Levels of Stakeholder Engagement

August 21, 2017

How engaged should your stakeholders be? Or how engaged do you want them to be? In an ideal world the answer to both questions should be the same, but to even deliver a meaningful answer to these questions needs a frame of measurement.  This post uses ideas from 1969 to propose this framework!

In July 1969, Sherry R. Arnstein published ‘A Ladder of Citizen Participation’ in the A.I.P Journal[1] looking at citizen participation and the consequential citizen power over a range of USA government initiatives designed to enhance the lives of disadvantaged people in US cities. The typology of participation proposed by Arnstein can be transposed to the modern era to offer a framework for discussing how engaged in your project, or program, your stakeholders should be in actively contributing to the management and governance of the work they are supposed to benefit from.

Modern paradigms such as ‘the wisdom of crowds’, ‘user participation in Agile teams’ and ‘stakeholder theory’ all lean strongly towards stakeholder ownership of the initiative designed to benefit them. These views are contrasted by concepts such as technical competence, intellectual property rights, confidentiality and the ‘iron triangle’ of commercial reality (often backed up by contractual constraints).

The debate about how much control your stakeholders should have over the work, and how engaged they should be in the work, is for another place and time – there is probably no ‘universally correct’ answer to these questions. But it is difficult to even start discussing these questions if you don’t have a meaningful measure to compare options against.

Arnstein’s paper is founded on the proposition that meaningful ‘citizen participation’ is ‘citizen power’ but also recognises there is a critical difference between going through empty rituals of participation and having real power to affect the outcome of a process. This poster was from the May 1968 student uprising in Paris, for those of us who can’t remember French verbs, translated it says:  I participate; you participate; he participates; we participate; you (plural) participate; …… they profit.   The difference between citizen participation in matters of community improvement and stakeholder participation in a project is that whilst civil participation probably should mean civil control,  this same clear delineation does not apply  to stakeholder engagement in projects.  The decision to involve stakeholders in a project or program is very much open to interpretation as to the best level of involvement or engagement.  However, the ladder of engagement proposed by Arnstein can easily be adapted to the requirement of providing a framework to use when discussing what is an appropriate degree of involvement for stakeholders in your project or program.

There are eight rungs in Arnstein’s ladder; starting from the bottom:

  1. Manipulation: stakeholders are placed on rubberstamp advisory committees or invited to participate in surveys, provide feedback, or are given other activities to perform which create an illusion of engagement but nobody takes very much notice of the information provided.   The purpose of this type of engagement is primarily focused on making the stakeholders feel engaged rather than using the engagement to influence decisions and outcomes. The benefits can be reduced stakeholder opposition, at least in the short-term, but there is very little real value created to enhance the overall outcomes of the project.
  2. Therapy: this level of stakeholder engagement involves engaging stakeholders in extensive activities related to the project but with a view to changing the stakeholder’s view of the work whilst minimising their actual ability to create change. Helping the stakeholders adjust to the values of the project may not be the best solution in the longer term but every organisational change management guideline (including our White Paper) advocates this type of engagement to sell the benefits the project or program has been created to deliver.
  3. Informing: informing stakeholders of their rights, responsibilities, and/or options, can be the first step towards effective stakeholder participation in the project and its outcomes. However too frequently the emphasis is placed on a one-way flow of information from the project to the stakeholders. Particularly when this information is provided at a late stage, stakeholders have little opportunity to contribute to the project that is supposed to be delivering benefits for them. Distributing information is a key stakeholder engagement activity (see the Three Types of Stakeholder Communication) but there have to be mechanisms for effective feedback for this process to maximise its potential value.
  4. Consultation: inviting stakeholder’s opinions, like informing them, can be a legitimate step towards their full participation. But if the consultation is not combined with other modes of participation this rung of the ladder is still a sham, it offers no assurance that the stakeholder concerns and ideas will be taken into account. Effective participation includes providing stakeholders with a degree of control over the consultation processes as well as full insight as to how their inputs are considered and used. In the long run window dressing participation helps no one.
  5. Placation: at this level stakeholders have some degree of influence although tokenism is still potentially involved. Simply including stakeholders in processes such as focus groups or oversight committees where they do not have power, or are trained not to exercise power, gives the appearance of stakeholder engagement without any of the benefits.
  6. Partnership: at this level power is genuinely redistributed and the stakeholders work with the project team to achieve an outcome that is beneficial to all. Power-sharing may seem risky all but if the right stakeholders with a genuine interest in the outcome are encouraged to work with the technical delivery team to constructively enhance the project’s outcomes (which is implicit in a partnership) everyone potentially benefits.
  7. Delegated power: In many aspects of projects and programs, particularly those associated with implementation, rollout, and/or organisational change, delegating management authority to key stakeholder groups has the potential to significantly improve outcomes. These groups do need support, training, and governance, but concepts such as self-managed work teams demonstrate the value of the model.
  8. Stakeholder control: In one respect stakeholders do control projects and programs but this group tends to be a small management elite fulfilling roles such as sponsors, steering committees, etc. Genuine stakeholder control expands this narrow group to include many more affected stakeholders. Particularly social projects, where the purpose of the project is to benefit stakeholders, can demonstratively be improved by involving the people project disposed to help. But even technical projects can benefit from the wisdom of crowds[2].

In summary, the framework looks like this:

The biggest difference between the scenario discussed in the original paper and stakeholder engagement around projects and programs is the fact that different stakeholders very often need quite different engagement approaches to optimise project outcomes. Arnstein’s 1969 paper argued in favour of citizen participation as a single entity and the benefits progressing up the ladder towards its control. In a project situation it is probably more sensible to look at different groups of stakeholders and then assess where on the ladder you would like to see that group functioning. Some groups may only need relatively low levels of information to be adequately managed. Others may well contribute best in positions of control or at least where their advice is actively sought and used.

Do you think this framework is helpful in advancing conversations around stakeholder engagement in your project?

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[1] Arnstein, S.R.  AIP Journal July 1969 pp:216 – 223.  A Ladder of Citizen Participation.

[2] The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, published in 2004, is a book written by James Surowiecki about the aggregation of information in groups, resulting in decisions that, he argues, are often better than could have been made by any single member of the group.


Good Governance, Good Outcomes!

