21st century governance
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21st Century GovernanceLes Wallace, Ph.D.
Who is this guy and what does he know about governance?
Short version of exaggerated credentials University professor / administrator Hospital administrator—traditional Board International consulting company…
Touch 20,000 people / 31 Execs / Ten Boards a year Bank Board of Directors Counterpart International Board of Directors
2© Signature Resources Inc 2009
Husband, Father, Grandfather, Champion Dry Fly Fisherman
3© Signature Resources Inc 2009
21st Century GovernanceAll centuries are different as the velocity and complexity of change accelerates.
Every generation finds
their traditional models
of doing business tested
by new ideas & demands.
“Nothing ages faster than the future.”David Carr
4© Signature Resources Inc 2009
21st Century Governance“The future ain’t what it used to be.”
Yogi Berra
Oversight lapses of this
Board of Directors will
impact every board for years to come5© Signature Resources Inc 2009
21st Century Governance “Permanent Whitewater”Peter Vaill Learning as a Way of Being, 1996
…1980s Change compatible—tolerate change
…1990s Change adaptable—evolutionary adjustments
…21st Century Change driven—create change
6© Signature Resources Inc 2009
21st Century Governance
“The future is not some place we are going to, but a place we are creating.
The paths are not to be discovered, but made,
And the activity of making the future changes both the maker and the destination.”
John SchaarU.C. Santa Cruz
7© Signature Resources Inc 2009
21st Century Governance
Anticipating the future and our value in it is one of the most critical set of leadership competencies of our age: thinking / acting in the future tense!
External awareness Strategic thinking Innovation Leading transformation Leadership succession
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21st Century Governance
“No such thing as an unmovable platform.everything is in motion relative to something.”
Albert Einstein
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21st Century GovernanceAre you running your organization…Are you running your organization…
… …or changing your organization?or changing your organization?
A Leader’s Agenda
CEO & Board…
About 25% typical business About 75% strategy and transformation
10© Signature Resources Inc 2009
21st Century Governance
“To be responsible inventors and discovers, we need the courage to let go of the old world, to relinquish most of what we have cherished, to abandon our interpretations about what does and does not work.”
““We must learn We must learn
to see the world anewto see the world anew.” .”
Margaret Wheatly, Leadership and the New Science
11© Signature Resources Inc 2009
21st Century Governance
“Professionals generally know so much about what they know that they are frequently the last to see the future differently.” Edie Weiner & Arnold Brown, Future Think
“Your biggest competitor is your own provincial view of your future.” Watts Wacker, The Visionary’s Handbook
12© Signature Resources Inc 2009
21st Century Governance
Boards frequently struggle with their role. Most board members have much more management
than governance experience.o Management is more day-to-day hands-on.o Governance is more strategic. No surprise…boards frequently stray into
operational or tactical decisions that should be the purview of the ED/CEO
(micro-management, getting in the weeds)
13© Signature Resources Inc 2009
21st Century Governance
The role of governance is to create, authorize and monitor the strategic direction of the enterprise and create values, policy and financial plans that support vibrant delivery of their mission.
Fiduciary, policy and strategy governance.Boards that Make a Difference, John Carver
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21st Century Governance
Governance is not so much about the technical literacy of a board member regarding a challenge facing the organization (e.g., HR, marketing, finance/budget, legal, fundraising, testing)
…as it is about the leadership competencies that give a board member a sophisticated peripheral vision to oversee a complex enterprise.
15© Signature Resources Inc 2009
21st Century Governance
Boards hire a CEO/ED to whom is assigned the management of the organization consistent with board direction.
What if a board has serious concerns about the effective management of some aspect or element of the enterprise?
