Issues in corporate governance and service governance as a solution

Issues in corporate governance and service governance as a solution

The justification for service governance is summed up neatly in the words of a CEO I know, when asked how things in the company were going: he said “Everything’s going OK, except operations.”

While he and the company’s board were happy that the finances were in order, things at the operational end of the organization were not working. There was a disconnection between the governance of the business and what was actually happening on the ground.

Peter BrooksAs absurd as it may sound, board directors – especially in large organizations - can sometimes find it difficult to understand what the organization is really doing and, consequently, what theyare supposed to be doing! This is a scenario that board directors shouldn’t take lightly: if a court case ever arises involving directors they need to demonstrate full knowledge of what was going on, including financial matters. Leaving it up to the financial director is not good enough; doing that might mean a director potentially didn’t understand the implications of a decision made.

The service governance solution

Adopting a service governance approach gives board directors a better grasp of the cost and the value of what an organization does in practice. It’s about breaking up the organization into its component services and applying consistent measurement criteria across them all.

This service portfolio enables the board to view the services coherently and recognize the value delivered for the investment made. This informed view which, over time, can become an “at a glance” dashboard allows understanding, not only in finance terms, but also a view of end to end services, including those provided by third parties.

The ability to look at operations in this way can also help to provide clarity and identify any particular service that causes headaches and where governance isn’t working.

Clearly, organizations thrived before the advent of service governance so why should this be on the agenda now?

Previously, it was considered acceptable to have a strong Chair, or CEO, who knew all the moving parts of a business and who exercised control with the rest of the board as a “rubber stamp”. However, in growing organizations with an increasing number of people involved, the clarity of the picture is lost. Equally, if an organization loses the principal director and there’s no succession planning this creates a big problem. Alternatively, the principal director might be acting in his or her own interest, providing the potential for large scale fraud. Or, a department acting alone on a project could be posing a major risk to the organization as a whole.

The presence of service governance allows other directors to question what’s being done. As companies get bigger, there is greater pressure for businesses to be good corporate citizens and that includes all directors’ involvement in fiduciary responsibility. The requirements have always been there, but not necessarily acted upon. Now, companies have to be equally accountable for all their foreign subsidiaries and ensure that governance is handled the same way wherever the company has operations.

In planning terms service governance is helpful for building future vision and strategy by knowing “where we are and how well we’re doing”. Using the service portfolio presents the mix of services being used and how they need to adapt to a changing market before problems arise. The board can look closely at services delivering little or less value than before and dig the organization out of a hole before it’s in too deep.

As we move to a more service-oriented world – which is more than just profit and loss – service governance allows these discussions to happen at board level without the need for directors to get involved in the granular detail of management or technology. And this ability to scrutinize offers an in-built and early deterrent for those prone to getting involved in sharp practices.

Service governance and best practice

A range of best practice guidance is relevant for making service governance work well in organizations.
For example ITIL® is crucial for structure and detail; MoV® (Measurement of Value) helps understand business value and how to measure it as part of a portfolio; MoP® (Management of Portfolios) reflects the importance of everything to a corporate-wide service portfolio while M_o_R® (Management of Risk) helps understanding of risk per service. As service governance is corporate-wide, you’d want a programme office running it, hence the need also for MSP®.

In addition, when auditing IT services COBIT 5 is an important element, while TOGAF helps guide the architecting of systems.

Each of the best practice approaches will fit under the umbrella of service governance and large mature, global organizations should strive to have all of best practices running together. Smaller companies can also benefit from a service portfolio but will have more flexibility to take what is useful to them and their needs.
The service portfolio will define organizational services with the intention to get best return on investment. Companies will know the services, their cost and value and, ultimately, improve their understanding of the value delivered.

More AXELOS Blog posts from Peter Brooks

Delivering organizational value through service governance

Peter Brooks’ upcoming book - “Adopting service governance” – provides the first stages of insight for boards to read and plan service governance.

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Comments

16 Mar 2016 Fustbariclation
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If you're interested in this article, there is more about Service Governance here:

http://service-governance.org

This site is a worked example, a Case Study, if you will, of how Service Governance would actually work in a real organisation.

As you'll see, it is work-in-progress, but it has been designed top-down, so you can see the board view of the Service Portfolio, and the first few layers below that.
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