July 20, 2017

Good governance is focused on setting the ‘right’ rules and objectives for an organisation, management is about working within those rules to achieve the objectives. Prudent governors also require assurance that the rules are being followed and the objectives achieved (for more see the six functions of governance)

Within this governance framework, getting the ethics and culture of an organisation right comes before anything else – it has far more to do with people, and culture than it does with process and policing! But crafting or changing culture and the resultant behaviours is far from easy and requires a carefully crafted long term strategy supported from the very top of the organisation. The journey is difficult, but achievable, and can pay major dividends to the organisation concerned. One interesting example of this approach in practice is the implementation of effective major project management by the UK government.

The problems with megaprojects[1]

The challenges and issues associated with megaprojects are well known, we recently posted on one aspect of this in the reference case for management reserves. The source materials used in this post clearly show that UK government has been acutely aware of the issues for many years as does any review of the UK National Audit Office’s reports into failed government projects.  At the 2016 PGCS symposium in Canberra, Geraldine Barker, from the UK NAO offered an independent and authoritative overview of the UK perspective and experience from her review of the Major Projects Authority, on the approaches, challenges, and lessons to be learned in improving the performance of major projects at individual and portfolio levels. While there were still major issues, there had also been a number of welcome developments to address the issues including:

  • Improvements to accountability with greater clarity about the roles of senior responsible owners;
  • Investment by the Authority and departments to improve the capability of staff to deliver major projects, with departments reporting to us that they are seeing benefits from these initiatives;
  • Increased assurance and recognition of the role that assurance plays in improving project delivery; and
  • Initiatives to prevent departments from getting locked into solutions too early.

Amyas Morse, head of the National Audit Office, said in a report to the UK Parliament on 6 January 2016, “I acknowledge that a number of positive steps have been taken by the Authority and client departments. At the same time, I am concerned that a third of projects monitored by the Authority are red or amber-red and the overall picture of progress on project performance is opaque. More effort is needed if the success rate of project delivery is to improve[2].

The major challenges identified in that report were to:

  • Prevent departments making firm commitments on cost and timescales for delivery before their plans have been properly tested;
  • Develop an effective mechanism whereby all major projects are prioritised according to strategic importance and capability is deployed to priority areas; and
  • Put in place the systems and data which allow proper performance measurement.

The latest report from the Infrastructure and Projects Authority – IPA (formally the Major Projects Authority) has allowed the UK government to claim an improvement in its delivery of major projects, with the number of those at risk reducing from 44 to 38 in the past year.

The report says that there are 143 major projects on the Government Major Projects Portfolio (GMPP), worth £455.5bn and spread across 17 government departments.

The data shows a steady improvement in the way that government is delivering major projects:

  • More than 60% of projects by whole-life cost are likely to be successfully delivered;
  • Since last year’s report, the number of at risk projects has reduced from 44 to 38, which continues to be an improvement from 48 the previous year;

The data shows signs of steady improvement in the way government is delivering major projects. The question is how was this achieved?

The answer is ‘slowly’ looking from the outside there seem to be three parallel processes working together to change the culture of the UK civil service:

  • The first is making project management ‘attractive’ to senior executives. Since 2000 the government has been working to develop the internal skills needed to allow the deployment of capable ‘Senior Responsible Owners’ (SRO) on all of its major projects including establishing a well-respected course for SROs. The Major Projects Leadership Academy was developed in 2012 (first graduates 2013) and is run in partnership with the Saïd Oxford Business School and Deloitte. The academy builds the skills of senior project leaders across government, making it easier to carry out complex projects effectively. In the future, no one will be able to lead a major government project without completing the academy programme.
  • The second has been making the performance of its major projects public. This includes an ongoing challenge to acquire realistic and meaningful data on performance (still a challenge) and is most obvious in the annual report from the Major Projects Authority. Their fifth report is now available for downloading.
  • Finally, skills development and robust challenges are put to departments to ensure adequate front end planning is completed before government funds are committed to a project.

This process is not quick and given the risky nature of major projects will never deliver a 100% success rate, but the steady change in attitudes and performance in the UK clearly show that ‘good governance’ backed by a sound multi-faceted strategy focused on the stakeholders engaged in the work will pay dividends. Proponents advocating for this type of improvement have many challenges to deal with, not the least of which is the fact that as data quality improves, the number of problems that will be visible increase – add the glare of publicity and this can be politically embarrassing!  However, as the UK reports show, persistence pays off.

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[1] For a definition of megaprojects see: https://mosaicprojects.wordpress.com/2017/06/09/differentiating-normal-complex-and-megaprojects/

[2] See: https://www.nao.org.uk/report/delivering-major-projects-in-government-a-briefing-for-the-committee-of-public-accounts/

 


Are you a workshop leader or facilitator?

November 17, 2016

workshopWorkshops are a routine feature in many projects. They are typically used either to find a solution to a problem or to develop and integrate knowledge needed for the work (eg, requirements gathering and prioritisation).

Effective project managers know that every workshop is a meeting and many of the rules for running effective meetings need to be applied including:

They also know that unlike normal meetings workshops are a creative process that needs the active contribution of the attendees to craft the best answer to the problem or question being posed…..  This means time is needed to ‘break the ice’ so that the people in the workshop feel comfortable working together and the facilitator needs to act as a host welcoming and engaging people as they arrive.

The job of the facilitator is to ensure the workshop ‘works’ and produces the required outcomes. The facilitator (or workshop leader) only needs sufficient knowledge of the subject under discussion to allow them to ask pertinent questions and summarise discussion – the core skills of facilitation lay in ensuring everyone is engaged and participates, all points of view are heard, the group works towards a consensus or conclusion efficiently and the outputs are agreed.  For more on facilitation see: http://www.mosaicprojects.com.au/WhitePapers/WP1067_Facilitation.pdf

Facilitation is a very useful skill for a project manager to acquire and use, however, to organise and run a successful workshop there are a two key questions that need to be asked very early in the planning stage – unfortunately both of these are frequently overlooked!

Question 1 – Will I be a key contributor to the process of developing the workshop’s output? If the answer to this question is ‘yes’ the project manager should consider engaging someone else to act as the facilitator for the workshop.  The role of the facilitator is to make sure everyone contributes, all of the ideas are brought into discussion and the best solution is reached; it is nearly impossible to do this if you are also contributing significant input to the discussion.

