The main problem with governance is the largely mechanistic approaches being used that are ill-suited to address the complexity and dynamics of today’s strategic and operating environments. If governance was instead designed as a system in its own right, layered in its complexity to provide dynamic control matching the complexity of the enterprise it is governing – then, we will see holistic outcomes being achieved on a sustainable basis. Yes, it’s more demanding. We can’t just set accountabilities and decision rights and let people get on with it, hoping the risk management process will drive compliance and take care of keeping the system in check. That’s not sufficient. This article is the first in a series exploring what and how we might get closer to the mark.
The wicked mess.
Traditionally, leaders set priorities for an enterprise overtime. This worked well until Peter Drucker came along and said, “In today’s economy, the most important resource is no longer labor, capital or land; it is knowledge.” In one stroke, he shifted the focus from physical things to the cognitive. This is so important. If we don’t manage the cognitive complexity before we dive into addressing the complexity of a contemporary situation, the risk of bad outcomes increases. Significantly. The statistics are horrifying, as 70% of projects fail to achieve their objectives. 95% of start-ups fail. And, half of the businesses started this year will not exist in 2 years’ time.
A brilliant engineer, Eberhardt Rechtin made two small yet profound adjustments to Drucker’s insight,“In today’s economy, the most important resource is no longer labor, capital or land; it is newknowledge and knowing how to use it.”This is profound, yet delightful, common sense. According to IBM, the build out of the “internet of things” will lead to the doubling of knowledge every 11 hours, whereas only 100 years ago the doubling rate was measured by the century. We’re all feeling the impact of as we can easily become swamped in new knowledge. Knowing how to use new knowledge is a new muscle to be strengthened to into a capability for dynamic choice. Everyone – not just the ‘leaders’ – need to be able to state their priorities at any pointin time while also keeping a headmark to the future by knowing their priorities overtime.
Now, if we can get everyone in an enterprise to do that, maybe then we can claim to be agile – not before. And, if we get the governance system to keep the enterprise on track now and into the future and we can claim we have tamed the gap between strategy and execution. The challenge is a tough, yet ubiquitous, one.
But, fail in either priority setting mode and the knowledge base will rapidly diminish our capability to deliver either the short or long term and widen the gap between strategy and execution. Should the system of governance fail to drive corrective action, behaviours default to the competitive culture – survival of the fittest self-interest. And, the fittest survivors get to govern what they see as a “good” culture.
Instead of governing the culture, we need to flip our thinking to having a culture of “good” governance, in which everyone aligns with the organising intent and shared outcomes, and behaviours align with the actions of the leaders and managers throughout the enterprise.
Make the response personal.
It’s easy for me to say it’s personal. In the heading picture, you see me and my wife jumping for joy in a close family circle of 10 – 2 daughters, their husbands and their four children. Our eldest grandchild, Cameron, was born in 2000. He’s one of the true millennials born in the year of the new millennium. He wears the barbs of entitlement that come with being a millennial. Yet, I think that for young folk born in these times they should be entitled to think that we’ve gotten the basics sorted already: a health system that spends more on prevention than it does on cure, an education system that prepares them to create and use new knowledge not learn it, an environment that will sustain life not having life strangled out of it, and a financial system with ethics to secure their future wealth not sequester funds into institutionally greedy pockets.
These are personal matters in need of a culture of good governance. And, I shall spend the last third of my life in collaboration and service of finding a solution.
Thinking differently.
On 24 May 1946,Einstein famously remarked to the US Commission of Nuclear Scientists, “the problems we face today cannot be solved with the level of thinking we were at when we created them.” This quote has become cliché as it points to the problem we all know, yet few have attempted to say what a higher level of thinking is, or how we engage with it.
In 1956, Kenneth Boulding gave us a great start with his philosophy and hierarchy of systems complexity. Boulding’s layered thinking ordered systems from static frameworks like mathematics and anatomy, through biological systems to social system and finishing with a transcendental layer unknowns and unknowables. He proscribed nine nested layers, each increasing in complexity and each containing the systems of lower complexity as shown here: