Governance…it is a Big Word

Whether you’re in the Big Pond or the Little Pond, governance is important for any organization.  It helps to identify the roles and responsibilities and people and processes that will be adopted and adhered to.

Without governance, organizations may not have a clear view of who is accountable or responsible for areas of the organization.  This can perpetuate inefficiencies with communication, decision making, and issue resolution.  Due to this, organizations Big and Little should all discuss, identify and document governance structure and procedures.

Considerations:

Some key considerations for identifying and implementing your governance structure:

  • Roles and responsibilities – determine which area is responsible for what. The focus here should be identifying complementary groups that work together with defining responsibilities that do not overlap with other groups.  Common sense should prevail over political correctness.  Beware the ‘right answer’ to serve soft issues that is actually the ‘wrong answer’ for progress.
  • External parties – with any structure, external parties outside of the organization (or group) will surely be involved.  Think about whom those parties are and what their involvement will be.   Communicate this publically to clear up misconceptions.  If these relationships feel soft or unclear, they probably are just that.
  • Communication channels– identify the communication forum and process that will work for the organization, whether big or small. This could be day to day channels, reporting channels (e.g. quarterly, annually), and/or issue escalation.  It seems easy, but this is done wrong so often. Simple and more communications are almost always better than any other option.
  • Little Pond Special; Fiduciary Responsibilities – few things are more damaging to a seed / early stage company than a team without a clear, segregated steward who is focused on shareholder value.  The CEO talking tough is not enough.  So many elements / protective covenants of share class structure and operational oversight break down if there is an inappropriate check and balance system here.

Big Pond Perspective (by guest Big Ponder, Jennifer Leung):

In the Big Pond, governance is a pre-requisite to operating a successful organization and ensuring strategy and key project initiatives made at higher levels can be successfully communicated to responsible parties, departments, and management.  Similarly, governance is a pre-requisite at the tactical level for implementing said strategy and projects.  Without proper governance, projects would be extremely challenging and can often fail.

As a consultant, I’ve frequently walked into an organization with thousands of employees, to work on a project with hundreds of staff members to implement something that is comprised of many new processes and systems.  More often than not, sponsors of the project have not properly set up a clear governance structure that fully defines roles and responsibilities such as a project steering committee, nor have all of the key stakeholders been identified to work with the project team.  To make matters worse, communication channels are typically lacking.  As you can imagine, the result can be inefficient and chaotic.

Spending time up front when planning a large project using the considerations discussed above to create the appropriate oversight structure will save countless hours, frustration, and rework in the long run.  For example, identifying the folks that need to be involved with key decisions through-out the project implementation and discussing their role with them before the project is in full swing would save lots of time with communication and buy-in.  Identifying key communication channels such as the reporting-out structure and knowing the parties involved in decision making and issue resolution as part of the governance structure ensures the process is shared appropriately and complied with by relevant parties.

The concept of project governance is not new, although many don’t prioritize the definition of a governance structure as a line item in a project plan.  The choice is yours – as a Big Pond, implementing a project, you can either choose to do the legwork upfront and have a clear strategy in place; or you can do it mid-stream and end up doing it anyway.

Little Pond Perspective (by Doug Locke – BOD member / cheerful advisor to other companies without D&O Insurance)

A wise friend (CEO of First Juice – David Glasser) once told me that if two people work together, and always agree on everything, then one of them is unnecessary.  This is especially true with governance.  I think that due to our work in Solidea, we (or I) probably have an uncommon view on governance – at least as it pertains to the stage of the company where I am about to focus.  Call this some thoughts for navigation in the seed / pre-A round, before a company has resources to truly round out their advisory framework and BOD in a formal way.

The idea that most emerging companies miss is that often the seed stage or early stage stakeholders/externals have little concern (read – awareness) about true governance.  Many angels do not ask questions about the role of the BOD or advisors.  Some are happy to see some names they recognize or can google. This is not to disparage such limited analysis thereof…there may be bigger fish to fry when looking at a private placement.  I am simply proposing that just because nobody is pushing, it does not mean that we should not be thinking about multiple voices (and roles) to protect shareholder value and the company at large.

So we are not here to pontificate about the merits of boards and segregated duties.  It’s much simpler than that.  A good governance model includes oversight of fiduciary interests of the shareholders, sure.  It should also provide a model of balanced thought and objective scrutiny at times.  Good governance = people who poke at key operational assumptions + people who ensure a healthy discussion on elements of user growth, fulfillment strategy, or supply chain management + people who instill a culture that challenges key issues + people who watch out for the interests of the company and of other stakeholders.

Far more teams have failed because EVERYONE is drinking the Kool-Aid.  How about some positively directed scrutiny? Is that so wrong?  Good governance will help you avoid the following ex post facto statements:

  • “I wish I had met this guy/gal 6 months ago.”
  • “How come nobody said that they were thinking this when we had funding?”
  • “I can’t believe we did that.”
  • “We went the wrong way for 6 months.”
  • “Why do we have 6 versions of the truth?”

It is not a magic bullet but all you CXOs operating in a pond of your own creation…you should change it.  Change it today.  Open the dialogue ASAP.

  • novice pm

    Big Pond...

    Thanks for the insight on governance and why it is so important. I am wondering if you can clarify a debate I have been having with other seasoned project leaders. How do you determine the proper levels and specific roles and responsibilities as part of the governance structure? For example, if I am a team lead, how do I know what to escalate to the project lead... and as the PM, what decisions can (and should) I make vs. the steering committee (SC)? I always see these fancy team charts that say the SC has "overall oversight and QA" or something broad like that. But, in reality - where are the boundaries here and how should I think about cleanly segregating the roles? I am also wondering if you have a perspective on if these governance structures need to differ based on the phase of the project you are in.

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