Simple governance is good governance

Simple governance is good governance
So why do we always tend to make things more complicated?
Whether you’re outsourcing, providing IT-related services, running a not-for-profit, or a household — this principle is a sound one to keep in mind. All too often, however, recognition of the need to keep things simple comes from hindsight and “lessons learned” notwithstanding the lone voice in the room that was probably there all along encouraging us to KISS.

There are a number of factors that contribute to the catalogue of lessons learned at the end of the day: busy professionals trying to triage their workload, advisers on the outside looking in, sales forces looking to close the deal, risk-averse clients, boards that seek to operationalize, and the list goes on.

So from a business perspective, what constitutes good governance? Well, for starters, what it isn’t is any of the following:
•    “It’s about the words, not the relationship.”
•    “My contact will sell it upward in the client organization, so there is no need for me to be involved.”
•    “I can solve this on my own and need not involve legal professionals or contract or commercial management.”
•    “My client and I trust each other; we don’t need to paper our agreement.”

I get palpitations when I read the last point. It is truly astonishing how frequently this happens — and then you get the call: “Things kind of went sideways and the client won’t pay us now. What can you do to fix this?” Or, “I should have known that his refusal to sign a prenuptial agreement was the canary in the coalmine of our relationship.”

Talk about lessons learned. Contracts do not, and indeed cannot, capture everything of course, so good communication as the foundation of a sustainable mutually beneficial relationship is essential. In other words, if you need a lawyer to help you solve a relationship issue, or are quoting contractual terms in your escalation e-mail, your governance process is not working. Governance is all about the relationship. Leading practices to consider include the following:

•    Simpler constructs are better
•    Communication of open items, without positional spin, facilitates early resolution
•    Executives need to be engaged and meet regularly
•    Information must be available and shared
•    Transparency is the best operating model
•    Adhere to the process
•    Good governance facilitates adaptation to change
•    No contract is complete — good governance fills in the contractual gaps
•    Be forthright; share bad news early
•    Deal with problems at the right levels — escalate if needed, but only when needed
•    Establish guiding principles for appropriate escalation steps to avoid end-runs and extinction of healthy debate
•    Debate the issues; not the people

All too frequently I encounter organizations that have multiple business units operating in silos with little cross-communication, where the environment is one of fear of reprisal, and sales teams are pressured by targets, pleading ignorance in the face of poor contractual terms and then hoping for forgiveness at the other end. It doesn’t matter what business you are in or whether you look at it from a personal perspective — the basic practices above should be applied.

The principles of trust, communication of information, common goals, respect, and long-term vision continue to withstand the test of time — and transactions. Businesses are better served by external counsel who represent the best interests of their clients, and not themselves.  Businesses better serve themselves by taking a longer-term view of sustainability, alignment of goals and objectives, relationships, and reputation.

Often in long-term relationships, the default position of the parties can be summarized as “the squeaky wheel gets the grease,” which is shortsighted in terms of approach and inevitably comes at a cost to both sides in terms of outcomes. A good governance structure, while it may not suppress the inclination of a sales team to throw “free stuff” at a client the minute there is noise, should enable a mutually beneficial dialogue to take the place of an instinct to be reactive.

There are two pieces of advice I got when I started my career that are still relevant today: In helping your clients solve their problems, there is always a legal way and a practical way. If you are lucky, they will be the same way. Our role should always be to seek to find a practical way within the law.

Also, whether you are right or wrong, you should be capable of saying that you are sorry. Being humble enough to apologize on the one hand and making the effort to find a way for your client to save face on the other can be powerful diversions from otherwise contentious paths where no one wins in the end.

Now go govern yourselves accordingly.

The opinions expressed in this article are those of the author alone, but I would like to thank SJC for brainstorming and sharing her invaluable ‘lessons learned’ with me.

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