Governance and Decision Rights
Experience demonstrates that a leading cause of organizations’ failing to realize their transformation objectives is that they have not backed up structural changes with the proper governance structures and decision making methods. Conversely, organizations that have adopted effective governance structures have been able to effect positive change much more rapidly than those that didn’t. Organizational accountability is vital in today’s challenging business climate and an organization’s ability to monitor and enforce change in alignment with business objectives is necessary. The experience some of the world’s most recognizable organizations have amassed in their own transformation projects shows the importance of effective governance and its implications on decision making and sustainable change.
Over the last 15 to 20 years, many organizations have made significant investments in HR operations with the goal of improving efficiency and reducing costs. Even though they have made costly investments to implement new service delivery models, which often include shared services, centers of expertise and technology, for some the returns have been marginal at best. Moreover, most of the HR functions that businesses have attempted to transform have yet to demonstrate tangible value. Failure to adopt effective governance can have negative implications including:
- Loss of credibility with business leaders
- Lower workforce productivity levels
- Lower customer satisfaction
- Higher vendor costs
- Reverting back to “old ways” of operating
Effective governance and decision making establishes a framework for transformation and can improve the odds of solidifying change and realizing the benefits of transformation.
Start at the beginning
Persistent, effective governance for HR is no longer optional. Compliance drivers now require organizations and their executives to demonstrate meaningful protocols and processes to guide organizational decision making. In addition, today’s organizations should take a hard look at how to embed meaningful governance principles into their daily operations, processes and culture.
Organizations that do not clearly articulate the need for governance early and instead allow decision making to evolve autonomously as part of their day-to-day operations, could find themselves using governance poorly at best and sporadically at worst. Governance should be consistent and flexible enough to adjust to an organization’s business, but the overall framework and its principles should endure time. Effective governance begins with a well-documented charter that outlines the purpose, accountabilities, timing of interactions and participants.
In approaching the implementation of an effective governance framework, three basic questions should be in clear focus:
What is governance?
The term governance is used in many different ways in business today, but it can be defined as a method of organizing resources for the purpose of providing guidance which is designed to lead to a desired set of behaviors for making decisions that have a positive impact on business performance. Read more about Governance and Decision Rights.