Question 2 – Do I want to lead the workshop towards a predetermined conclusion or do I want the workshop to have free reign to explore and develop its own solutions?  While a degree of flexibility is needed in both situations, if the workshop is focused on getting buy-in to a concept that is already in mind (quite common in problem solving mode) the approach to managing the workshop will be quite different to an open discussion looking at all of the options.

Based on your answers to these questions there are four quite different types of workshop that require different approaches to deliver successful outcomes:

workshops

The best way to approach the planning and running each of these workshop types varies significantly.

You facilitate. In situations where you have no particular input to contribute and no predetermined outcome in mind (beyond the fact you need an outcome) facilitating the work of the group participating in the workshop can be a good way to build credibility and enhance your leadership position. Provided you are comfortable in the role, facilitating the workshop to achieve a useful outcome is a valid role for the project manager.  If you are not comfortable in the role, there is nothing wrong with using an experienced facilitator, your objective is simply to get a useful outcome from the process (for example a prioritised list of requirements).

Others facilitate. Where you are going to be a key participant in the workshop process and have significant input to contribute as a subject matter expert, but do not want to drive to a predetermined conclusion, the use of a neutral facilitator is essential.  The job of the facilitator is to ensure all of the viewpoints in the room are heard and the outcomes from the workshop incorporate the views of the participants, either based on a consensus or by applying an impartial selection / decision making process. It is virtually impossible to simultaneously be a participating expert and an impartial facilitator.

Briefing sessions. Have a very different focus, the purpose of the workshop is to explore and understand a predetermined proposition.  The role of the facilitator shifts towards making sure everyone’s questions are heard and answered, and there is a full understanding of the proposition being put. The outcome from the workshop is focused on creating understanding and buy-in from the participants rather than crafting a free-form solution – depending on the nature of the proposition being discussed, there may, or may not, be opportunities to adjust or fine-tune the concepts. However, provided someone else is the primary source of the concepts being discussed, the project manager can usefully take the role of facilitator.

Sales sessions. Have a similar focus to briefing sessions but the concept being ‘sold’ is primarily ‘owned’ by the project manager.  In this situation if you want genuine buy-in from the workshop participants it is essential that the workshop is facilitated by someone else!  The facilitator’s job is to make sure everyone is heard and to help lead the group towards a common understanding and consensus. Your job is to answer the questions and ‘sell’ the proposition (and where appropriate adapt your proposition based on the feedback received).

Understanding the objectives of the workshop and the best way for you to participate in delivering a successful outcome lays the foundation for success.  Then the hard work starts……..


Governmentality -the cultural underpinning of governance

August 27, 2016

Governmentality1Two major governance failures in recent times highlight the importance of organisational culture in delivering a well-governed entity.  Professor Ralf Müller has adapted the term ‘governmentality’ to describe the systems of governance and the willingness of the people within an organisation to support the governance objectives of the organisation’s governing body. When the willingness to be governed breaks down, as these two examples demonstrate, governance failures follow.

Toyota

The Lexus ‘unintended acceleration problem’ from 2009 has cost  car manufacturer Toyota a staggering $1.2 billion fine to avoid prosecution for covering up severe safety problems and continuing to make cars with parts the FBI said Toyota “knew were deadly.”  In addition to numerous civil actions and costs of reputational damage.  The saga was described as a classic case of corporate culture that favoured the seemingly easy way out instead of paying the cost and doing the right thing.  But, the actions of the people who magnified the problem by attempting to cover up the issues fundamentally contradicts the ‘Toyota Way’ that has guided Toyota since 2001. The Toyota Way has two core principles, respect for people and continuous improvement (kaizen).

Respect for people puts ‘people before profits’, and this is not an idle slogan.  Following an Australian Government decision in 2014, all motor vehicle manufacturing in Australia will cease by 2018 (this affects General Motors Holden, Ford and Toyota). In February 2014 Toyota president Akio Toyoda personally came to Australia to tell his workers of the closure and Toyota’s commitment to its staff through training and other activities has maintained staff commitment at our local Altona plant with everyone working to make the “last car the best global car!”.

The difference between the “people first equals customer first” attitude demonstrated in the approach to closing the Altona plant where people are still being released for paid training to up skill for new roles and the ‘customer last’ approach that dominated the Lexus saga is staggering.  The reaffirmation of the ‘Toyota Way’ may have been driven in part by the Lexus disaster but this does not explain why quality and customer service was allowed to fail so badly in the company that practically invented modern quality.

Volkswagen

A similar dichotomy is apparent in the Volkswagen diesel engine emissions scandal.  A company renowned for engineering excellence, from a country renowned for engineering excellence allowed engineering standards to slip to a point where the cars being sold were illegal.  The actual emissions were only part of the problem, Volkswagen engineers had developed a software program dubbed the ‘diesel dupe’ that could detect when the cars were being tested and change the engine performance to improve results. When the cars were operating under controlled laboratory conditions – which typically involve putting them on a stationary test rig – the device appears to have put the vehicle into a sort of safety mode in which the engine ran below normal power and performance thereby reducing emissions. Once on the road, the engines switched out of this test mode.

Governance issues

Neither of these issues involved ‘a few bad apples’ – the excuse used by most institutions to explain banking and financial scandals. They both required extensive management involvement and cover-ups or acquiescence. A substantial subset of both organisation’s management felt that doing the wrong thing was in the best interests of either themselves or the organisation (or both, at least in the short term). But the governing bodies of both organisations would seem to have maintained a commitment to their overall philosophy, the ‘Toyota Way’ and ‘Engineering excellence’.  So what caused the governance failure?

Governmentality

One element that seems central to both of these failures was a breakdown in the willingness of managers to comply with the overall governance philosophy of the organisation which in turn caused the governance processes to fail; this is the domain of governmentality. Governance cannot be successfully imposed on a population that does not want to be governed!

Governmentality2Governmentality is a term coined by philosopher Michel Foucault around 1980 and refers to the way in which the state (or another governing body) exercises control over, or governs, the body of its populace. The concept involves a complex series of two-way transactions involving:

  • the way governing bodies try to produce the people best suited to fulfil those governments’ policies;
  • the organised practices (mentalities, rationalities, and techniques) through which people are governed, and
  • the techniques and strategies by which a society is rendered governable.

