Good governance creates a strong organisation by continuously steering it towards a vision and ensuring that day-to-day management is aligned with the organisation’s goals. An effective governance framework enables cohesive teamwork to achieve financial targets and planned social impact. Conversely, poor governance can lead to missed targets, legal problems and loss of reputation.
The scope of governance is broad, and for us to be effective as advisors, we need to focus on those critical areas where we have expertise.
Customer Value Management
One of our core beliefs is that globalization and the development of improved logistics and information sources has begun to change the dynamics of customer-supplier relationships. The rise of web based sales and information channels have been a key trend in marketing, sales and customer service functions. The development of collaborative communities, labelled as Web 2.0, will further impact on Customer Value Management practice. Figure 1 illustrates the five key areas we see as needing significant thought and relevant actions to bring them into line with changing market demands.
Specific issues to be examined are:
- Living brands
In a Web 2.0 world, customers and other stakeholders scrutinize the promises corporations make and compare notes in very well informed social networks and communities of interest. How can the living brand thrive in this environment?
The buyer should believe the seller’s self interest is best served by solving the buyers problems. How do we build trust as the cornerstone of the engagement process?
How can we ensure that product quality and service reliability consistently meet / exceed expectations and that performance is recognised and builds confidence?
- Shared values
Exposure to communities will increase buyer’s sensitivities to their key issues. They will seek sellers who share similar values (which could encompass a wide spectrum from seeking ‘green’ solutions to hammering down supply chain costs. How do we share our values and ensure they resonate with customers?
- Thought leadership
Proactive thought leadership is a significant part of building reputation and growing a living brand. How can corporations lead and inform their stakeholders?
Increasingly knowledgeable and collaborative stakeholders lead to internal communications failures exposure more visible and potentially harmful. How do we steer the values and actions of the normally separate marketing, sales and delivery functions through clear, articulated vision?
Information systems(IS) have become increasingly embedded and critical to every part of an organization. Due to limited technical experience and IT complexity, key decisions are often deferred to IT professionals.
However, IT professionals are not always aware of the visions and goals of their internal customers. IT governance implies a system in which all stakeholders, including the board, internal customers and related areas such as finance, have the necessary input into the decision-making process. This prevents a single stakeholder, typically IT, being held responsible for what may subsequently be seen as poor decisions. It also avoids the situation where users later complain that a system does not behave or perform as expected.
The rising interest in IT governance is partly due to compliance initiatives (Sarbanes-Oxley in the USA and Basel II in Europe) and partly because of well-publicised examples of IT projects running out of control and profoundly affecting the performance of an organization. There is compelling evidence that a majority of major IT projects are not delivered on time and on budget.
- Organizations must not lose sight of the fact that data, forming a record of their transactions, is at the heart of the matter. Ensuring the integrity of data requires control from the point of entry through transmission, processing and reporting
- As volume and complexity increase, business processes need to be more carefully designed, to be formal, and to have clear handovers and a segregation of duties in order to maintain control
- Older technology can be expensive to maintain and can make a business uncompetitive. Equally, constant upgrades can be disruptive. The basis of technology selection and its pace of introduction are important governance issues
- Collaboration is a term that is often discussed but less often understood. From a governance perspective, the key questions are about creating an information system that motivates people to work together and helps them be a more effective team
- Integration is a key issue of governance. Ensuring common standards, from data collection to hardware and software, repays huge dividends in increasing flexibility, data mobility and analytical relevance. It also delivers at lower cost. However, ensuring standards are enabling and not disabling is a vital governance issue
- Business Intelligence is not only understanding what your market and competitors are doing but also what new technological possibilities are emerging which could be employed to gain competitive advantage. Effective visioning should include key IT systems with a ‘fantasy wish list’. Effective intelligence gathering can turn some items on the wish list into a reality
Corporate Social Responsibility
In a web 2.0 world, characterised by an abundance of information and collaborative analysis, businesses are increasingly being required to manage their activities with sustainability as a key driver. Organizations have an obligation to consider the interests of customers, employees, shareholders, communities, and the environment in all aspects of their operations. This obligation is driven by stakeholders and customers whose concerns extend beyond the need simply to comply with legislation.
CSR is closely linked with the principle of Sustainable Development, which requires enterprises to make decisions based on a combination of factors. Short-term financial concerns over profitability and dividends need to be balanced with the long-term social and environmental consequences of their activities. Increasingly, articulate stakeholders are evaluating organizations on their long-term perspectives. Figure 3 summarizes the four broad areas that we see as critical to be governed.
- For trust to flourish, transparency is necessary. However, business managers often see a conflict between maintaining competitive advantage through secrecy and increased stakeholder transparency
- To build and nurture a living brand requires a consistent set of behaviours across the whole organization. CSR can make a vital contribution to a living brand and the consistent application of corporate policies is essential
- An important element in the corporate vision is the role the organization plays in its community. Follow-through and effective governance ensures the corporation can profit from its vision
- In a similar way, a business needs to consider its philosophy regarding ecological issues and to make choices on what it should aim for. Realistic and achievable objectives can be a powerful tool in building a sound reputation with stakeholders
Risk and Compliance Watch
An invasive proliferation of technology-enabled information systems and escalating pressure for business to deliver on its social responsibilities – means that risk will escalate. Figure 4 outlines our view on the areas that require strong governance.
The longer view
The demands on business will intensify as well-informed stakeholders question and make purchase and investment decisions on wider issues that simply product or service. Web 2.0 provides a forum for information sharing and collaborative analysis. The scope of governance will evolve as technology- enabled globalization creates a growing pressure to embrace best practices. At GB, we have focused on four key, inter-related domains that we believe will be critical to organizational governance issues in the near future.
An organization’s ability to define its vision, express it succinctly and implement it consistently has always been the key to success. However, that vision is having to become broader and more complex than hitherto, which makes the process exponentially more difficult.
We believe that in this environment executive action without effective governance is unlikely to succeed. Competitiveness will stem from an organization’s ability to harness its collective thinking, communicate its values and build responsive delivery systems. Web 2.0 aware customers, employees and investors will choose to engage with organizations that have embraced this complexity and given it a unique meaning.