Good Leaders Need Integrated Management Systems
I posted my first LinkedIn video a couple weeks ago on the coming 4th Industrial Revolution. I highlighted the fact that Leadership is not keeping up – by noting that in the same time the rotary telephone has evolved into the smart phone very little has changed in the way organizations are led or managed. In this article I will explore that point further and offer a door to the path forward.
Leaders in the 21st century face more demands than ever before. Not only are they expected to achieve financial success, they must manage risk, make good strategic and operational decisions, be transparent, meet performance goals, be socially responsible, be aware of their employees, build an effective culture, understand their supply chain, avoid doing business with unsavory parties, meet growing environmental stewardship expectations and know who all of the stakeholders are that are impacted by their entity. Not a small task. Especially, when information to manage each of these tasks may be hard to find. Wouldn’t it be great if a Leader had all the information they needed easily at their finger tips?
Information is created first by definition and organization (called a framework) and then through tagging and collecting. Many professionals create valuable frameworks and pockets of information that have been improving over the last 2 decades and could be useful in helping a good leader. These pockets of information include EXTERNAL things like International Financial Reporting Standards (Principles); The King Code governance standards (Principles); Integrated Reporting Framework identifying non-financial value; Environmental, Social and Governance legislation and sustainability frameworks; and INTERNAL things like Alignment of Board and Executive Policy (Structure); Decision Science (Clarifying Strategic Choices); Workforce Management; Risk Mitigation Programs (Compliance, Information Security, etc.); Performance Management (including Operational Capability Development) and the evolution of Governance, Risk and Control concepts and information. The challenge is that many of these areas overlap, and none have been aligned into one integrated system focused on helping the leader.
INTEGRATION OF INFORMATION – THE LEADERSHIP INDUSTRIAL REVOLUTION
So, what might an integrated management system, leveraging the pockets of value above produce for a leader? Let’s answer this by envisioning a Leadership Mobile Device (LMD) built with the perfect Apps. Here is what I that future Leader could see:
- Decision Center App – In this app all decisions would be categorized by level of approval required. By clicking on one pending decision, a form would illustrate the choices from three perspectives: supporting data, likely value outcome with measures description, and the completed bias checklist. Board Members would see decisions that require their approval and be able to review all relevant information. FRAMEWORKS LEVEREGED: Decision Science best practices, Strategic Process and Operational Control best practices.
- Governance App – This app would begin with Education Center material focused on the Board Role verses the Executive Role. It would include a Policy Section with an Alignment Score on top. The score would reflect the structural ideals expected in Bylaws, Board Policy and Executive Policy as compared to the Mission Objective and Roles of both the Board and Executives. It would also include Policy set status, templates, development processes and current open tasks. It would have a Financial Section with budget and current performance. Finally, the Governance App would have a Strategy and Operations Section where initiatives and important business objectives would be tracked. In this section the Leader could look at each initiative or objective by control capabilities or existing risks. FRAMEWORKS LEVERAGED: The King Code, Governance Implementation best practices (i.e. AlignedInfluence.com), Policy writing best practices, IFRS/GAAP, IIRC and Strategic, Operational and Hazard risks and controls best practices from International Institute of Internal Audit.
- Operations App – In this application the Leader would find documented business objectives (the purpose of each function) linked to cascading and important sub objectives to make operations successful. Each business objective (area) would have performance, risk and control data associated with it. The combined data would be compared to a desired operational capability (risk appetite, control maturity and performance output) resulting in an operational capability score and actions to mitigate gaps. FRAMEWORKS LEVERAGED: Operational Development best practices, Sawyers 7th Edition-Enhancing and Protecting Organizational Value-the Internal Audit Foundation, Objective Based Risk and Control Internal Audit model. Integrated Reporting, COSO/ISO 3100 Risk Management, Other risk mitigation models and standards.
- Sustainability App – Here Public ESG and Internal Risk Mitigation goals, reports and information would be tracked. ESG goals such as workforce goals, supply chain goals, natural resource use. Risk Mitigation Programs such as business continuity plans, compliance programs, cyber security programs, safety programs, insurance programs, etc would be tracked. Finally, non-financial public reporting would be listed here with data sources linked to the final published reports. FRAMEWORKS Leveraged: ESG (Workforce Development Initiative, GRI, SASB, World Bank, European Commission – Directive 2014/95/EU) Integrated Reporting, Risk Professionals and Associations leading sustainability best practices.
WHERE TO START? VISION & VALUE
Everything valuable begins with a conversation about the ideal outcome. So, above we have a potential ideal integrated management system. Before any building or integrating, the vision of the need must be discussed by all directly and indirectly involved parties. Am I close with my LMD? What is right and what is still needed? From Business Leaders to Government and Professional Standard setters, more discussion is needed about the Ideal outcome of an integrated management system.
One way the vision becomes clearer a discussion of Value. How is value created? Why is value created? Both of these questions are deeper than they seem, because they get to the purpose and role of each party involved. What products and services does an entity directly produce? What is their value and to whom? What indirect value is consumed or produced in the process? Traditionally, the role of government is to protect indirect value consumption and enable its production. Government has addressed fairness and tried to eliminate exploitation of people and the environment. However, sometimes, particularly in a rule-based society like the United States, government can end up destroying direct value in the pursuit of indirect value protection. This is where evolution in leading practices can help. Governance, Risk and Control have become valuable tools in laying out expectations or basic protocols that good boards and good executives follow. This can be helpful. If there are basic protocols for Good Leaders to follow, does that not become the architecture for our LMD integrated management system. Also, can not a Government rely on those same protocols to lower their rule based expectations in favor of principle based expectations?
We are ready for and very much need a first Leadership Industrial Revolution. Let’s lower the traditional protection of our methods and models and focus on Value and getting the future better organized.