In the same way as governments rely on most people complying with legislation most of the time, organisational governance mechanisms such as ‘project management offices’ and ‘portfolio management’ cannot function effectively without the cooperation of the people being governed. When governmentality breaks down and people no longer support the governance processes they cease to be effective.

The challenge facing every governing body, in every organisation, is in three parts

  1. Creating an authentic vision and mission for the organisation.
  2. Creating an effective governance system that supports the achievement of the vision.
  3. Creating and maintaining an ethical culture that embraces and supports governmentality.

Effective governance systems can weed out the bad apples and correct errors, but they cannot oversee the actions of every manager all of the time if the majority of people do not wish to follow the governance dictates, or actively work to subvert them.

Developing the ‘right culture’ by employing the right people (and importantly offloading the wrong people) starts at the top.  The governing body needs to ‘walk the talk’, their CEO and senior executives need to model the desired behaviours and ‘doing the right thing’ needs to be encouraged throughout the organisation.

Achieving this requires authenticity and a holistic approach to the way the organisation functions; all of the elements need to work together cohesively. Achieving this is the primary responsibility and challenge for the ‘governing body’, in most organisations, the Board of Directors!

If you get the vision, mission and culture right, even major lapses such as the ‘Lexus unintended acceleration problem’ can be overcome.  Despite the damage this caused, Toyota is now the world’s largest automotive manufacturer with a market capitalisation that is nearly double that of Ford and GM combined.  This is also the reason why Objectives, ethics and culture are the top three elements in my model for the ‘Functions of Governance’.


Practical Ethics 2

March 10, 2016

EthicsA couple of weeks ago I posted Practical Ethics discussing the undue reliance governments and others  place on other people’s ethics, Through naivety, undue optimism, or laziness, they set up situations based on blind trust in the ethical standards of others which have resulted in deaths, injury and the loss of $billions.

In this post I want to look inside an organisation and discuss reason why Determining the ethics of the organisation is at #2 in my Six Functions of Governance and Creating the culture of the organisation is at #3.  #1 in the list is Determining the objectives of the organisation.

The underlying approach I’ve taken, founded in stakeholder theory, is the presumption that the best way to achieve an organisation’s objectives is to work with the organisation’s full spectrum of stakeholders so they contribute to the success of the organisation and everyone benefits. This requires a strong ethical foundation and an outwardly focused culture. The role of the governing body is to set the objectives and create the organisation’s culture and ethics, the role of management is to work within this framework to achieve the objectives. Whilst many aspects of governance can be delegated to a degree, setting the ethical standards of the organisation in particular is non-transferable. It starts and stops at the top – with the governing body.

The ethical standards of an organisation are created in two ways:

  • The way the organisation’s leaders act;
  • The ethical standards the leaders are prepared to tolerate in their subordinates.

This post will look at both of these aspects, using the example of the current scandal surrounding Comminsure (the insurance arm of the CBA bank) to highlight their importance – see more on the scandal.

 

Leaders set the standard.

Generally speaking, the top managers in an organisation create a ceiling on ethical behaviours. Leaders at the next level down tend to be rated lower than their managers on every leadership dimension including their honesty and integrity, many may rate equally but it is very rare to find a subordinate acting more ethically than the organisation’s leaders (for more on this see Ethical Leadership).

The key here is the word ‘act’ – leaders set the ethical standards of the organisation by their actions, not their statements. It more than ‘walking-the-talk’, talking is almost irrelevant.

One glaring examples from the Comminsure scandal will serve to demonstrate the issue.  The CBA’s CEO said that he placed a high value on transparency and open communication; this included both encouraging and protecting ‘whistleblowers’ within the bank. A commendable and highly ethical position; and from a practical perspective essential for the minimisation of wrong doing in a workforce of 55,000.

However, actions speak louder than words! In November 2014 the chief medical officer of Comminsure, Dr Benjamin Koh, disclosed his concerns over “an improper state of affairs” concerning aspects of Comminsure’s business to key independent directors at Comminsure including the chairman Geoff Austin. Two months later Comminsure began to investigate Dr Koh and he was sacked by the managing director of Comminsure, Helen Troup, for ‘misconduct’, in August 2015. He is now suing Comminsure and the CBA for unfair dismissal.

The appearance is that the bank’s management won’t fire you for whistle blowing but they will find some other excuse. The bank virtually admits as much, in this statement which states: “Commonwealth Bank encourages all employees to speak up if they see activities or behaviours that are fraudulent, illegal or inconsistent with our values. We provide a number of different safeguards to ensure that there are no negative consequences for raising concerns. We have thanked Dr Koh for raising concerns that led to the CMLA Board conducting a review. Dr Koh’s employment was not terminated for raising concerns. It was terminated primarily for serious and repeated breaches of customers’ privacy and trust involving highly sensitive personal, medical and financial information over a lengthy period of time.”  What they fail to mention was one of major issues raised by Dr. Koh was the manipulation, alteration and loss of information from the records he is accused of mishandling.

The perception may be incorrect, but to anyone looking on from outside of the organisation it would seem the person running Comminsure preferred to sack a whistleblower rather than deal with the problems he raised.

The CEO and the Directors of CBA can talk until they are blue in the face about the ‘ethical standards’ they purport to uphold, their actions speak louder. The person running Comminsure and responsible for the issues raised by Dr. Koh is still in her role, the ‘whistleblower’ is out of a job. If the board really meant what is says, the whistleblower would have been protected and the manager attacking him disciplined. Everyone else in CBA will clearly understand the message.

It really does not matter what the final outcome of all of this is; the actions of CBA and Comminsure management have made it clear to every one of their 55,000 staff that if you raise concerns within the banks ‘whistleblower’ processes you will be fired!

Given this perception, is it any wonder that the leaders of the CBA seem to be continually in the dark about what’s really going on in their organisation……..  Unfortunately for those in governance role not knowing is not an excuse.

 

Tolerating unethical behaviour.

Ethics2The second plank underpinning an ethical organisation is the degree of unethical behaviour it is prepared to tolerate. If an organisation is prepared to tolerate a person increasing his or her bonus by not paying out an insurance claim to a dying person for 3 or 4 years, everyone else in the organisation will understand the acceptable level of behaviour.

Comminsure has been shown to have withheld legitimate payments to claimants for years to boost profits and bonuses (only rectified after the national broadcast was imminent).  As far as I can tell everyone responsible from the managing director down are still in their jobs.

