long term damage this short-sighted policy of ‘cover-up’ and ‘look-the-other-way’ will cause to the churches in particular has yet to emerge but I suspect there will be massive consequences that damage both the institution and the people the institutions serve, their congregations.

Summary

In each of these cases, the governance failure started at the very top of the organisation, the Executive Committee, Directors, and Bishops failed to develop a culture focused on achieving good outcomes for all of the respective organisation’s stakeholders and allowed corrupt cultures to develop focused on advantaging a very select group of ‘stockholders’. The resulting crises will be causing damage to the organisations and their stakeholders for decades to come. Unfortunately in the vast majority of cases the people responsible for the breakdown of governance in their organisation are still hanging on to their jobs and pretending the failures are the fault of people lower down the organisational hierarchy.

Avoiding this type of problem is not easy but it starts with the governing bodies recognising that they, and they alone, can set the cultural and ethical tone for an organisation. The functions of governance outlined in our White Paper may seem soft and fuzzy concepts but if they are not implemented effectively and rigorously the next crisis will only be a matter of time. Long term success can only be assured by governing for all stakeholders, which in turn requires an ethical framework and a culture that demands transparency and accountability (as well as technical excellence) from everyone working in the organisations hierarchy.

Making Projects Work: Effective stakeholder and communication management

Making Projects WorkMy third book, Making Projects Work is now generally available in hardback and Kindle editions.

Making Projects Work: Effective Stakeholder and Communication Management focuses on the skills needed by project management teams to gather and maintain the support needed from stakeholders to make their project successful.

The underlying premise in the book is that projects are performed by people for people. The key determinants of success are the relationships between people in the project team and between the team and its wider community of stakeholders. This web of relationships will either enable or obstruct the flow of information between people and, as a consequence, will largely determine project success or failure.

Making Projects Work provides a framework for understanding and managing the factors required for achieving successful project and program outcomes. It presents guidelines to help readers develop an understanding of governance and its connection to strategy as the starting point for deciding what work needs to be done. It describes how to craft appropriate communication strategies for developing and maintaining successful relationships with stakeholders. It highlights the strengths and weaknesses of existing project controls and outlines effective communication techniques for managing expectations and acquiring the support required to deliver successful projects on time and under budget.

Features – the book:

  • Provides a framework for understanding and managing factors essential for achieving successful project and program outcomes.
  • Facilitates an understanding of governance and its connection to strategy as the starting point for decisions on what work needs to be done.
  • Describes how to craft appropriate communication strategies to develop and maintain successful relationships with stakeholders.
  • Supplies an understanding of the strengths and weaknesses of existing project controls.
  • Outlines effective communication techniques for managing perceptions and expectations and to acquire the support necessary for successful delivery.

For links to more information on this, and my other two books, start at: http://www.stakeholdermapping.com/stakeholder-management-resources/#Books