Governance in an Organic Enterprise

I spent a few minutes this evening reading through Tom Graves’ fascinating post Management as ‘just another service’ and it got me thinking of Governance in the organic enterprise.

As Tom describes, there are two paradigms of management at play: organization as machine, and organization as living organism.  Tom is of the opinion that most organizations think that they are of the first type, while they actually behave like the second type.  While I cannot quantify his assertion, I have noticed that my own organization behaves more like an “organization as living organism.”

So, this evening, as I contemplate the notion of enterprise governance, I consider the reality of improving governance in an organization that behaves more as an organism than as a structured automaton.  In order to share my thoughts, I want to establish some basic terms to make sure we are all on the same page.

First off: Governance is a system of distributing decision rights to specific individuals or groups so that (a) desirable behavior is encouraged, (b) undesirable behavior is discouraged, and (c) business rules are aligned with enterprise principles and legislative constraints.  Governance can be a simple as having the project sponsor review the project plan, and as complicated as having the United States Supreme Court review the specific clauses of President Obama’s healthcare reform law, before the administration compels the various states to implement it.

There are many things that can be governed:  the scope of projects, the expected architectural outcomes, the assignment and activity of individuals, the assignment of responsibilities to teams and systems, the correct handling and security of information, and the measurable performance of processes, to name a few. 

In addition, there are many different levels at which governance occurs.  Governance can occur at the personal level (I choose to do the right thing).  It can also occur at any “level” where a group of people with specific decision rights have a stake in the governable elements of an activity.  To whit:

• A team may want to govern the efforts of its members. 
• A business sponsor may want to govern the activities of a project team that is spending his or her money. 
• A cross-business virtual team (v-team) may want to insure that dependencies between teams are carefully managed in order to insure the delivery of value. 
• A senior business executive may want to govern the level of acceptable risk in a portfolio of projects to insure that there is a good balance between innovation and incremental improvement. 
• A senior leadership team may want to insure that leaders have clear ownership and accountability (no gaps or overlaps) so that strategic changes can be implemented in cross-functional processes.

This may lead you to conclude that governance can be performed as part of a hierarchical escalation process, but that is not a foregone conclusion, as you will see below.

When designing a system of governance in an organic enterprise, we need to make sure that the “solution” matches both the “problem” and the organizational “network of influence” (instead of hierarchy) that the enterprise uses to make decisions and resolve disputes. 

So let’s break down the problem a little.  What is the array of problems that organizational governance (of which IT governance is a subset) is supposed to solve?  Here are some elements of that array:

• Senior leaders are consulted when the cost of day to day operations overwhelms the organization’s ability to behave strategically
• Business Managers are consulted when investments by one business manager can interfere with the efforts of another
• Process owners are consulted as a process is being changed, leveraging organizational knowledge and experience
• Information facet owners are consulted as requirements emerge that impact master data management and data quality
• Platform owners are consulted for the improvement of business capabilities supported by enterprise platforms
• Architectural owners are consulted as system designs are considered for inclusion in the enterprise IT ecosystem
• Organizational standards are followed in order to minimize the cost of ownership of process, system, information, and infrastructure investments

 

The key thing to note from this list is that different “governors” are interested in governing different things.  There is no simple “chain” of escalation.  Rather, it is a network.  This is one effect of organic governance.  Another is that the number of levels of governance, for any one issue, should be fairly short.  You deal with things at an individual level, at a project level, and then, fairly quickly, at the level of a “governance body” designed specifically to resolve that particular type of issue for a business and then the enterprise.  Lastly, there is a senior management body that can settle all remaining disputes. 

Unfortunately, when considering this kind of problem, the metaphor of “enterprise as organism” begins to fail.  Actors in an enterprise do not behave like cells in an organism, nor do business units within an enterprise behave like organs.  Cells are regulated by internal instructions, hard-coded in chemical DNA sequences, and respond to fairly simple stimuli with pre-programmed responses.  Actors and business units do not. 

Organizations do not have consistent and uniform instructions (like DNA) that guide each person and business unit.  Governance is needed because of the variation of human beings and their desire to continuously look after their own interests.  Quickly we can see that the “organism” metaphor is shaky at best.  In small units, the metaphor of a sports team is a better metaphor, and at the larger end, the metaphor of a city is more appropriate.

I work in a fairly large company, so the metaphor of a city is better for me to consider.  After all, I’ve lived in cities all my life.  So in a city, how many times have I behaved in a beneficial way?  I’d like to believe that I do that every single day, in a hundred small ways.  How many times have I interacted with the police?  Less than the fingers on one hand.  Well… that’s interesting.  That simple observation alone makes one thing starkly clear: the police do not govern my city life.

I believe that the most important governance element of city life is the system of property laws, commercial practices, licensing laws, and simple rules of civil behavior that allow the city to be a productive and useful environment for individual people.  Governance itself is a tiny fraction of the overall efforts of the population of a city, and it is normal to live your life for years without involving a police officer, filing a law suit, or walking into a court.  That said, courts and lawyers and legislative bodies are essential overhead.  From an economic standpoint, governance is overhead and waste.  People who govern contribute nothing.  But from a social standpoint, the system of governance is critical to the success of the “organically” managed city. 