Previously the CBA was shown, courtesy of a Senate enquiry, to have misrepresented information to clients and falsified documents.  Again, most of the people responsible still work for the CBA and the ethical benchmark has been determined by this fact.

If the behaviours were ethically unacceptable people would be fired or moved into roles where they cannot adversely affect customer’s lives. The fact most people are still in their roles and still have their bonus payments from previous years indicates to everyone the CBA believes these behaviours are ethically acceptable and will continue to reward people for placing profits ahead of customers (see The normalisation of deviant behaviours). Management’s actions speak far louder then PR announcements and so called ‘public apologies’ that only eventuate after adverse national publicity.

 

Culture

Culture is ‘the way we do thing around here’ – one of the key elements of culture is the ethical standards people see as ‘normal’; another is the learned experience of how to behave within the organisation. As outlined above these settings are very different from the rhetoric.

But, ethics and culture are always shades of grey; the CBA’s culture is clearly flawed if the bank claims to be concerned about its customers. However, if the CBA is really only concerned with short-term profits, the culture, ethics and PR spin may be appropriate. In the last 6 months, the CBA achieved a remarkable return on equity of above 17 per cent, and a $4.8 billion half-year profit. And, despite the scandal, its shares have increased in price today. The cost is the damaged lives of some of its customers; the unresolved question is what are the acceptable limits? Maybe a Royal Commission will let everyone know.

Legal implications aside, the challenge facing the CBA is that changing culture and ethical standards is a massively difficult task and the people who created and thrive in the current culture are unlikely to be willing participants in changing it.  There’s no easy answer to this dilemma.

 

Conclusion

The real measure of an organisation’s ethical standards are set by the way people behave when no one is looking on – there will always be mistakes and unethical actions by a few, others within the organisation will correct these deviations and being behaviours back inside the culturally acceptable norms of behaviour of the organisation. This has undoubtedly been occurring within CBA and Comminsure on a daily basis, unacceptable behaviours will have been corrected or sanctioned; desired behaviours rewarded. What’s acceptable and unacceptable is determined by the culture of the organisation and its ethical standards.

The ethical standards of an organisation are set by the actions of its leaders. What they do themselves sets the ceiling and what they tolerate in others the floor. The rest of the people in an organisation will generally find a position between these two limits and the culture of the organisation will adapt to see this level of ethical behaviour as acceptable. The problem the governors and leaders of the CBA face is the simple fact that changing the ethics and culture of an established organisation is extremely difficult.


Practical Ethics

February 26, 2016

EthicsA string of disasters over the last couple of years suggest many business and government leaders simply do not understand ‘practical ethics’.  Through naivety, undue optimism, or laziness, they have set up situations based on blind trust in the ethical standards of others resulting in deaths, injury and the loss of $billions.

Just a few examples:

  • The ‘Home insulation program’ of 2008/9 resulted in 4 deaths, numerous house fires and many well established businesses being destroyed. The naive assumption by the Government seemed to be that with $millions of government funding easily accessed, businesses would still act ethically, train staff and comply with occupational health and welfare standards. The failure by businesses to meet this expectation has resulted in numerous prosecutions after the damage was done.
  • The outsourcing of technical and further education training (TAFE) to the private sector. Private providers under the VET Fee-Help scheme are paid for students signed up to courses, not for students qualified from courses – the naive assumption by the Government seemed to be that with $millions of government funding easily accessed, businesses would still act ethically and only sign up students that could benefit from the courses and would deliver good training outcomes. $hundreds of millions of public funds have been wasted – most of which can never be recovered.
  • Downer EDI’s Board of Directors appear to have blindly trusted their management to run the disastrous $3 billion Waratah train project. Normal governance feedback seemed to have been ignored to the point where the Directors were unable to get information on the project when needed, blowing a $20 million loss into a $200 million loss.

In each of these cases the government and business leaders seemed to have either assumed everyone would act ethically or relied on Adam Smith’s ‘Invisible hand’ (a flawed theory much loved by the rabid right, particularly in the USA). Unfortunately ethics is not that simple!  Writing a code of ethics[i] is a relatively simple process; encouraging people to live up to the code is far more difficult. There are several factors needed:

  • First, the organisations leaders need to lead by example. The ethical standards of the organisation and its supply chain are unlikely to exceed the standards set by the leadership (see: Ethical Leadership).
  • Second, the expected standards need to be clearly and unambiguously articulated. Saying you require one standard of behaviour and then paying people to perform differently will inevitably lead to the organisation getting what it has paid for (see: The normalisation of deviant behaviours).
  • Third, the governance and management systems need ‘real-time’ feedback to both encourage the desired standards of behaviour and to detect any ‘slips’ very early in the process so corrective actions can be implemented before there is a major issue (see: Self Correcting Processes).

Unfortunately governments in particular are reasonably good at enforcing standards years after the breach took place and seem to assume that the ‘deterrent effect’ will suffice to maintain ethical standards – this assumption patently does no work!  I doubt the £2.25m fine imposed on UK consultancy Sweett Group[ii] for bribing a prominent United Arab Emirates (UAE) businessman in return for work will have much effect on other unethical business people contemplating paying a bribe – for a start, no one expects to get caught. The ‘pink batt’ prosecutions occurred years after the scheme was closed, prosecutions under the VET Fee-Help scheme are still to eventuate (and rip-offs are still continuing). The simple fact is the fear of a potential prosecution in a few years time compared to the opportunity to make $millions now has very little effect on unethical people.

Conversely, over policing ‘ethics’ and watching every move can be as destructive as ‘blind trust’. If people feel they are not trusted, there is no incentive for them to act ethically.  Micro management is a major de-motivator and will inevitably lead to suboptimal performance with people doing ‘just enough’ and seeing how much they can get away with[iii]. This approach stifles innovation and creativity.

Practical ethics requires pragmatic trust. You need to trust the people you are working with, governing or managing, but have agreed processes that provide feedback and monitoring, that demonstrates your trust is being honoured.

