Organizational Excellence Series – Assessing governance quality

ndetails

Assessing good governance is still in its infancy. The most common approaches are focused on interactions with the top-level board and senior executive. The state of the art is starting to apply software tools and data analytics both at the board level and throughout portfolio companies.

AT THE BOARD LEVEL

Funds are spending more time to align the board composition up-front and monitor on-going governance excellence during the holding period. Beyond ensuring that the right mix of industry experience and diverse competencies are present in the board, some funds are investing in up-front team assessments to improve collaboration and the way board members interact.

There is more diversity in how funds are managing board governance during the holding period. The most structured have invested in customized on-line software tools to manage board documentation and provide a platform for continuous quality feedback. These tools can capture 360 feedback on every board member around each meeting. Did everyone contribute? Was the discussion hijacked?

Ongoing assessments are the foundation for periodic feedback discussions with each board member to ensure that their contribution is having the intended impact.

IN MIDDLE MANAGEMENT

Governance in middle management is assessed by looking at the quality of management processes in each functional area. Humatica utilizes a codified maturity model of documented best-practice management processes to assess the quality of governance. This can be done through structured interviews to understand management rhythms, management information, KPIs and feedback loops which dictate how decisions are made and implemented.

WITH FRONT-LINE EMPLOYEES

On-line tools like Humatica’s Altus behavioral benchmarking survey can be used to measure the quality of interactions which drive the ability to make and implement decisions at all levels. Early-adopter funds have applied Altus across their portfolio to identify where behaviors are consistent with good governance and where outliers indicate risks in the way decisions are made and implemented. It’s proven to be an efficient way to get early, fact-based transparency on at-risk teams and governance gaps. Transparency also provides a strong incentive for governance excellence at all levels in the portfolio company.

This article is part of our series on Organizational Excellence.

Other articles in the series:

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