The most compelling stories about corporate governance tend to be the most shocking and scandalous.
From Enron’s ethical lapses that led to the company’s downfall, to Volkswagen’s falsification of emissions tests that impacted its brand reputation, governance creates the conditions that lead to either pain -- or progress. How can you be in the right group?
Most enterprises (and many small- to medium-sized companies) have governance structures in place: a board of directors, one or more advisory panels, and often, standing committees that work to harmonize strategy and operations. Financial, environmental, and quality concerns are examined at a high level to determine how to meet an organization’s strategic goals and continuously improve business performance.
Governance includes not only board practices, but also organizational design, figuring out how decisions will be made, risk management and controls, compliance and auditing, and disclosure and transparency. (BCBS, 2010) As a result, governance is intricately connected with quality management. To implement effective governance, determine how your organization will (NIST, 2019):
- Be accountable to owners, shareholders, and other stakeholders
- Promote transparency, so that the rationale for key strategic and operational decisions is communicated effectively to all
- Ensure fair treatment of all stakeholders
Effective governance structures:
- Exert pressure on a company’s senior leaders to improve performance
- Make sure that the needs of all stakeholders are articulated, understood, and addressed on a regular basis
- Raise awareness throughout the organization about how key decisions are made
- Create alignment between senior leaders and operational divisions
Governance impacts performance and innovation. Without sufficient governance, an organization’s quality management system may be unable to manage required changes effectively. With rigid and bureaucratic governance, organizations will be less agile, and less able to identify and benefit from taking intelligent risks. Balanced governance systems provide priorities for quality leaders and operations managers to decide how best to deploy resources.
The challenge, for all leaders, is to find the right balance to match your organization’s size, industry, and competitive situation.
Basel Committee on Bank Supervision (BCBS). (2010).“Principles for Enhancing Corporate Governance.” Bank for International Settlements, Consultative Document (March). https://www.bis.org/publ/bcbs176.pdf
Freeman, G. (2019). Culture of Quality: Achieving Success with Tools, Processes, and People. Intelex Insight Report. Available from https://www.intelex.com/resources/insight-report/culture-quality-achieving-success-tools-processes-and-people
National Institute of Standards and Technology (NIST). (2019). Baldrige Excellence Framework (Business/Nonprofit): Proven leadership and management practices for high performance. Available from https://www.nist.gov/baldrige/publications/baldrige-excellence-framework/businessnonprofit
Shen, L. (2017, December 31). The 10 Biggest Business Scandals of 2017. Fortune. Available from http://fortune.com/2017/12/31/biggest-corporate-scandals-misconduct-2017-pr/
About the Author: Nicole Radziwill is the Vice President, Global Practice Leader, Quality & Supply Chain at Intelex Technologies. Before Intelex, she was an Associate Professor of Data Science and Production Systems, Assistant Director (VP) End-to-End Operations at the National Radio Astronomy Observatory (NRAO), and manager and consultant for several other organizations since the late 1990's bringing quality management to technologically-oriented operations. She is a Fellow of the American Society for Quality (ASQ) with a Ph.D. in Quality Systems from Indiana State University. Nicole serves as Editor of Software Quality Professional (SQP) journal and is a former Chair of the ASQ Software Division. She is an ASQ Certified Manager of Quality and Organizational Excellence (CMQ/OE) and Certified Six Sigma Black Belt (CSSBB).
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