(E.g. HR, Member services, Financial controls, work climate)
16© Signature Resources Inc 2009
21st Century Governance
Governance competencies—sometimes referred to as executive leadership competencies include…Enterprise leadership (complex multifunctional business entity)
Strategic thinking and planningOrganizational transformationComplex policy developmentExecutive leadership assessmentPolitical savvy—influence, negotiation, communicationCustomer value creation
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21st Century Governance
Our Journey Today
Fiduciary GovernancePolicy Governance
Strategy Governance
Governance LeadershipGovernance Leadership
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21st Century Governance:Annual Duties
1. Elect board officers
2. Conduct external financial audit
3. Affirm financial statement is accurate
4. Re-validate and update “strategic plan”
5. Approve annual budget
6. Evaluate the CEO and set annual goals
7. Resign conflict of interest statements
8. Conduct board self-assessment
9. Nominate new board members for positions19© Signature Resources Inc 2009
Fiduciary Governance Revenue & expenditures Assets & liabilities Operating reserves Potential to generate revenueHistorical trends / shifts in overall financials Concerns of external auditor (exceptions?) Risk management Conflict of interest Whistleblower policy
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Policy Governance:“The conditions under which organizational
functions should be carried out?”Areas of organizational risk and performance: Financial management Human resources Ethics Technology Customer/constituent value / service Governmental compliance Governance
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Strategy Governance
Envisioning a desired position in the business environment of the future
Articulating strategies / tactics for migration Approving resources for the journey Monitor strategic (positioning) progress Act as sentinel of business environment shifts Board guidance--organizational transformation
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21st Century Governance
Get out of the Blender
Into the Helicopter
…see ourselves and our organizations from
distance—and test the moment to moment choices we make.
Move toward “governance leadership”
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21st Century Governance LeadershipPolicy Based Governance
“Oversight of organizational performance”
25-50% of Board conversations
Governance Leadership“Future facing conversations”
50-75% of Board conversations
Fiduciary conversations
CEO performance oversight
Customer satisfaction review
Policy review and creation
Periodic organizational self-assessment
Annual planning processes
Environmental scanning / tracking
Strategic Thinking about transformation
Scenario building
Strategic Plan Review (5 year horizon)
Innovation / breakthrough discussion
Benchmarking with industry innovators
Purposeful transparency
Board Leadership Succession
Organizational leadership succession
Inclusive customer input data
Customer value tracking (not simply satisfaction)
Annual self-assessment & development plan
24© Signature Resources Inc 2009
21st Century Governance:Challenges
Discussions stagnate into decimal point performance reports, departmental work plans, and second guessing management decision-making
Individual political / personal agendas
Provincial Viewpoints vs Strategic thinking
Leadership succession
25© Signature Resources Inc 2009
21st Century Governance:The Balanced Scorecard Dashboard
Monitoring a set of “indicators” across the “balance” of the organization’s work
Distilling the “cattle call” of numbers and progress reports from management
Business Performance Customer Performance Employee Engagement
Budget performance Capital investment Operating reserve Transactions / income New businessRobert Kaplan, Balanced Scorecard
Customer value tracking Customer satisfaction Quality tracking Repeat business
Harry Beckwith, Selling the Invisible
Employee survey Retention Employee development Talent succession
Marcus Buckingham, First, Break all the Rules
26© Signature Resources Inc 2009
21st Century Governance:Strategy
Positioning the organization to remain Positioning the organization to remain relevant, valuable, and vibrantrelevant, valuable, and vibrant
Strategic thinking should Strategic thinking should proceed strategic planning.proceed strategic planning.
““Evolution keeps you alive…Revolution keeps you relevant.”Evolution keeps you alive…Revolution keeps you relevant.”Gary Hamel, Leading the Revolution
27© Signature Resources Inc 2009
All products, services, organizations have lifecycles
Re-positioning through vision,
strategic thinking, and planning28© Signature Resources Inc 2009
External Awareness
Globalization Economics Government Customer value shifts Technology Social / demographic shifts Leadership / Governance competencies
“Getting out of Plato’s Cave”
29© Signature Resources Inc 2009
21st Century Governance Vision: where are we going? Mission: why do we exist? Values: how will be behave? Strategic Thinking: “how might we re-Strategic Thinking: “how might we re-
design our enterprise to leverage leading design our enterprise to leverage leading edge marketplace and business models?”edge marketplace and business models?”
Strategic Planning: given our desired position, how must we change to assure it’s accomplishment?
30© Signature Resources Inc 2009
21st Century Governance:Strategic Thinking
Strategic Planning: “What is our desired business position and how must we change to get there?”
Strategic Thinking: “How might we re-design our business to leverage leading edge marketplace and business models?”
