Governance Includes Roles of Leadership, Management, and Ownership

Governance determines control of the private business. Governance of a private business is a perspective viewing those in the roles of leadership, management, and ownership participating in a decision-making process. Owner authority and selection of managers is established in the legal documentation of the business entity. The owner’s leadership role assures control through policymaking.

As the owner goes through the life cycle of a business, going from founder and producer to owner-manager, and then owner-policymaker, the management role comes and goes, but the leadership role is constant. It is helpful to contrast the two roles.

Leadership establishes direction by developing a vision of the future and strategies to produce the changes needed to achieve that vision. From a strategic plan, a manager organizes and budgets resources and establishes detailed steps and timetables for achieving results. Leadership aligns people by communicating the vision through words and deeds to those who need to cooperate to accomplish the vision. Following the vision in the plan, a manager establishes structure through staffing and delegating responsibility to execute the plan providing procedures to guide people and systems to monitor implementation. Leadership motivates and inspires people to overcome barriers to change through the articulation of common values. Following the plan, a manager monitors results and identifies problems then organizes procedures to solve those problems. Leadership involves the potential for useful and dynamic change. To consistently produce the desired results, a manager works to institute procedures of predictability and order.

When there is only one person in the business, the planning conversation can be with the mirror, and shared vision is not an issue. As the business grows, there is a need for planning to become a group activity. Then leadership requires taking the goals and actions of the plan and making it a shared vision with the stakeholders of the business, especially those who must execute the plan. This is where many owners fail to perceive an important shift in the leadership task. Now the conversation is no longer with the mirror, before and after the planning the conversations must be with all stakeholders with the intent of accomplishing a shared vision.

For a business in the owner-policymaker stage of the business cycle, the owner as leader and policymaker of the business will define goals in a strategic plan. The executive managers of the business, with the goals in mind, set action plans to accomplish the goals and establish mileposts to monitor the progress of the action plans. Once there occurs a failure to meet a milepost, the action plan and possible the goal must be reconsidered and the plan revised. The constant, leadership, is the task of communicating the goal and the action plan in such a way as to make it a shared vision, and then monitoring the progress toward the goal, refining and redirecting as needed.

By definition, a shared vision requires more than one person. A plan not communicated will be a plan not executed. The best way to make a plan a shared vision is to have conceived the plan with the input and contribution of the people who will execute the plan and thereafter have communicated that plan in written form to those people. This information must be carefully gathered to avoid tainting the reality and authenticity of that information. This preliminary work, most of which will need to be done by conversation, will be important to the decisions made in creating the plan, but also to the execution of the plan. Those whose counsel has been sought will better respect the plan, even if that plan may not have decisions made as they would have made them. The beginning of communicating a plan is to have it in writing, and that documentation should show the basis for the decision. The act of execution, where the creation of shared vision can inspire successful execution of the plan, is accomplished through effective communication of the goals and actions of the plan and having those goals and actions become shared. This is the culmination of the leadership task.

This is not a delegation of authority or loss of control. The legal document forming the business entity will determine the role and selection of executive and advisory positions. The owners of the business with the designated authority will make the determination of the policy for the business (unless they delegate that authority by inaction, ignorance, or inattention). Ideally, those policy decisions should be made with full knowledge of the opinions, intuition, experience, and predilections of those who must execute the plan, but allowing stakeholders to participate in the decision-making process does not delegate the responsibility and authority to make the decision.

When the strategic plan has been determined by the owners with the input of the stakeholders carefully sought with care for reality and respect for the perspectives of those stakeholders, and then communicated with care to the managers creating a shared vision of executing the goals of the plan, the execution of the plan, and its subsequent revision and renewal, will enable the success of the business.