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Fostering Employee and Community Based Ownership

Fostering Employee and Community Based Ownership

Governance System Design Considerations

The governance system should be as simple as possible. Complex systems that specify the procedures for dealing with all the possibilities that their designers can imagine often tum out to be awkward, inefficient, and harder to operate than simpler, cleaner systems. A good governance system should specify very clearly the basic organizational structures and procedures that will be used for dealing with governance matters– but should leave a great deal of room for members to develop specific procedures that are uniquely appropriate for special problems that come up.

Critical Design Considerations

Specify only the basics up front.

The temptation, in setting up a governance system (or any organizational system, for that matter), is to try to anticipate everything that might come up once the system is in operation.   That is a mistake. You will never be able to fully anticipate ahead of time what the most pressing issues will be, and what kinds of mechanisms may be needed to deal with each and every one of them.

Recognize individual differences among members, and use them wisely.

Within any firm there will be some members who have a natural talent for governance matters and other who are not so inclined or who have less talent for dealing with governance questions.These differences should be acknowledged in selecting people for roles in the governance system. It can be fatal for a co-op to act as if everyone is equally suited for every function in the organization. Initially, this will mean that certain individuals will gravitate to more central positions in the governance system than others. That is fine. But care also must be taken to ensure that those who are less inclined to seek (or be selected for) positions in the governance system are not left out– and therefore never have the chance to learn the facts and the skills that are needed in co-op governance.

Get the governance system functioning quickly.

Once a governance structure is put in place, governance should begin.  If it doesn’t begin without delay people will start to wonder if the system is really needed, or if it is just some kind of window dressing. Soon after a system  is installed,  governance  bodies must actually go to work  on  the  goals,  policies  and  oversight  functions  that will guide co-op  management  and  set  the  direction of  the  firm.  The grievance committee must be ready to act as soon as an issue is brought to its attention. Managers should be urged to  get  their  business  plans  and programs ready  for  review  by  the  appropriate  governance  groups  without delay.

Don’t turn away expertise–but be careful about how it is used.

Some decisions truly benefit from technical expertise and it may be sensible to recruit  non-members with the requisite expertise (e.g. banker, a lawyer, a production expert). Whether these individuals are engaged as consultants or members of the Board of Directors, it may turn out that the person with the perfect expertise, is not supportive of all the goals of the organization. Great care must be taken in the selection of outsiders to make sure that they support the overall aspirations of the organization–or at least that they are willing to be educated about those aspirations. Otherwise, the costs to the organization may outweigh the benefits of the special expertise that is gained.

Be careful that the small, intense governance issues do not drive out the big important ones.

When co-op members talk about governance, they often talk, with lots of emotion, about interpersonal challenges. Whether it’s the manner in which someone was laid off, or a debate between the board and the general manager. What doesn’t get talked about so often is how the long range business plan is shaping up. Or what criteria ought to be used to assess how well the top managers of the co-op are doing their jobs, or what strategy should be used to raise the capital needed to replace some obsolete equipment, or how much time and money should be spent on educational programs to help people learn how to function more competently in a democratic organization.

This is a mistake. Co-op members need to ensure that the  currently ‘hot” governance  items do not use up so much of people’s time and energy that they have nothing left to give to less intense,  longer-term,  but  ultimately  more  important  policy questions. Moreover, if co-op leaders do not give personal attention to the governance items that have real importance for the long-term well-being of the organization, they run a serious risk that these items will be side-stepped or overlooked until it is too late to do anything meaningful about them.

Watch out for a blurring of the boundaries between the governance system and the management system.

It is very common for the distinction between  and governance work to become blurred. A governance group, for example, may find itself “naturally” getting into some of the issues that really should be the prerogative of management and managers, if unchecked, may “naturally” find themselves making decisions that are really policy matters.This is especially true at times of crisis. If the governance system is the best mechanism the co-op has for dealing fairly and openly with important matters, then it is just what is needed when important and urgent matters come up.  Yet in such circumstances there is often a tendency for the top managers of the organization to meet and hash out informally what should be done.