It was interesting to read the article, ‘Good Governance: Putting the UK Business House in Order’ in the November edition of the Director Magazine and indeed ‘The 2016 Good Governance Report’ released by the Institute of Directors (IoD) in September 2016.
Image sourced from: IOD
‘The 2016 Good Governance Report’ is subtitled, ‘The great governance debate continued’ and indeed the IoD state that’s its purpose is to encourage the study of good governance among UK companies and stimulate public debate on the importance of corporate governance in rebuilding the reputation of the UK business community.
The debate is indeed an interesting one. It is also a source of keen interest to anyone in quality and business improvement - those at Triaster and within the wider Triaster community.
The Context for a Good Governance Debate
The context for a debate on good governance is the dichotomy between the fact that the ground breaking UK Corporate Governance code, covering boardroom best practice, is now copied and replicated around the world, whilst the UK still continues to experience ‘shocking lapses from HBOS through to Sports Direct.’ (Director November 2016)
The IOD report is sponsored by the Chartered Quality Institute (CQI) and this is no surprise. The CQI Competency Framework was developed to help the quality profession address the challenges of a world in which the ‘consequences of quality failure grow ever more significant’ and yet there are ‘still too many quality failures that cause harm to society, damage lives and waste money.’(The Quality Profession Challenge, CQI)
Another aspect to the debate, which Estelle Clark, Head of Profession CQI, talked on very eloquently last year (at her key note session delivered at the Triaster workshop, Achieving Better Processes and Systemic Improvement) is how the Quality Profession is perceived. Estelle spoke about a CQI survey of senior management which had revealed that too often senior management see the quality profession as being about box ticking, compliance, accreditation – an add on to the core business of the organisation.
Image sourced from: IOD
A change in Approach to Good Governance
The 2016 Good Governance Report is about taking a step back and assessing what matters in governance and indeed whether one can measure governance.
This is building on their research report released in 2015, ‘The Great Governance Debate: Towards a good governance index for listed companies’, which examined governance from the standpoint of company directors and investors. Their main finding was that governance was organic, rather than mechanical. As much about relationships, trust and transparency as about codes and regulations.
This viewpoint chimes with both the CQI Competency Framework and also the latest iteration of ISO 9001 (ISO 9001:2015). Both have a focus on context and leadership as well as governance, assurance and improvement.
Image sourced from: IOD
The 2016 Good Governance Report
The report’s approach is to combine traditional governance indicators with a measure of the quality of corporate governance as perceived by stakeholders. So both
- A list of objective, measurable factors drawn from public sources
- A survey of stakeholders’ perceptions of corporate governance
“The combination of these two components allows us to understand the relative importance of different governance factors as perceived by stakeholders. We then use the estimated model to build an index of corporate governance.” (The 2016 Good Governance Report)
The resulting ranking of the 100 largest companies listed on the London Stock Exchange as of 31 March 2016 is interesting.
Almost more interesting though, are some of the questions posed in the report by key contributors.
Estelle Clark, as a member of the report’s advisory panel asks,
“So, how does the head of a large complex organisation ensure that the operational body is fit to deliver strategy and to take account of the balance of stakeholder needs? Put another way, how do the executive and non-executive teams have confidence that the organisation does not have a horsemeat scandal waiting to emerge in its supply chain?”
Good questions indeed.
These questions are not answered in the report, indeed that is not its purpose, but the debate is moved forward and the point made that governance cannot be reduced to tick boxing and crude compliance. There are many factors to determining good governance, which must combine and align to the strategy of the organisation.
Image surced from: IOD
Adding to the Governance Debate
So to add my viewpoint.
My viewpoint has developed from working closely with professionals responsible for quality and process improvement over the last 16 years. It has arisen from my observations of the commitment that those professionals typically show and the hard work that they typically do.
But more than anything it has arisen from my observation that within their own organisations, this commitment often goes unrecognised; unnoticed even.
Also, despite working for really big organisations, the Quality or Improvement team is often very small - just two or even one dedicated person. And they generally struggle to get budget and senior support for their projects.
This has always seemed very strange to me. Surely those trying to improve the quality of what the organisation does should be core personnel? Improving an organisation is hard, it involves change, it impacts a lot of people, it can’t be done from the side-lines.
So my viewpoint (which incidentally chimes with the CQI’s) is that Quality must sit at the heart of every organisation. In practice this means:
- A Director of Quality sitting on every Board
- That the Quality strategy for every organisation must, as standard, align with its Corporate strategy
- That every organisation’s quality management system must align with their business management system – in fact they should be the same thing
In my opinion, once we have this, we will have good governance.