Improve Corporate Governance With BPM
By Joanne Wortman | Published June 28, 2017
What is corporate governance, really?
Governance has been a popular word in the business world for quite a few years, although there are many published definitions of the term. Let's be clear: governance has been required when humans work together toward a common goal.
In the commonly accepted business parlance, corporate governance is defined as:
- "Establishment of policies, and continuous monitoring of their proper implementation, by the members of the governing body of an organization. It includes the mechanisms required to balance the powers of the members (with the associated accountability), and their primary duty of enhancing the prosperity and viability of the organization."
In small, young organizations, governance begins informally and provides the answers to Who? What? Where? When? and How? As organizations grow, mature, and interact more broadly with external parties, governance needs grow and the rules and processes that comprise the governance framework multiply. Some businesses need to provide proof of compliance to financial auditors and certification authorities.
Governance Requires Documentation and Policing
In the corporate setting, governance pervades the organization at many levels:
- The corporate officers and board of directors abide by the corporate by-laws (rules), which can only be amended by a documented formal process.
- Corporate executives further define operational processes and rules for accountability, fairness, regulatory compliance, and transparency as well as the rules and processes for resolving disputes and conflicts between all the internal and external stakeholders.
- In a similar fashion, departmental managers may also define governance processes and rules for internal departmental functions.
- Individual projects often contain governance rules and processes that apply to the responsibilities of project team members.
Clearly, effective governance at all of these levels requires the highest levels of effective business process management (BPM) - BPM is all about processes and rules. Implementing governance of a business, department, information, or a project requires:
- Processes with clearly defined steps, roles, and handoffs
- Business rules about how and when those processes are to be performed
- Crisply defined roles and responsibilities
- Procedures for handling exception and crisis situations
- Clear processes for amending the governance processes, rules and documentation
Governance requires that processes and rules are created, updated, and promulgated at many levels. Historically, these processes and rules created a body of written documentation and a flurry of change notices that grew year by year and created a huge set of responsibilities for policing compliance. Policing becomes a dispersed audit function with its own set of business rules for:
- Approval authorities for various transactions and procedures
- Reporting and notification
- Timing of formal, periodic audits
The first line of responsibility for policing governance largely lands on middle managers who spend significant amounts of time training employees on governance procedures, auditing employee work for governance lapses, reporting on compliance with governance policies and providing notification and corrective action when there is a failure in governance. A second layer of governance responsibility resides in the internal audit department. Large organizations have added the role of Corporate Risk Officer (CRO) who is responsible for ongoing assessment of internal and external risks that may create the need for changes to corporate governance rules and processes.
We can reach several conclusions about the role of governance in any organization:
- It is vital to the viability and profitability of a business.
- Corporate governance is dispersed through many operating departments.
- It is not a static framework - changes to governance rules and processes must be rolled out quickly to retain business agility.
- Effective policing may require significant management overhead
- Lapses in governance can have catastrophic effects on customer retention, brand strength, and revenues and they can lead to costly fines and legal fees.
Automated BPM Improves Governance
Given these conclusions, it's no surprise that many organizations now recognize the significant role that automated BPM can play in strengthening governance, and they include improved governance in their business cases for adopting a BPM solution. BPM solutions provide the following governance benefits:
- Only those users who have authority perform steps in governance processes.
- Software enforces the business rules, instead of human action. Business rules reduce the need for policing and auditing compliance.
- Every step in a governance process is stamped with the date, time and the id of the user who performed that step. This information can be extracted to identify the root cause of any lapse in a governance process.
- Compliance reporting is provided in real time via dashboards, eliminating the need for manually compiling reports.
- When governance processes and rules need to change (as they must, due to changing internal and external risks), the changes can be quickly implemented and enforced. Compliance no longer depends on employees' memory and willingness to abide by new requirements.
- Automation frees up middle and executive management time for leading, mentoring, and strategic planning and growing the business.
- Managers can drill down through the BPM interface to monitor compliance even when they are out of the office.
Secondary benefits are also significant:
- Automation of governance processes starts with an analysis phase that serves as an opportunity to improve those processes, making them more efficient.
- As you try to move your business toward tighter governance in any area, dashboards with meaningful KPIs give you real-time information on how compliant you are, allowing you to be more proactive about intervening in lagging departments.
- The right BPM solution for your governance needs can also be used to improve the speed and accuracy of all other transactional processes in your business. There is no need to purchase, install, learn, and administer more than one system.
- External audits and certification reviews are more efficient and less costly because auditors can easily see who, what, where, when and how governed processes are performed.
Automated Governance Process Management is Within Reach
Integrify's automated workflow solution provides all businesses with a cost-effective, quick-to-implement, easy to reconfigure governance process management framework that was previously only available to larger organizations. If you are considering automated workflow for your business or department, be sure to include corporate governance benefits in your business case.
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Joanne Wortman is an independent business/technology consultant and freelance writer in the NY Metro area. She has almost two decades of experience providing business process optimization, organizational change management, M&A integration, and program management across many business sectors, with a concentration in manufacturing.