  • In my ‘Six functions of governance’ management control functions are expected to provide feedback to the governing body that allows it to hold its management accountable and ensure conformance by the organisation being governed. Had these functions been implemented effectively EDI-Downer would be in a much better position today.
  • Demand feedback – even if you do not want to hear bad news! The recent announcement by CSIRO that its climate division will be virtually eliminated may be a pragmatic response to government initiatives and cost cutting but serves no one in the long term. Governments and business rely on climate science to make billion-dollar decisions. Without it, they will be relying on guesswork. Shooting the messenger simply means everyone is ‘flying blind’.
  • Build feedback into management systems. In the various government debacles mentioned above (and others) simple changes in process could have reward desirable outcomes rather than rewarding unethical behaviour. The purpose of any TAFE course is to educate a person and demonstrate learning by success in an exam.  Why not pay most of the money on completion of the course? Then make sure audit processes are in place to validate the exam performance is genuine – these exist and are easily applied.

Pragmatic trust is a graduated process – as people demonstrate their trustworthiness and ethical standards less oversight is needed (but less does not mean no oversight); the challenge is to design systems that reward desirable behaviours and outcomes creating a win-win, people who demonstrate high ethical standards are rewarded.

This approach is the antithesis of the current government approach which seems to rely on blind trust, assumes everyone is ethical, and as a consequence directly benefits unethical behaviours (at least in the short term). Not only have the $millions paid out in VET Fees to unethical providers resulted in minimal return to the government; they have actively encouraged unethical standards and have damaged businesses and organisations that do offer quality courses. A lose-lose outcome in which the only winners are the unethical businesses that have ripped off the system – the Pink Batts Royal Commission found a similar effect on the insulation businesses.

Slippery-slopeEthics are by definition based on the standards of behaviour considered acceptable by a group[iv].  When a significant proportion of the groups members start to let standards slip, they will tend to drag the rest of the group with them down the slippery slope – it is very hard to stand out against the normally accepted behaviours of your group. And as with any slippery mountain slope, it is far easier to slide towards the bottom than to keep your footing and climb towards the top.

The role of ethical leaders is first to set the ethical standards, then live up to the standards themselves, and finally require their followers to conform to the standards using pragmatic trust and encouragement rather than after the event punishment.

 


 

 

 

[i] The PMI Code of Ethics and Professional Conduct is a good example: http://www.mosaicprojects.com.au/PDF/PMICodeofEthics.pdf

[ii] See: http://www.globalconstructionreview.com/news/sweett-group-must-pay-32m-bri7bery-a7bu-dh7abi/

[iii] For more on motivation see: http://www.mosaicprojects.com.au/WhitePapers/WP1048_Motivation.pdf

[iv] For more on ethics and leadership see: http://www.mosaicprojects.com.au/WhitePapers/WP1001_Ethics.pdf

 


How to succeed as a PM in 2016

January 6, 2016

On-the-busProjects are done by people for people and through the medium of social media, people power is growing.  Successful project managers know this and use it to their advantage; they create a team culture focused on working with other stakeholders to create success.

Project managers know when they get this right because their project team will challenge, follow and support them, and each other, in order to get the job done. Not only that, but word spreads and other people inside the organisation will want to join the team or be associated with its success. When a PM achieves this, they know they have created something special and paradoxically are under less pressure, can get a good night’s sleep, and as a consequence are fully refreshed each day to keep building the success. This is good for the people and great for the organisation!!

Developing the skills and personal characteristics needed to develop and lead a committed team needs more then technical training. Experience, reflection, coaching and mentoring all help the project manager grow and develop (and it’s a process that never stops). Five signs that they are on the path to becoming a great team leader are:

  1. They’re well liked. Great leaders make people feel good about themselves; they speak to people in a way that they like to be spoken to, are clear about what needs to be achieved[1], and are also interested in their lives outside work and display a little vulnerability every now and again to demonstrate that they are human. They’ll always start the day with a ‘good morning’, the evening with a ‘good night’ and every question or interaction will be met with courtesy. When the team picks up on this the project area will be filled with good humour and great productivity.
  2. They put effort into building and maintaining teams. Designing great teams takes lots of thought and time – you need the right people ‘on the bus[2]’ and you need to get the wrong people ‘off the bus’. A great project manager doesn’t accept the people who are ‘free’ or ‘on the bench’ unless they’re the right people and they’ll negotiate intensely for the people that they really need, going to great lengths to recruit people into the vision that they have. Once the team is in place, they never stop leading it, building it, encouraging it, performance managing it and celebrating it.
  3. They involve everyone in planning. Or at least everyone that matters! The PM identifies the team members and other stakeholders that need to be involved; creates a productive, enjoyable environment, and leads the process. They want to ensure that they get the most out of the time and at the end have a plan that the team has built and believe in.
  4. They take the blame and share the credit. Great project managers are like umbrellas. When the criticism is pouring down they ensure that the team is protected from it. They then ensure that the message passed down is presented as an opportunity to improve not a problem to be fixed. Similarly, when the sun is out and the praise is beaming down, they ensure that the people who do the real work bask in it and are rewarded for it. When they talk about how successful a project has been, they talk about the strengths of the team and the qualities they have shown, never about themselves.
  5. They manage up well. Stakeholder engagement, particularly senior stakeholder engagement is the key to project success[3]. Great project mangers know they need senior executive support to help clear roadblocks and deliver resources and know how to tap into the organisation’s powerlines for the support they need.

Great project mangers are also good technical managers; they have an adequate understand the technology of the project and they know how the organisation’s management systems and methodologies work. But they also know they can delegate much of this aspect of their work to technologists and administrative experts within their team. And if the team is fully committed to achieving project success, these experts will probably do a better job than the project manager anyway.

Projects are done by people for people and the great project managers know how to lead and motivate[4] ‘their people’ to create a successful team that in turn will work with their stakeholders to create a successful project outcome.

 

[1] For more on delegation see:  http://www.mosaicprojects.com.au/WhitePapers/WP1091_Delegation.pdf

[2] In the classic book Good to Great, Jim Collins says, “…to build a successful organization and team you must get the right people on the bus.”

[3] This is the focus of my book Advising Upwards: A Framework for Understanding and Engaging Senior Management Stakeholders, see http://www.mosaicprojects.com.au/Book_Sales.html#Adv_Up

[4] For more on leadership see: http://www.mosaicprojects.com.au/WhitePapers/WP1014_Leadership.pdf


Is your steering committee costing $5000 per hour?

