How Is Governance Different for Small Versus Large Organizations?
by Betsy Burton
I recently presented a webinar on Aragon Research’s Governance Framework. During this webinar, a client asked how governance was different for small versus large organizations. And specifically, how the infrastructure and organization for supporting governance was different in small versus large organizations.
The answer to the question is that the framework for thinking about governance is the same in small organizations and large organizations. However, the execution and institutionalization of governance will be different in terms of scale.
Governance Framework for All-Size Organizations
In March this year, Aragon Research released its Governance Framework. The goal of this framework is to help clients understand what elements need to be considered as part of a highly effective governance discipline (Aragon Research’s Governance Framework: Achieving Business Outcomes). The framework highlighted
1. Regulatory Requirement—Understanding and working within the regulatory constraints.
2. Risk Management—Quantifying the risks an organization may face and assessing the probability of unexpected, unfortunate events.
3. Performance Management—Measuring the performance of an organization and finding ways to improve it.
4. Roles & Responsibilities—Defining who does what in an organization and optimizing its distribution of labor to enforce its goals.
5. Investments—Ensuring that investments are properly reviewed and in line with the desired business outcome.
6. Business Ecosystem—Developing an understanding of the broader network of organizations involved in delivering business value.
7. Organizational Structure—Defining the flow of responsibilities and activities that make a business function.
8. Business Operating Model—Defining how a business delivers value through a combination of people, process, and technology.
9. Ethics—The establishment of evolving ethical guidance and decision-making.
These elements must be considered when defining a governance program within both large and small organizations. However, the operationalizing may be very different in terms of scale and scope.
The key here is that all organizations need governance, but the complexity will differ by size, industry, business model, and operating model.
Common Organizational and Operational Supporting Structure
The structure for supporting governance is often the same between small and large organizations. However, the scale will differ.
Governance Team—To support effective governance, organizations large and small need to have a body of resources focused on governance. In the case of a small business, that may be the operations manager or head of strategic planning. A large organization should have a group/team focused on governance and working across business units to execute, communicate, and evolve governance. Regardless of size, organizations must also invest in change management to enable governance, although the degree and complexity of change management may differ by size of organization.
Supporting Boards/Councils—To support governance, many organizations define cross-organizational teams that can serve as architecture review boards, investment boards, advisory councils, strategy teams, and regulatory councils. In small organizations, these bodies may be smaller and more dynamic. In larger organizations, these groups are often led by a senior executive directly involved in governance, include representation from diverse business units, and meet on a regular basis.
Communication—All governance, regardless of size of organization, needs to be effectively communicated throughout the organization. Many smaller organizations assume that they can invest less time and energy in communication because of their size; this is a mistake. The outputs (metrics, regulatory requirements, etc.), decisions (RASCI, operating model, etc.), and guidance (ethics, ecosystem) must be clearly and concisely communicated regardless of organization size and must be supported with effective change management.
All organizations, regardless of size, industry, and business model, must invest in a governance program and work on all the elements highlighted in the Aragon Research Governance Framework. In addition, all organizations must ensure their governance program is in support of and informed by a clearly articulated business strategy and outcomes.
However, the size of the governance team and supporting boards/councils/teams will differ by size of organization, as will the investment into change management.
Organizations small and large that support governance effectively can have a dramatic impact on business efficiency and effectiveness, and on employee engagement. Organizations that ignore governance and supporting change management risk business operations, and regulatory requirements.