Identifying an alternative future position
Anticipating opportunity and threats
Setting change priorities
Designing change pathways
Evolving / adapting systems
Outlining formal plans
Three-five year cycle
Course corrections regularly
Challenging core business assumptions
Re-inventing the business
Exploration of new paradigms
Sponsoring paradigm shifts/pilot tests
Bold innovative movement
Confirming stakeholder value shifts
Projecting / anticipating lifecycles of
products, services, organizational model
31© Signature Resources Inc 2009
21st Century Governance:Strategic Planning
1. Envision your enterprise 3-5 years out: Be bold, Dream, Be specific! Describe your desired future in as many ways as possible.
2. Imagine yourself there—how did you get there?
3. What five-seven strategies might be most vital to making the desired journey?
4. What data / research / benchmarking might we need to validate our vision and strategies?
5. For each strategy outline: tactics, milestones, resources, leadership
32© Signature Resources Inc 2009
21st Century Governance Building greater external awareness /
strategic thinking on your Board… Dissect a trend at each Board meeting. Discuss articles about governance or the profession. Play with a paradigm shifting question: What if? Pose a dilemma to your social network and discuss
the responses. Invite 3-5 new credential holders / members in for a
chat about perceptions of value and service—better yet, invite 100’s through web 2.0 social networking!
33© Signature Resources Inc 2009
21st Century Governance
Governance and Leadership Succession
Development, Recruitment, On-boarding, Developing
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21st Century Governance
How many potential board members do you currently have in the developmental pipeline?
Committee work is not enough—real leadership and governance competency development!
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Weak 20th Century Governance 2008
Governance and the Wall Street Collapse:
“You had very few real, functioning boards to control what went on on Wall Street.
The CEO puts friends on the board, his cronies, and in the end those guys aren’t going to throw him out.”
Carl Icahn, United Shareholders of America, Nov. 15, 2008
Governance and credentialing boards…hmm
36© Signature Resources Inc 2009
21st Century Governance Charisma is not leadership. Professional popularity is not leadership. Leadership is not technical competency—
yet that’s what many depend on for Governance.
Selecting governance leadership by any measure other than competencies is an out-dated model.
Oops, what about the membership organizations and “running for office?”
37© Signature Resources Inc 2009
21st Century Governance Leadership—not committee work at a higher level
Sponsor “governance leadership” workshops at any meeting of your profession of more than 100 people
Conduct some “governance leadership” tutorial at every committee / task force / item writing meeting
Principles of 21st Century Governance should be available on your website. [Start with John Carver]
At least: Board candidates should speak to distinct governance experience and competencies
Maybe Board candidates should “test” to assure adequate competency understanding of governance
38© Signature Resources Inc 2009
Consumer & Public Board Members
Huge opportunity for next generation governance excellence
1/3 of current consumer / public members are clueless, adrift in governing chaos, and not contributing. Another 1/3 iffy.
NCCA is clear on purpose: stakeholder interests
Not hard to find executive / governance leadership competencies for this position
39© Signature Resources Inc 2009
21st Century Governance:Annual Self-Assessment
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21st Century Governance:Annual Self-Assessment
Personal governance contributions Advancing the vision / mission Strategic planning Oversight: fiscal, programs, services Board / Management partnership Governance roles and responsibilities Governance structure Board dynamics: meetings, relationships, prep Board makeup, development, succession
41© Signature Resources Inc 2009
21st Century Governance:CEO Feedback
Annual feedback, goal setting, compensation decisions…biannual updated feedback!
Entire Board participates—
Executive or Governance Committee Communicate© Signature Resources Inc 2009 42
21st Century Governance:CEO Feedback
Enterprise operational management (financial, HR, org. climate, customer satisfaction, legal compliance)
Board relationship and communicationExternal relations (governmental, customers, funding
sources, enterprise partners, vendors)Strategic thinkingSelf developmentEthics Specific goal achievement (e.g. IT update, resturcture)
43© Signature Resources Inc 2009
ContactLes Wallace, Ph.D.
President
Signature Resources Inc.
PO Box 460100
Aurora, CO 80046
Les@SignatureResources.com
© Signature Resources Inc 2009
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