Which leads me to a rather startling conclusion: In order for a large organization (of say 100,000 employees) to successfully becoming a mega organization (of say 1,000,000 employees), they must develop a simple and fair system of property laws, commercial practices, licensing laws, and rules of civil behavior, and a simple adjudication system to address conflicts.  Hierarchy does not work as a model of governance in an organic enterprise.

Technorati Tags: Enterprise Architecture,Corporate Governance

Comments

• Anonymous
  October 03, 2011
  The comment has been removed

• Anonymous
  October 04, 2011
  Hi Tom, I'm really glad you managed to get past the bugs in this goofy blog software and get your comment posted.  As always, your comments add great value and I appreciate the time and attention you paid to my humble article. You did make one comment that I'd like to expand upon.  In your concern about "rights" vs. "responsibilities", you stated a presumed goal: "We want to be (reasonably) certain that the person to whom the 'decision-rights' are assigned has the ability to make competent and appropriate decisions in the context - what we might describe as the required 'response-ability'." From a purely social standpoint, and if the world were a meritocracy, I would agree with you.  I do want to make sure that the person who is in charge of making a particular decision is both competent and "up to speed" on the issue at hand.  However, EA is also a political art.  Where a decision responsibility becomes a decision "right" is in the realm of trust, not the realm of competence. Trust is not a state.  Trust is a vector.  It represents a one-way-relationship.  From an organizational standpoint, I choose to describe trust as either "ascending", "descending", or "horizontal peer." The easy one is for a horizontal peer.  I can trust a peer to decide an issue if I actually own a decision but wish to seek the opinion of a trusted partner.  Of the three types, this is the only one where I own the decision but choose to extend it to another.  In both of the other two types, someone else owns the decision.  The relationship "ascending" or "descending" is used to describe the manner in which I come about trusting that other person to make their decision. I can trust a senior manager or executive in a particular division, based on their experience and known accountabilities.  That is ascending (trust coming from the bottom, me, to the top, the person whom I'm trusting).  This can be direct (I trust that person) or indirect (I trust my superior, who trusts that person).   The descending form of trust is as important.  In this mechanism, large organizations are partitioned up into the "kingdoms" of various empowered individuals, each of whom repeat this pattern, choosing to trust their "inferiors" until most major decisions are made in the narrowest possible context.  Trust descends from the CEO, who trusts the divisional presidents, to the corporate VPs who are held accountable for specific business goals, and on down the stack to General managers who hold the lowest level of P&L accountability.  This is "descending" trust. To support an ascending trust model, we have only to find the most appropriate person to make a decision.  That would fit your comment about "rights" vs. "responsibility."  However, to support the descending trust model, we have to make sure that the person that the executive looks to, for addressing a particular problem, is the person that is making the decision.  Any other decision maker can have his or her decisions reversed in a heartbeat, without warning, and often with unpredictable consequences. In an early-21st-century organic organization, BOTH trust models are at play.  Therefore, we must not only identify the most appropriate person, but also the officially appropropriate person.  They may be different.  The former can have the responsibility, but he latter holds the "right" to make a particular decision.  That is the only person who gets to own the decision, and claims the consequences (both good and bad) that arise from it.  That is the person who cannot be excluded from the decision, and whose word carries executive buy-in, and therefore, stickiness.   Decisions must be sticky.  If a systematic change is implemented on the basis of a decision that is quickly reversed, chaos ensues.  I've seen this happen.  It is NOT pretty. So, I stand by the decision to use the term "decision rights" because, at the end of the day, the stickiness of the decision is as important as the competence of the decision maker (if not more so).  That is the nature of politics.  I can sway, or educate, an incompetent manager, but there is no way to recover from a decision being made by the wrong person. Identifying the right person... fodder for another blog entry :-) -- Nick

• Anonymous
  October 04, 2011
  Hi Tom, As for the organism metaphor, I did reference the notion of organs, not just cells.   That said, I agree that there needs to be a better metaphor than "machine."  We don't follow orders, and we do self-form, and we do respond in complex manners, and we do offer services... so the "machine" metaphor is clearly broken.  We agree. However, the organism metaphor is not working for me either.  We don't have internal instructions driving individual actors, and we do have the ability to change and reshape our services (a kidney cannot decide, on its own, to perform a different function than it was programmed to perform).  In fact, we are required to respond in "self-organizing" ways, much more like a colony of individuals and less like a single organism. That is why I prefer the metaphors of community over the metaphor of organism.  A community can change how it is organized.  An organism cannot. I point out that there are many metaphors of community.  At the low end, a team is a good metaphor of community.  At the larger end of the scale, a city is a good metaphor.  Which metaphor to use depends on the context.   I apologize for creating confusion by appearing to agree, and then disagree.  I hope this response clarifies... I agree that "machine" is a broken metaphor, but disagree that "organism" is a satisfying alternative, preferring "community" in its stead. Once again, I really appreciate that you challenged me as you have to consider these ideas more deeply.  It is in an environment of mutual exchange of interesting ideas that I find the greatest opportunity for the growth of my own skills and perspective. --- Nick

• Anonymous
  October 15, 2011
  The comment has been removed