Control Vs. Governance in Organization Design

  |  December 20, 2017

Whether in subtle ways or blatant ways, one issue that is bound to come up in nearly every organization is that of control. People rarely admit they want to be the one in control, but in reality it’s an ongoing undercurrent in nearly every human interaction – especially in organizations.  In business, we often use the more politically astute term, “governance” instead of “control.”  But is “governance” simply a euphemism for control? I would argue that there is a difference, and a very relevant one where organization design is concerned.

Defining Control

When we think about control, what do we mean?  Historically, organizations have been set up in command-and-control configurations, similar to how the military is structured.  Control in this sense means that work direction comes from a single place and is coordinated by an individual or small group of people who function as a central planner, making the decisions, setting priorities and passing orders or commands down the chain. Through the chain of command, everyone is ultimately accountable to a single leader, who by virtue of this prominent position maintains control over the resources needed to deliver value or work.

In many ways, a direct control organization design has advantages. We know who’s accountable, and where to go to fix a problem. It doesn’t require a lot of time building consensus or debating who’s in charge.  Decisions can be made and work accomplished quickly and efficiently.

Most business leaders would agree that in today’s business environment the command-and-control structure in its purest form has outlived its ideal—and in fact very few organizations operate in a pure command-and-control manner any more.  The reality is that whether you are producing a report for financial purposes, selling something, creating a product, or doing virtually any kind of organizational work, it’s nearly impossible to have direct control over all resources (i.e., people, equipment, technology, expertise, data, etc.) needed to deliver value in today’s complex marketplace.

Defining Governance

However, people are still wrestling with the question of how to accomplish work without directly controlling it. That’s where the concept of governance in organization design comes in. Governance is a way of ensuring the organization can produce consistent quality or efficient outcomes when direct control is impossible, impractical and/or culturally undesirable.

One of the clearest examples of this dynamic is in a buyer/supplier relationship. Say, I need a component from a supplier.  If I had direct control over the supplier, I could dictate the quality, timing and cost of procuring the component. This is not a practical solution in many cases because owning every supplier would be costly and ultimately inefficient.  Instead, most buyers and sellers enter into a business transaction where a contract is drawn up, which basically says, “here’s the money I’m going to pay for this, and I’m counting on you to deliver this component on this date at this quality level.” If something doesn’t go as planned, I can take my business elsewhere.  This is a pretty simple and straightforward example of governance, but it highlights how two parties in this case orchestrated a positive outcome using a simple governance technique that clearly defined roles, obligations and separate interests.

But what happens when we extend the notion of governance inside an organization? Now we have groups of people across an entire enterprise who may need to work together to get things done, with no one person, department, or function controlling everything. The immediate needs and goals of one group might not mesh completely with those of another.

Three Keys to Success in Governance

Everyone saying “we want the company to do well, let’s all pitch in” is great in concept, but it only works in real life when we nail down the specifics. For this to happen and governance to work, it is necessary to design three things:

  1. Roles – If, for example, you need someone to help develop a pricing model, it won’t work to just send an email out and say “hey, we’re trying to launch a product and we’re wondering if anyone would like to help figure out the right price to charge.” Rather, you need a pricing specialist along with data about a market or customer segment. Opening this business problem up to anyone in the organization, won’t deliver the accountability and expertise needed to get the right results.  Defining roles (whether by position or expertise or by access to information/data) is a powerful way to ensure that key work activities and business outcomes are owned and achieved.
  2. Interfaces (or Linkages) – Hand-offs exist throughout organizations at points where one group or individual needs something from someone else or needs to deliver something to the rest of the organization. These interfaces work great in small start-up companies because the vision for the business is strong, the number of interfaces is limited, and people are generally in close proximity.  As an organization grows in the number of people and locations, the power of the company’s vision get less poignant for people, the number of interfaces grows exponentially, and the ease of face-to-face communications goes away.  Now organizations need to thoughtfully design linkages that will facilitate work across organization boundaries and geographic locations – collaboration technologies, process management teams, communities of practices, shared goals/objectives, various meetings and communication forums, and/or dual-reporting relationships.
  3. Shared measures – Shared business goals, strategies and values provide powerful incentive for disparate organizational units to see the value of working together for the greater good. Of course, the key is to make these targets relevant to the area or person and their scope of work. For example, a sales target is great for the sales and marketing teams, but for indirect purchasing a sales target is less meaningful.  (This is why it is so important for leaders to develop clear strategic goals and then to cascade them in relevant ways across the organization.)

Defining the roles, interfaces, and shared measures of success involved in collaborative work lets organizations put the governance into place that will allow for high-quality and productive work even without having direct control.  As you do this, approach governance design in a way that is appropriate to your company’s culture. Governance doesn’t have to be overly formal or bureaucratic, but it does require giving thought to how best to encourage the right sort of contributions, interfaces, and interactions among people outside of a dogmatic you-report-to-me-and-if-you-don’t-do-what-I-say-you’re-fired type of structure.

If your governance model is not delivering the results you want, it may be time to consider a change in organization design.

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