Management and Governance

Management and governance have separate and related roles in strategic planning.

First, we will look at the terms governance and management.

Management and governance and leadership

Managers are accountable, for being effective at tasks given by their managers. They are accountable also for the outputs of others.

A manager’s job includes building an effective team capable of producing those outputs.

It is the manager's job of exercising effective leadership.

Leadership is an aspect of the management role

Leadership is the requirement that a manager influence those in their team to accept willingly task objectives, and to cooperate with the leader and each other to achieve these agreed outcomes.

All managers, whatever their specific outputs, have common responsibilities. These include leading and sustaining the team, managing resources available, and complying with relevant policies and systems of the organisation.

It is pointless to engage in debates over whether leadership or management is more important or valuable to an organisation. It is also unhelpful to set management and governance in opposition to one another. It is as nonsensical as asking whether the thickness and colour of a piece of material is more important than the material. You cannot have an object without its properties. Leadership is a property of all managerial roles. All real managers have leadership accountability, just as they have a team sustaining accountability.

What managers do

As I said in relation to leadership, the basis is building and engaging a team to achieve results. A simple process builds on this.

These elements link together in the order shown in the diagram.

A manager begins with a team.

They decide tasks. They select how to do them. This includes selecting which of the team will work on the tasks. They must know how to do the tasks before they can choose the correct people and other resources. Managers give instructions and then checking results. Depending on what they find when checking results, the manager can adjust earlier stages, or even start the process over if necessary.

The manager does their best to develop, coach, and equip the team. If there is persistent underperformance, the manager may need to consider removing one or more members of the team from the roles they now occupy.

These are the basic elements of management in the minimalist system we need to understand the role of managers in managing the development and implementation of strategic plans.

Now let us turn to the system of corporate management and governance under which the managers carry out these tasks.

A minimalist model of corporate governance

Sadly, much governance is defective. Therefore, we will now look at a pattern for a system of governance suitable for most organizations. I will outline the core duties of governing directors.

First, let us be clear what governors should not do. We do not need or want them to act in any way as managers, advisers to the management, or defenders of the management. Management and governance have completely distinct roles. Governing directors should have nothing to do with the processes of management listed above.

We do want them to act as internal watchdogs on behalf of the intended beneficiaries and the interest groups. They need to set performance to suit the beneficiaries. We want them to also to set standards of conduct towards the interest groups, and to ensure they both get what they are supposed to get.

The governing directors have a very limited number of duties to perform as follows -

Or more fully -

  • To define these things -
    -  who the intended beneficiaries of their organization are to be,
    -  the nature of the benefit they should receive,
    -  the beneficiary performance indicator (BPI) to measure it, and
    -  the long-term minimum (Tmin) and satisfactory, (Tsat) targets.
  • To define the organization's code of corporate conduct, including its relationship with all its relevant interest groups.
  • To monitor the organization's performance in respect of these things. Report at least annually upon them to the intended beneficiaries.
  • To appoint, review the performance of, remunerate, and dismiss the chief executive officer.
  • To wind up the organization if it persists in falling below Tmin.

They would have no other duties of any sort. Indeed, they should not undertake any other tasks. Above all, they should keep out of the day-to-day management of the organization. Thus, they would be strictly non-executive. Remember we have stressed that management and governance are quite separate roles. The governors would hardly ever actually do anything except in their official dealings with the chief executive and, in the extreme, closing down the organization.

For explanations of the process used by management and governance to establish key elements of organizational purpose, and for a free copy of the process involved, go to the Argenti Purpose Sequence.

Corporate management and governance
and the hourglass

Having set a framework for the distinct roles of management and governance, we now look at how they are related. Management and governance link in a double hierarchy.

Organizations of all kinds are hierarchical.

I believe that an organization needs two hierarchies, respecting the distinct roles of management and governance. The first is a beneficiaries' hierarchy. The second is the management hierarchy.

This separates their respective roles in strategic planning. The board of governors represent the beneficiaries of the organisation. They set the performance targets and conduct standards. They give these to the managers. The executives’ task is to achieve the targets within the policies governing corporate conduct. Therefore, they must devise the best set of strategies they can for doing this.

At the very top, we have the governing directors setting the corporate performance and conduct criteria to the chief executive. The CEO in turn then breaks down these corporate targets into a small number of strategically important decisions. These few significant decisions constitute the core of the corporate strategic plan. Then the CEO with their top team sets targets for the cascade of managers throughout the organization. A number of well-tried systems for making these strategic decisions now exist.

The Argenti Strategic Planning Process is the most effective in enabling managers in this task.

Thus, there is a hierarchy of managers in all large organizations, all moving through a set-target, decide-means, and set-target sequence.

At the top of the beneficiaries' hierarchy are non-executive governors, headed by a non-executive chair.

At the apex of the management, is the chief executive over the managers and other employees. A core item in CEO job descriptions should be strategy formulation and implementation to achieve the targets set by the governing body. This is of course within the code of conduct set by the governing directors. The executives' task is to choose and carry out strategies to achieve the targets, while conforming to the culture.

You will find more on the role and responsibilities of the CEO here - The job of the CEO

An organization not set up in this form stands little chance of meeting the standards of performance and behaviour that we ought to be demanding of it in today's world. Without it, corporate perversion becomes too easy, especially for the managers. The design of the top hierarchy is every bit as important as the managers' hierarchy.

Think of the image of this unique structure as the badge of the beneficiary doctrine. It is the hallmark, and the seal of approval, which shows us that the organization manages in the interests of its intended beneficiaries. A double triangle or hourglass design would make an elegant and appropriate logo for a new beneficiary focused 'Institute of Governing Directors'. Perhaps to keep the separate roles clearly in mind a hybrid of the two might be more useful. Perhaps this is less elegant from a graphic design perspective!

Some practical implications

Such a concept will not function if elementary common-sense rules are broken. Alas, they often are. One rule must be that the governors must be independent of the management and must have an interest in and knowledge of the beneficiaries. Thus, while parents are no doubt the right people to sit as school governors, it could be difficult if any of their own children were now at the school. It would be wrong for teachers of a school also to be its governors. Conflict of interest is too well known to dwell on here.

In light of the approach to management and governance outlined here, the concept of a supervisory board does not make sense. In some European companies for example, half the board are worker representatives and half are shareholder representatives. What are the workers there for? If to protect the interests of the workers, why not also appoint representatives to protect the interests of customers, suppliers, the local community, the state, and environmental groups? It is the sort of difficulty inherent in the Stakeholder Theory.

Many governing bodies are composed of many dozens of governors. What are they all doing there? It does not take more than half a dozen committed and sensible people to supervise any organization, however large. Look at government agencies, institutions, and building societies. So many of them suffer with too many worthy directors who have no idea what they are supposed to be doing. They are not alone in this folly. General Motors' own byelaw states that the board shall have more than fifteen members, and not more than thirty-five. Nissan has forty-eight. By law, large German companies have to have twenty people on the supervisory board.

Without a properly constituted board of governors, sitting above the hierarchy of managers, any large organization is in danger of confusion and long-term decline.

Return from Management and Governance to Organizational Effectiveness.

Return from Management and Governance to Simply Strategic Planning Home Page.

You will find more useful resources here -Organizational Governance and Management

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