How to “Govern” Effectively

How to “Govern” Effectively

There are many books and articles on people management and corporate governance. In fact, if you stacked them end-to-end, they’d probably reach to the moon and back.

At Quadrillion Partners, we don’t really like the word “governance” in the corporate context: It conjures up images of bureaucracy and, worse yet, the government. Instead, we use words like “management” and “collaboration” to describe how we engage with business owners and operators in portfolio companies. We encourage leaders to set, define, refine and measure their management processes.

As a business owner or board member, you know that you need a board of directors, some subcommittees, and an executive team of leaders to manage the business. You also need employees who are aligned with your strategy and financial objectives. How do you manage these various constituencies in an integrated fashion, toward positive outcomes?

Where to start

Implementing an effective governance structure in your company doesn’t have to be complicated, but it does require an explicit strategy, measurements, feedback loops and tools for the process to work well. The key is to start with your corporate strategy, then drill down quickly to initiatives and, finally, to objectives and key outcomes. (Google and Intel use “objectives and key results (OKRs),” as they call them, to create structure for their teams.)

Here are five steps for “governing” effectively:

  1. Know your stuff.  Make sure you understand and can articulate your strategy and imperatives for the next 12 to 24 months.
  2. Focus on the big questions. Make a list of the critical decisions that need to be made, then segment it into administrative, financial, strategy, customer and operational categories.
  3. Prioritize your actions. There are three levels of important activities here: (1) the board  (compensation, audit, regulatory, etc.); (2) strategic/cross-functional initiatives (e.g., improving time to market, improving order to cash); and (3) functional (grow sales by X amount, increase Web traffic by Y, improve receivables by Z days, etc).
  4. Rally the troops. Determine which employees should share specific goals across the organization based on function and skills. In our experience, creating co-owners of goals is important as it not only spreads accountability, but it fosters teamwork. To help with this, TalentCove is a great tool for defining OKRs, particularly for companies with more than 30 employees.
  5. Define goals and cascade them down. We suggest following the SMART principles when creating goals — they’ve been around since November 1981 when George T. Doran wrote his famous article on the subject in the American Management Association’s Management Review.

SMART goals are defined as follows:

Specific:
Goals must be clear and unambiguous. When goals are specific, they tell employees exactly what is expected, when, and how much. Measuring success or failures against goals is easier when they are specific.

Measurable:
Goals must be measureable so you can constantly judge progress. If your goals are not measurable, you never know whether your employees are making progress toward their successful completion.

Attainable:
Goals must be realistic by employees’ standards. We often define a goal in three buckets — stretch (harder to accomplish, but not impossible), target (reasonable to achieve), and threshold (below target, but still meaningful value).

Relevant:
Goals must relate directly to your corporate objectives and strategy. Without relevance, goals are simply interesting activities.

Time-bound: 
Goals must have start and end dates. Deadlines and deliverables help employees to focus their time on completion of the goal.

What’s exciting for middle-market owners and managers who get their governance process right is that governance, done well, helps drive execution and positive outcomes for employees, business leaders and, ultimately, shareholders.

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