Governance

Elements of Enterneering^®/Organisation/Governance

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In general economics, corporate governance is understood as a functional, organisational and ethical system for the control and management of a company. This system consists of regulations, norms, standards and processes that serve structured corporate management. In some countries, certain types of companies, such as banks, listed companies or state-owned enterprises are subject to specific governance requirements. However, it is generally a voluntary instrument for successfully managing companies above a certain size and complexity. Governance often also aims to address the interests of the various stakeholders of the company, which can lead to the inclusion of components that a company might not voluntarily impose on itself.

In the practical implementation of governance, one inevitably encounters the term compliance. Both terms – governance and compliance – are often used in the same context, although there is some divergence of opinion regarding their definitions and the difference between them. Enterneering^® assumes that governance refers to the internal elements a company uses for its control and management. It encompasses the elements that are essential for making sound decisions within the company and ensuring adherence to laws, external requirements and its own values. Compliance, on the other hand, is a downstream set of instruments for monitoring, confirming and documenting compliance with, or the implementation of, governance.
 

WHY?

The simplest but probably the most unfavourable answer to the question 'Why?' is: because external or legal requirements determine it that way. However, a more sustainable approach is to have an awareness of the business-related necessity and for the management to have the conviction that a suitable instrument is needed for the professional control and management of the company. In this case, the dominant factor is the realisation that the size and complexity of the company, its business model or its products have developed to such an extent that special arrangements must be made for sustainable and serious corporate governance. There are also cases where governance is implemented after a previous crisis or reorganisation.

An easily understandable explanation for 'Why?' is the cockpit motive. It is clear to everyone that steering a bicycle needs fewer instruments and processes than piloting an aircraft does, for example. Similarly, it should be clear that managing a 3-person advertising agency requires less governance than managing a 160-person Fintech company.
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WHAT?

Enterneering^® focusses on the form of governance that deals with the management of the company and the control elements that are directed inwards. The focus is on tools that entrepreneurs can and want to use to actively manage and lead their companies. Important components of sustainable governance are:

• cultural development,
• strategy orientation,
• quality awareness,
• enhanced SWOT awareness,
• safety awareness and
• confidentiality.
   

HOW?

ACTIVELY DEVELOP CORPORATE CULTURE

Successful implementation of governance includes some of the Enterneering^® elements from the area of corporate culture. Of the elements explained there in detail, the following are directly related to governance:

​These elements must be integrated into governance. It is important to establish clear responsibilities and set regular intervals. For each of the four elements, in addition to the person responsible, the intervals for review and, if necessary, revision or updating must be defined.
 

IMPLEMENT CORPORATE STRATEGY SUSTAINABLY

Within the framework of governance, the Enterneering^® element of the strategy is primarily concerned with defining the process for the corporate strategy, including the individuals responsible for it in the company. Also, it defines the associated methods, tools and documents and anchors their application. Governance should ensure that a continuous or regular strategy process is implemented. It should help maintain a clear view of the strategic goals of the company. It should ensure that the organisation works actively, with a focus on implementing the strategy and achieving the goals. Governance is thus the instrument that ensures that strategy is not only developed and described once but is also regularly reviewed, adapted or redeveloped at sensible intervals. It also ensures that all organisational units align themselves accordingly.
 

EMBED QUALITY MANAGEMENT IN THE ORGANISATION

Quality management is a discipline with a wide range of definitions, standards, methods and tools. It is important for entrepreneurs to take their own stance on quality and recognise the importance of actively managing it. Ideally, the realisation that quality management serves as an active measure to maintain and expand one’s competitiveness prevails. Within the framework of governance, it is crucial to embed the general requirements for the implementation of quality in the company. This begins with defining one's quality claim and the understanding of the term ‘quality’ in the company. At this point, many companies subject themselves to an overriding standard and define, for example, the application of ISO 9001 for their organisation or parts of it. Thus, the regulations of this standard take their place within the governance for quality management.

Even without implementing a dedicated standard, companies should define and anchor the most important components for useful quality management within their governance.
 

CUSTOMER ORIENTATION
The framework of quality management should clearly include a definition, in concrete terms, of the orientation towards customer needs in the company. This includes identifying the most important customer requirements and expectations from the company's products and services. Modern companies have a clear understanding of what purchase or application experience they want to create for their customers and what is important in this regard. Quality management should have the following components within governance:

CORPORATE MANAGEMENT
Entrepreneurs who internalise and consciously implement the most important elements of Enterneering^® inevitably create the environment for quality-conscious corporate management. Therefore, apart from the reference to the other elements of Enterneering^®, only one aspect is of relevance at this point: successful companies view quality management not as a bureaucratic element or administrative circumstance but as an important pillar of active corporate development and daily management. Strong company management succeeds in deriving and applying, from the standardised contents of classical quality management, management competence that is tailored to their organisation and suitable for practice.
 

ENGAGEMENT
As described in the Enterneering^® element of the same name, companies need committed and talented individuals in all organisational units. This applies equally to the achievement of quality goals.
 

PROCESS ORIENTATION
One of the most essential characteristics of professional quality management is process orientation. Companies are characterised by several diverse processes. This depends strongly on the business model, products and market conditions. Conventional quality management is based on a process-oriented approach. The basic logic is that the complexity and quantity of requirements, work steps and stakeholders can be better and more securely organised by planning, executing and monitoring the work in processes. These processes must be coordinated and operationally implemented. The aim is to ensure that companies develop an individual approach to active process management and integrate it into their organisation. The necessary methods, tools, internal requirements and standards must be defined. Responsibilities and roles must be established.
 