December 13, 2015

The loaded cost of running a committee of senior managers can easily exceed $5000 per hour once the opportunity costs are included.  Productive committees offset this by creating value, hopefully significantly greater than their running costs.  Project and program steering committees should be no different!

Steering_Committee

However, if the steering committee is simply focused on ‘governance’ it is highly unlikely to be generating any significant value.  At the management level where most steering committees operate there is very little governance decision making needed and conformance and assurance usually needs specialists.

The first four functions of governance defined in The Functions of Governance are:

  • Determining the objectives of the organisation: this is done by the organisation’s governing body and implemented through the strategic plan. The project should have been selected because it contributes to achieving the strategic plan, a function of portfolio management, but once the project has started it is rather too late.
  • Determining the ethics of the organisation: this is done by the organisation’s governing body; it is a duty of every manager to support the organisation’s ethical standards and ensure the people they are managing conform. But you do not need a committee to ensure this occurs, just the project manager’s line manager (usually the Sponsor).
  • Creating the culture of the organisation: again this is done by the organisation’s governing body; it is a duty of every manager to support the organisation’s cultural standards and ensure the people they are managing conform. But you do not need a committee to ensure this occurs, just the project manager’s line manager (usually the Sponsor).
  • Designing and implementing the governance framework for the organisation: this should be done before the project is started and include delegations of authority for expenditure and decision making and escalation paths. If it has not been done, one half hour meeting of the sponsor and a few key managers can set the delegations.

In summary, the aspects of governance that determine the way the organisation operates and how the project or program will fit into the overall governance framework does not need a monthly meeting of any type.  There are management responsibilities but these are vested in the responsible line manager, typically the Sponsor (see more on the role of a Sponsor).

The final two functions of governance are ensuring accountability by management and conformance by the organisation.  A steering committee can certainly focus on these aspects of governance but if they do, they are largely wasting their time and most of the $5000 per hour.  There are two fundamental reasons for this:

  1. It is extremely poor governance for a managing entity to seek to provide assurance that the people it is managing are conforming. Assurance oversight should be provided by an independent body.
  2. Most aspects of project surveillance and assurance require high levels of technical skill. It is highly unlikely any of the managers on a steering committee posses these skills (see more on project surveillance).

The organisational entity best suited for the work of surveillance and assurance is a PMO with appropriate support from management. If there is an effective PMO structure in place with the ability to identify shortcomings, backed up by responsible line management there is no need for another committee to second guess the process a few weeks later (see more on PMOs).

Dilbert-committee

Some of the completely unproductive ‘governance’ functions undertaken by ‘steering committees’ include:

  • Validating correct procedures have been followed (properly resourced PMOs are a better and cheaper option).
  • Discussing negative variances and allocating blame (management action is needed not committee discussions).
  • Second guessing management decisions after the event and interfering in the day-to-day running of the project (project professionals are not helped by interference from amateurs – even if they are senior managers).
  • Listening to lengthy reports on what has happened during the last month (effective reporting is all that is needed).

Being involved in this type of activity may make the steering committee members feel important but contributes little or nothing of value in a well governed and structured organisation; if the organisation is not well governed and structured the committee members would be far better off focusing on fixing the real problems.

 

Steering Committees can be highly valuable!

The constitution of most steering committees creates a real opportunity to add value to the overall management of a project or program, but only if the committee focuses on helping craft success. Steering committees typically include members from a range of areas within the organisational affected by the project and its deliverables. Therefore as a group its members are uniquely placed to assist the project manager and sponsor deliver a successful project by helping them steer a path through the organisational politics and stakeholder issues that confront any project or program.

This objective can be achieved by making the members of the steering committee personally responsible for the realisation of value from the organisation’s investment in project, and in particular for dealing with the organisational change and stakeholder issues that are outside of the project manager’s responsibilities. Some of the key responsibilities allocated to the steering committee may include:

  • Responsibility for preparing the organisation for the changes needed to make use of the project’s deliverables and the realisation of value.
  • Managing the interface between the project and the organisational change management work
  • Being available to assist in the management of stakeholder issues escalated from the project and/or identified in areas outside of the direct influence of the project.
  • Ensuring effective benefits management is in place for the life of the initiative (ie, it continues after the project is closed).
  • Dealing with any other aspect of organisational politics that may affect the work of the project or the on-going change initiative.
  • Making value based decisions on complex change proposals, including contributing positively to the resolution of intractable problems, to optimise the value outcome for the organisation.

Obviously the steering committee also needs to take an interest in the project its steering to success. The problem is these are all management activities, not governance activities (for more on this see Does organisational governance exist?).

Effective steering committees work with the project manager and sponsor to identify the external influences causing problems and help the project successfully navigate the organisational stakeholder environment. They also resist the urge to interfere in the actual running of the project or program. There is a world of difference between a collaborative and supportive approach focused on success and the negative approach adopted by so many steering committees that seems to translate ‘governance’ into giving the project manager a ‘hard time’ to ensure compliance with ‘due process’ even if this adds to the existing problems.

Are your organisation’s steering committees worth their hourly running costs?


Does organisational governance exist?

November 8, 2015

Governance99Governance and governing have historically was associated with the role of the Sovereign governing his (or occasionally her) ‘sovereign state’. Over the last five or six centuries the exclusive power of the Sovereign has largely been devolved to governments of one form or another but the functions of making laws, authorising the collection of taxes and providing direction to the citizens of the state remain fundamentally unchanged.

The concept of corporate (or organisational) governance grew out of this overarching concept; to imply there was a similar role within an organisation for a ‘governing body’ to take responsibility for the governance of the organisation. This concept of a governing body setting the ‘rules’ by which an organisation operates and providing guidance on the organization’s objectives has many parallels with the functions of a government.  A government may choose to declare war on another country and provide resources and directions to its military but, at least for the last 2 or 3 centuries, governments have learned not to interfere in the actual conduct of the military campaigns – fighting the war is the responsibility of the professional military. Similarly the governing body of an organisation can set the objectives for the organisation and define the rules by which members of the organisation should operate but is wise to refrain from becoming actively involved in managing the actual work.

The paramount reason for separating governance and management is the simple fact it is almost impossible to take an objective view of work you are actively involved in! With these thoughts in mind, I started to consider the functions and purpose of governance to contrast with the functions and purpose of management.

