A Fascination With Governance

If a little is good, then a bunch must be better, until it isn’t.  I was having a conversation on the train the other day on the way home from work. I was sitting with an acquaintance that I ride with from time to time and we were both complaining about the week we were having. And we started to realize that we were both frustrated by a similar problem – but seen from a different view.

My friend told a story about how he had to travel on business and how he had found a hotel closer to his client’s offices so he wouldn’t need cab service. The problem was that the hotel was not part of his company’s preferred vendor list, and it was $10 more expensive than the hotel 30 minutes away that was preferred. His experience from previous trips showed that he spent $45 on cab fair, so the net savings would have still been $35. So far, so good. However, since the hotel was not a preferred vendor, his expense needed management approval. So he went to his manager, and yada, yada, yada – the CFO of his business unit had to sign the form before he could get his expenses approved, even with a $35 savings. My guess is that that the cost of all the management attention on this expense cost his company something close to $250. So much for the $35 savings – his little deviation from policy cost $215.

But Why?

It is hard for me to understand why an expense report that saves at the bottom line would be subject to that kind of scrutiny even at the C-Suite. And this is not a small company – it is a financial services company with 15000 employees and 3000 in his business unit. Perhaps there had been some out of control expenses that needed to get back under control. Perhaps the company was under expense pressure or there were austerity measures in place. I can understand companies that need to “Tighten the belt” for a couple of quarters to get things back in line. I even understand policies that get cranked up to ensure greater scrutiny over even minor excesses.

Overkill

What I don’t understand is the kind of scenario here, where a staff or line manager can’t even approve an expense report with a net savings. It is a prime example of a policy that demonstrates that senior management doesn’t trust its own leaders to do “what’s right” for the company. But what really smarts is that the cost of the “governance” is probably more expensive than the hotel bill in total. Perhaps as much as 30% of the entire trip. In this regard, the governance actually “works against the solution”. Rather than the governance helping save money, it actually makes it cheaper to spend more, than to spend less.

The cost of deviating from a draconian and inflexible policy, where discretion (over saving money) is taken away from direct staff managers or nearby line managers and only exercised by executives is very high indeed. And of course, the employee, rather than being rewarded for minimizing expenses, is probably regarded by his managers as a pain in the ass, because they all had to use judgment.

So Who?

Will govern the governance? Who will ask the tough questions about whether the policies that are in place are producing the right results? Who will call the policy into question and ask why the direct manager can’t be trusted to escalate for approval only when there is a net overage in the expense report. If the non-preferred hotel would have been the same price or less, the policy as written would not have been in question – so it clearly is a case of the policy being enforced to the letter. But the letter of any policy cannot cover every case, so clearly managers need some discretion (and accountability) to enforce the intent of the policy, even when the letter is violated.

So What?

So what’s the big deal – $35 or $215 – neither one is a big enough deal to concern such a large company. Yet it seems that I hear examples like this from capital projects as well, where the project governance structure causes “Decision Death Spin” because the executives on the “steering committee” can’t fathom either the abstractions or technical implications of the decisions that need to be made on capital IT projects. This death spin creates anxiety or uncertainty when clarity is required.

The same is true, when procurement or HR sets rates for IT staff that fairly ensure that development teams cannot hire the talent they need to do innovative or transformative applications, or worse, it simply lengthens the talent search so that by the time the right talent is acquired the project is already late and over budget because the governance team overhead have been billing the project while the team has been stood up, even though nothing of value has been delivered.

There Is A Reason

for governance. Governance is there to put on the brakes on the runaway train. It is the emergency brake. It is the control system to keep the car from going in the ditch – but it is not the steering component – it is the system that keeps the car from going too fast for the steering to work.

Governance is not what you need to get things moving. Governance does not EVER help maintain momentum. Governance does not EVER help accelerate. That is not what governance is for, and we should not forget it.

Part of the Problem

I think the answer to this starts at home. We all have to ask ourselves “Am I part of the problem?” Am I behaving in a way that makes things harder. Am I acting in a way that accelerates, that keeps momentum going. Am I acting to slow things down, when the car is clearly under control? Am I acting to constrain the speed when conditions are good and the road is straight?

Governance isn’t there to make steering decisions (how to stay on the road). Governance is not there to make navigation decisions (which road to take).

Each of us needs to take a long hard look at what we use governance for, and how we can reduce the cost of governance. We need to make choices that make governance effective at keeping things under control, but without impeding the progress of normal or strategic work.

When governance is implemented in a way that makes it clear that ordinary managers are no longer trusted, then we we have no choice but to escalate every steering and navigation decision to the governance function.

And the governance function does what it always does. Slow things down.

Governance is like that annoying driver on the road in front of you that comes to a full stop before merging on to the free way or making a right turn at a green traffic signal. In fact, just like in traffic, governance, when engaged wrongly causes traffic backups and accidents that are very costly, sometimes even killing projects unnecessarily.

Governance when used incorrectly is part of the problem, not part of the solution.

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