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Ideas for Leaders #179

Bridging Organizational Governance

Gaps

Key Concept

What the Board spells out as good practice, and what motivates managerial

behaviour is not necessarily the same thing. The gap between both can lead

to serious consequences, not unlike the scandals that took place at Enron,

WorldCom and more recently, the BBC. How can your organization create a

sense of moral responsibility from ‘the bottom up?’

Idea Summary

The concept of governance is certainly not new, but in recent years it has

been gaining more attention, especially in the business world. ‘Corporate

casualties’ are proof that commercial pressures nudge executives towards

introducing irresponsible risk into routine business operations. Today, these

risks are easily obscured thanks to technological complexity, the large scales

on which organizations are run, and hierarchical structures. The latter in

particular is proving to be an important factor in recent governance slip-ups; in

many organizations, employees appear detached from feelings of ownership,

or belief in their organizations values, thus emphasizing a gap between board

directives and realities of governance practices.

Analysing this problem, Cranfield School of Management’s David Butcher and

Martin Clarke ask, how businesses can build a culture of moral responsibility

from ‘the bottom up?’

The answer lies in understanding the power of debate. Good leaders are able

to foster debate about the principles and practices of their business.

According to Butcher and Clarke, they should accept responsibility for voicing

the concerns of their employees to the Board, and directors should adjust

their objectives accordingly. This type of ‘grass roots’ level leadership will

help to establish morally responsible local communities that will readily

assume governance responsibility. Boards should allow these groups to self-

regulate; moreover, they should encourage them to keep an eye on the power

invested at senior levels, should those leaders appear to stray from the

principles of good governance.

There are already parallels in the corporate world of such initiatives. IBM and

BP, for example, use sessions called “Values Jam” and “Open Talk”,

respectively, which involve the entire workforce in discussions encouraging

them to challenge prevailing corporate views. Similarly, Marks and Spencer

has also established Business Development Groups, in which employees are

offered the chance to influence governance within the organization.

Business Application

In order for the initiatives discussed by Butcher and Clarke to be truly

Authors

Butcher, David

Clarke, Martin

Institutions

Cranfield University School of Management

Source

Developing Leaders

Idea conceived

August 2013

Idea posted

July 2013

DOI number

Subject

Boards, Roles and Responsibilities

Business Ethics

Governance

Organizational Effectiveness

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effective, board members must first realise that their leadership role extends

beyond setting and communicating governance standards (i.e. a ‘top down’

approach). Instead, they should encourage debate, and lead the way in

creating moral communities that embrace good governance. It is essential that

do not feel that even if they disapprove of certain practices there is nothing

they can do about it.

In terms of ideas on what kind of discussions to foster, examples can be

considered from the corporate world. Nevada-based Zappos asks employees

to consider questions such as whether their company has a higher purpose

than profit, or whether their own role has personal meaning. This key is to

embed the value of employee voice into your overall corporate strategy.

Leading by personal example is also important; this means never turning a

blind eye or appearing to condone questionable governance practices.

Further Reading

Addressing the Governance Gap: Organizational Democracy and Moral

Communities, “Butcher, David” and “Clarke, Martin”, Developing

Leaders, Issue 8 (2012) p. 18–23

Further Relevant Resources

David Butcher’s profile at Cranfield School of Management

Martin Clarke’s profile at Cranfield School of Management

Cranfield School of Management’s profile at IEDP

© Copyright IEDP Ideas for Leaders 2013

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