What is your organization's governance model? Is there a governance model? Is one needed? When an organization has multiple owners a governance model provides effective communication of the owner's values and objectives to the Chief Executive Officer. I have found the policy governance model effective.
It is essential the board establish the organization's "Desired Outcomes." Just what are Desired Outcomes?
Desired Outcomes are best described by answering three questions:
- What is to be achieved?
- For Whom?
- What is the economic impact or measurement?
What?
What is the purpose for the organization? Why does the organization exist?
- What is the service or product?
- What is the value proposition to the customer?
- Is it a particular customer segment? Product segment?
- Is there a social element? Providing jobs? Impacting community?
- The 'what' is important to achieve the economic impact; it is not the economic measure. The "What" is the service or product intended to create the value.
- If the "what" of Desired Outcome is $$ profits or return on investment, it is unlikely to be achieved. Creating value by product or service and profits or money will follow.
Whom?
- Who is the organization to benefit? To add value? It may be customers, owners, family, a defined social-economic segment. It is the owner's responsibility to define the "whom" of the Desired Outcomes.
Economic Impact?
- Every Desired Outcome must have an economic component.
It may be return on invested capital? On equity capital? It may be capital gain in a defined time period, or the ability to sell the organization at a targeted amount. In some organizations the economic measurement may be based on cost rather than return. An example will be a partnership for the purpose selling product, and the owners establish x% of sales as acceptable.
"Desired Outcome" conveys more specificity than "mission" or "vision." It moves the discussion from esoteric to measurable outcomes. Organization vision and mission are necessary and good for communication to large, diverse audiences. The ability to evaluate the organization's achievement requires the clarity and specifics of "Desired Outcomes."
Does your governance body need more focused time on Desired Outcome?
Assign this assessment exercise to the members. Write in fifty words or less in each segment:
- What is the purpose of the organization? One is best, but there should be no more than three;
- For whom does the organization exist? Who is to receive the benefit, the outcome of our organization?
- What are the financial measurements to be achieved? What is success? What is missing the target?
Record the answers by category and group by similarity or alignment with in the category.
Score by category as % of answers in agreement.
It may look like this:
- What? 9 board members, may be up to 27 answers. But remember the organization should have no more than three "whats?" Is there one group of 9? Fantastic! And rare! Do this with each category. 80% agreement - Great!!! 50% agreement - Help is needed!!! <50% agreement - call the EMT now!!!
Desired Outcomes clarity results in board productivity, an effective accountable relationship with the CEO, and significantly increases the organizations likelihood of success, success measured against the standard - "Desired Outcomes!!"
Call John Shelford for a "Governance Development" proposal for your board. 239-293-4848 or [email protected]