This article will discuss how to develop integrity in an organization through defined roles, effective controls and actions taken by a leader (e.g., policy) that support the policies of an organization in daily activities.
1. Define Roles, Authority and Responsibility
The lack of clear definitions of roles and authority is one reason why governance has limited effect. When there is ambiguity in who makes the decisions in an organization, problems can spread, and accountability is absent.
To enhance clarity in an organization’s governance and reduce ambiguity in an organization’s governance system, the following must occur:
- Define clearly the responsibility of the Board and Executives.
- Document in writing the approval levels for spending and risk-taking.
- Document in writing the procedure for escalating disputes and/or incidents.
By defining these three elements of governance, you will provide an opportunity to eliminate confusion, and thus remove the “hidden” power structure(s) in your organization.
2. Create Effective Policy Development Through Practical Controls
Development of policy is only effective if it is supported by controls. Controls are what take the policy development and make the expectations of policy development into action where they can be measured.
Controls are as follows:
- Disclosure statements related to potential conflicts of interest.
- Rules and tracking systems for procurements.
- Separation of duties for financial decision making.
- Confidential reporting channels for potential violations of wrongdoing.
Controls must be easy to follow and powerful enough to deter people from violating the rule.
3. Build a Culture That Supports Ethics
Your organization’s culture and values related to ethics are shaped by what your leaders allow. Your organization’s culture and values are developed through a series of choices, not a slogan.
Leadership behaviors that foster an ethical culture are as follows:
- Rewarding transparency in all matters, including those that result in negative outcomes.
- Promptly addressing wrongdoing, regardless of position.
- Sharing as much of the decision-making and rationale as possible.
- Providing ethics training to employees using real world examples, not just rules.
When leaders reward certain behaviors and ignore others, employees will follow what they see being rewarded.
4. Evaluate Governance Processes Regularly To Improve Them
As with any other process system, governance should be reviewed/evaluated regularly. This will assist in identifying any blind spots in governance.
Useful tools to evaluate governance processes include:
- Internal audits in high-risk areas.
- Reporting to the Board about ethics and compliance.
- Annual review of risks and update to controls.
- Annual leadership training about governance.
Reviewing governance processes will provide ongoing confirmation that governance is a living system and will encourage a culture of continuous improvement in your organization’s governance processes.
Conclusion
Good governance is a method of creating integrity in an organization by making accountability a tangible concept. It establishes decision-making rights, provides practical controls to support policy, promotes an ethical culture, and continuously assesses and improves its governance processes. Viewing governance as a dynamic system will decrease an organization’s risk exposure, and will increase employee, customer and partner confidence in an organization. An organization’s integrity will become a tangible competitive advantage. Making decisions will become easier due to better information, problems will arise sooner, and an organization will gain credibility due to consistently visible standards.