The functions of management were quite easy to define, the work was done 100 years ago by Henri Fayol in his 1916 book Administration Industrielle et Generale, while there has been some academic argument about the syntax of Fayol’s five functions of management, they have basically stood the test of time. These are outlined in The Functions of Management.

Defining the functions of governance was much more difficult. Almost all of the standard texts describing governance either define:

  • The objectives of ‘good governance’; for example Cadbury’s ‘holding the balance between economic and social goals and between individual and communal goals’;
  • The principles of ‘good governance’; for example the OECD Principles of Corporate Governance (2004 and the 2015 update); or
  • Elements of defined or required practice such as the ASX listing rules and the AICD Governance framework.

None of these sources actually describe what the governing body does or the extent of the governance processes within an organisation.  These are the questions I’ve been focusing on for the last couple of years.

The functions of governance have been described in The Functions of Governance, so far there has been no significant disagreement, that I’m aware of, that would indicate the need for change.  The functions of governance are also mapped to the functions of management and suggest a clear difference in purpose between governance and management that can be summarised as ‘governance sets the objectives and rules for the organisation, management works within the rules to achieve the objectives’.  A closely coupled, symbiotic relationship.

The responsibility for governance seems to be clearly defined by law makers and regulatory authorities.  The governing body is held accountable for the actions of the organisation it governs; this is the Board of Directors in most commercial organisations, in others the person, group or entity accountable for the performance and conformance of the organisation.

Having established the functions of management and governance, the fundamental question posed in this post is does organisational governance exists as a separate entity or is it simply an extension of ‘good management’.  To a degree this is a ‘chicken and egg’ problem.  Does the functioning of an effective governing body lead to ‘good management’ or does ‘good management’ embody the elements of good governance as an integral element in the overall functions of management (ie, Fayol’s five functions need expanding to include governance).

The consequence of the first option is the presences of a governing body which has as its primary function the oversight of the organisation’s management.  The consequence of the second is so-called ‘governing bodies’ such as a Board of Directors, are in effect simply the first, and most senior level of management.

There are a lot of writings that suggest the second option is at least considered viable by many commentators.  This month’s magazine published by the Australian Institute of Company Directors  contained a number of articles on ‘cloud technology’ and ‘big data’ suggesting Directors should be making management decisions on a daily basis based on current sales information, etc.  Similarly there are numerous publications describing various mid-to-low level management committees such as project steering committees as ‘governing bodies’ responsible for the ‘governance of’ a project. However, a project steering committee is in essence no different to any other management committee responsible for overseeing the work of a management entity; therefore under this scenario, every management committee responsible for the oversight of a management function is a ‘governing body’. The consequence of this line of argument is the proposition that governance and management are integral and there is no significant difference in the entities that undertake the work. Every level of management from the Board down is responsible for delivering good management which incorporates governance.

The alternate view based largely in corporate regulations and laws suggests the functions and responsibilities the governing body and its management team are discrete and different. The governing body (singular) represents the owners of the organisation and is responsible for governing the organisation to achieve sustained superior performance. The governing body accomplishes this by:

  • Defining the objectives of the organisation;
  • Determining the desired ethical, cultural and other standards they expect the organisation to work within (‘the rules’);
  • Appointing management to accomplish the objectives, working within ‘the rules’; and then
  • Ensuring the conformance and performance of their management and the organisation as a whole.

The primary advantage of this approach to governance is the functions of management are separated from the functions of governance. It is virtually impossible to have an impartial view of the work you are engaged in and one of the key responsibilities of the governing body is to oversight the performance of its management; the law says so!

Therefore, I suggest good governance requires a clear separation of the management and governance functions for no other reason than the need for the governing body to be able to objectively oversight the performance of it management. But this raises practical issues.

It is virtually impossible for the governing body to meaningfully oversight the work of 100s of managers and 1000s of staff, contractors and suppliers. Some aspects of governance have to be delegated to the management body.  This requires the following:

  • A carefully designed governance framework. Roles, responsibilities, decision limits and escalation paths need to be defined.
  • Clear rules for managers to follow in the performance of their management responsibilities. Managers should be personally responsible for following ‘the rules’ and for ensuring the people they manage follow ‘the rules’. Complying with, and conforming to, the objectives, ethics and culture of the organisation should be a condition of employment and a clearly defined management responsibility.
  • Ensuring any governance function is separated from the management function being governed. Assurance and conformance cannot be in the same place as management responsibility for performance. For example, a project steering committee should be responsible for providing direction and support to the project management team to ensure the performance of the project and the achievement of the project’s objectives (a management function) – ensuring conformance with ‘the rules’ is also part of this management responsibility. Assurance that these objectives have been achieved is a governance function that has to sit in a separate reporting line. In many organisations the PMO may be the entity tasked with this responsibility.

However, while the governing body by necessity has to devolve aspects of its responsibilities to people and entities within the overall management structure, the governing body remains responsible for the design of the governance framework and accountable to the organisation’s owners and other external stakeholder for the performance and conformance of the organisation and the validity of any assurances provided by the organisation to regulatory authorities.

 

So where does this leave questions such as the use of ‘big data and ‘the cloud’? I would suggest the responsibility of the governing body is to understand the technologies sufficiently to be able to set sensible objectives and ethical parameters for the organisation’s management to work within and then to ensure their management are working to achieve these objectives. It is no more the responsibility of the governing body to ‘manage big data and use it to make decisions on a daily basis’ than it is the responsibility of a steering committee to ‘govern’ a project. The responsibility of the governing body is to govern; the responsibility of a management committee is to manage.

This concept of separate functions and focus is not intended to imply an antagonistic relationship. In the same way every high performance soccer team blends people with different skills and responsibilities into a tight unit, a goal keeper needs very different capabilities to a striker; a high performance organisation needs a blend of capabilities: effective governance, effective management and committed staff. Certainly members of a performing team support each other and will help to correct deficiencies and errors by others within the team (high performance organisations are no different); but if the team start to mix up the skills and responsibilities the overall team performance will suffer (the consequences of steering committees pretending to be governance bodies is discussed in a 2012 post Management -v- Governance).

 

In conclusion, the answer to the opening question is YES, I believe governance and management are different and their functions are different:

A high performance organisation that is capable of achieving sustained superior performance combines both governance and management in a clearly delineated governance framework, supported by a clearly delineated management structure.


Governance and ethics

October 10, 2015

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!