The distribution of decision rights, authority, and resource control is the essence of governance design. The aim is to ensure successful execution of strategy with sustained integrity. And in this context, virtually every executive will claim to want honest, open debate – and be upset if important facts are withheld. However, all too often, resource control, authority over execution decisions, and setting long and short-term priorities don’t occur where they should. On the contrary, such responsibilities are usually assigned to the wrong level and include too few of the right players.
Why is dissent – or at least the possibility to challenge “truths” so important? Simply, to avoid Groupthink and provide an atmosphere in which people feel comfortable holding difficult discussions. In such an atmosphere, mistakes can be found and corrected before they end up endangering the business!
So how to get it right? The real quality of a corporate governance system can be seen in the organisation’s culture (Are mistakes really acceptable or must they be swept under the rug? Can decisions be challenged without risk to one’s career? Etc.), in the delegation of responsibility for meeting reporting requirements (Do the frontline employees also report on their actions?) and in decision-making and resource allocation of the company (Who decides how resources will be distributed? How are business decisions made?).
For companies looking to strengthen their governance (not just the reporting function!), a useful start can be to assess where they are strong and where risks may lie today. The Straturity Human Capital Self-Assessment© gives answers to these questions and more. Check it out on www.straturity.com!