CONTINUOUS IMPROVEMENT
Within quality management, the way in which a company organises permanent further development and optimisation should be defined. This is often referred to as Continuous Improvement Process. Successful companies consciously ensure that their production processes and service delivery are continuously optimised. The approach is that maintaining the current level of performance and effectively managing upcoming changes can be achieved only through continuous development. Companies should define their organisational approach to continuous improvement, provide the necessary resources and establish clear responsibilities and roles.
 

STAKEHOLDER MANAGEMENT
The Stakeholder element in Enterneering^® describes how and why companies should deal with internal and external stakeholders who are of particular importance to the company. These explanations should be applied in terms of active quality management with relevant stakeholders such as customers, suppliers or authorities.
 

FACT-BASED DECISIONS
The principle of corporate management with fact-based decision-making is not only the basis of traditional quality management but also an integral part of the strategy element in Enterneering^®. The basic assumption is that decisions in a complex and dynamically changing environment are always accompanied by uncertainties. Therefore, it is crucial for entrepreneurs to take the relevant decisions in the company based on adequate facts. Personal perceptions and subjective criteria should be consciously supported by concrete figures, data and facts. Therefore, in holistic quality management, key indicator systems, management cockpits and requirements for analyses, evaluations and decision proposals are clearly defined and integrated into practice.
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ESTABLISH ENHANCED SWOT AWARENESS AND CAPABILITIES

Each kind of governance should describe and establish an appropriate form of regular operational engagement with the four SWOT dimensions and the additional element of risk. An appropriate process with adequate methods and tools should be defined to ensure that the state and expression of these five components are regularly assessed so that appropriate actions can be taken.

• Strengths: What are the company's strengths? Where does it outperform the competition, and in what tasks does it excel effortlessly?
• Weaknesses: What weaknesses does the company have? Where does it fall short compared with competitors and which tasks does it find particularly difficult?
• Opportunities: What opportunities exist in the market for the company? What options can the company leverage to its advantage?
• Threats: What circumstances or developments pose a risk to the company’s success, and what are the critical influencing factors?
• Risk: Where do threats meet weaknesses or vulnerabilities, and is there a relevant probability of occurrence?

While the current corporate strategy and strategic goals must always be taken as a basis when considering the first four SWOT dimensions, the corporate risks should be dealt with in a comprehensive and independent manner. For this, it is advisable to develop a dedicated approach to internal risk management and to define a suitable process.

In many industries, risk management has established itself as a complex and comprehensive tool, with its own systems, responsibilities and processes. Here, regulatory or supervisory requirements often dominate. Entrepreneurs should determine for their company what is necessary, sensible and practical, and what they want to actively integrate into their corporate management. Adopting none of these seems just as inadvisable and unsustainable as implementing the greatest possible scope.

Within the governance framework, in addition to the intervals for consideration and responsibilities, regulations for handling the activities to be carried out at those intervals should be defined:

• Identify.
• Assess.
• Treat.
• Monitor.
   

IMPLEMENT SECURITY MANAGEMENT

Comparable to quality management, there are international norms and standards for security management. Basically, security management is about identifying imminent dangers from and for business operations, as well as defining and implementing suitable preventive, defensive and corrective measures. Classic components of operational security management are:

• regulations and concepts for accident prevention,
• dealing with sources of danger in the areas of health and environment,
• protective measures against potential threats to the operational process, from inside and outside,
• information technology security,
• emergency plans for incidents, accidents and disasters,
• restart or recovery plans after severe operational disruptions.

To better assess how extensive a security management system needs to be implemented, many companies find it helpful to look at insurance policies. Many business insurance policies have requirements for appropriate security management. And under certain conditions, breakdowns, interruptions or even the downfall of a business are not insured if appropriate safety measures are lacking. Furthermore, it is advisable to identify potential threats and hazards with the help of the SWOT analysis mentioned earlier and assess them for their impact, i.e. the potential damage they can cause to the company.

The higher the potential for damage, the more valuable the implementation of suitable security management becomes. When it comes to averting risks to health and the environment, entrepreneurs often face legal obligations and the risk of personal claims. Finally, the product and contract portfolio should also be examined for corresponding threats. If there is a threat of high liability claims and claims for damages in the event of interruptions or failures, this should also be considered appropriately.

With the advent of digitalisation, no company should ignore the topic of security management. The scope of cyber security has taken on significance in almost all industries. The size of the company plays a relatively subordinate role in this context. The background is simple: the more digital the business models become, and the more the technological and technical components of a company are distributed and networked, the greater the risk of unintentional or malicious influence and targeted attacks.

Security management should be part of governance in every company and entrusted to qualified hands. This function must be provided with an adequate budget and clear requirements for the security architecture, security management process and reporting or escalation obligations. In this matter, the management should not make any compromise it has not actively assessed and consciously accepted.
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REGULATE THE HANDLING OF CONFIDENTIALITY

Clear guidelines for handling confidential information and data must be defined as part of governance. These must be communicated in a suitable manner within the company and declared as binding obligations. Typical types of confidential information include personal data, trade secrets, contractual confidentiality obligations and sensitive customer data. In many countries and markets, the handling of certain kinds of data is regulated by law. For instance, the handling of personal data within the European Union is comprehensively regulated by law, and violations are penalised with considerable sanctions.

In summary, it should be emphasised that corporate governance should not be viewed as a bureaucratic act of self-government or an unlimited field for the realisation of all standardisation and regulation actionists. It should always be developed and implemented based on the principles of common sense, corporate responsibility and pragmatic diligence. The sustainability of a company's governance relies heavily on the personal conduct of its executive management. When members of the executive management do not authentically support governance, it quickly becomes a bureaucratic act of self-administration.
 

Related content:

• Elements of Enterneering/Culture/Code of Conduct  ❭ ❭ ❭