The case of the troublesome homograph

 

Confusion sometimes arises in our non-profit governance and management work where a word we use is assumed to have a particular meaning, but actually another meaning is intended. I think a case can be made for that to be the case with regard to the terms “business use case” and “business case“.

Here the word ‘case’ is used four times, with at least three (and arguably four) separate meanings:

1. an argument or proposition
2. an instance or example
3. a business process
4. a governance decision-making tool – a particular type of argument or rationale.

Polysemes and homographs

Polysemy is the capacity for a word or phrase to have multiple meanings
Polysemes are words possessing multiple meanings
Homonyms* are words that sound the same but have different meanings
Homographs are a subset of homonyms, describing words with the same spelling but more than one meaning e.g. mean/mean
Homophones are a subset of homonyms, describing words that sound the same but which have different spellings and meanings e.g. see/sea

Confusing narratives with arguments

We usually use the words adjacent to a polyseme or homograph to discern the particular meaning intended. e.g. legal case, brief case, case study, upper case, case load, hopeless case, etc.

When reading or hearing the terms “business case” and “business use case” however, that method could mislead us. While these two terms share two words, they refer to quite different things. As illustrated in the first chart below, a business case is essentially an argument or rationale for proposed action or inaction. A “business use case” however, is a description of processes used by actors to complete a task, usually in a digital environment. (Hence, ‘the case of the troublesome homograph‘.)

A related example of similar words being used for different purposes focuses on the word ‘story’. The use case is sometimes confused with a user story, and that in turn can be confused with the storylines method. The following chart seeks to further differentiate these, by outlining the steps and stages involved for each. (While at opposite ends of these charts, it is worth noting that the storyline method can be used to present a business case.)

Context and Meaning

While it is widely recognised that truth is a relative concept, it remains true that the words we use need to hold specific meanings in our work context. Otherwise, misunderstandings will occur, leading to risks that could have been avoided by adherence to standards, including nomenclature.

In another time, the difference between a narrative, a description, and an argument seemed clearer. While there is an important role for descriptions, and narrative approaches in many aspects of non-profit governance and management, directors and managers cannot rely on those methods for effective decision-making. Argument and evidence-based reasoning are the right tools for that job.

(*Not to be confused with Houyhnhnms. A fictional race of intelligent horses described in the last part of Jonathan Swift’s satirical 1726 novel Gulliver’s Travels. According to Wikipedia, Swift apparently intended all words of the Houyhnhnm language to echo the neighing of horses.)

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Strategy and Risk: 2 sides of one coin

 

The argument that strategy and risk are two aspects of one governance activity has been highlighted by many pundits over time. In practice however, some non-profit boards still separate strategic planning from development and review of their risk register.

My previous two posts (see links below) promoted the concept of continuous monitoring of the external and internal environments, and adjustment of strategy in the light of significant changes in stakeholder needs and emerging priorities. This post looks at the parallel issue of ensuring that risk considerations are integrated into strategic planning.

Risk Bow-ties

Let’s start with a schematic called the risk bow-tie, illustrated below. Risk managers use risk bow-ties to help them identify various threats associated with a particular type of hazard, and then to assign escalating threat controls to each in order to prevent the hazard being triggered. Subsequently, for each of the possible consequences of that hazard, a range of escalating mitigation measures is assigned, to minimise the harm or damage caused by the event.

A variation on the risk bow-tie makes provision for both unexpected threats, and unforeseeable events (often called ‘black swan’ events, like the COVID-19 pandemic).

Strategy Bow-ties

The bow-tie chart device has also been used as a marketing tool to identify ways of optimising customer retention. My version however, is more closely aligned with the risk bow-tie, as it adopts similar graphic elements to describe the consideration of options, strategic decision making, and execution measures for primary and secondary goals.

Adaptive Governance

COVID-19 has dramatically demonstrated the need for boards to be resilient, and to employ ‘adaptive governance‘. Recognising the continuous nature of the board’s strategic and risk management roles therefore, and the need to integrate strategy and risk deliberations, the chart below combines the risk and strategy bow-ties in a mirrored timeline. As the strategic question “What should we do and why?” is asked, the risk question “What could go wrong?” is posed simultaneously. That question is applied to each of the action options before the board, including the option to do nothing.

The parallel chains of strategy and risk bow-ties reminds us that responsible boards integrate their risk deliberations into all their decision-making and strategic planning. Treating them as separate and potentially unrelated activities, possibly addressed at different times on the board governance calendar, is likely to result in more adverse outcomes, with negative consequences for your organisation’s reputation and finances.

Whenever we schematise complex concepts and processes like strategy and risk governance, we are likely to over-simplify and generalise. That said, this ‘adaptive governance’ schematic is primarily intended to encourage non-profit directors to see risk as a key dimension of every decision they make, rather than a matter they attend to once a year when the risk register is updated.

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Looking outward and inward

 

Non-profit directors are not usually spies. They do need to gather and analyse ‘intelligence’ however, to inform their governance activities. This includes monitoring the external environment and internal systems, processes and performance.

Business intelligence software and dashboards are available commercially. While some non-profits will be able to afford these, most smaller entities will seek free or low cost alternatives.

In the EDM model of governance, evaluating and monitoring activities inform the directions set by your board. Both activities rely on access to timely, relevant data, and insightful analysis, to inform board decisions and adjustment (or even pivoting) of your strategic direction.

Looking outward

Environmental scanning is one form of intelligence gathering. This is sometimes treated as an annual or triennial activity rather than as part of a continuous monitoring process. While your board may formalise an overview of key developments in its regular strategic planning program, every board meeting should involve the identification/analysis of, and response to, key developments. Sometimes these developments will be so urgent that they will necessitate immediate governance action.

Stepping back from day-to-day governance activity so that stakeholder needs are re-assessed, and emerging developments are analysed, is essential if your non-profit is to remain relevant to those stakeholders. Most non-profits do this on a cycle somewhere between annually and triennially. Unfortunately, some treat this as an episodic chore rather than a continuous process of staying in touch with the context in which they are working. When boards remain alert, they can flexibly adjust their goals and activities to ensure that the organisation remains up-to-the minute, and at the cutting edge.

The COVID-19 pandemic has demonstrated the imperative for boards to be ever-vigilant. They need to be ready at a moment’s notice to make directional, risk management or resource allocation decisions to anticipate likely scenarios as they unfold. This suggests that your planning cycle should be both continuous and episodic.

Looking Inward

Evaluation and monitoring of the governorganisation’s performance and conformance are not limited to maintaining a ‘steady state’. These activities also help your board to determine where more or less resources and oversight should be directed.

Strategic opportunities can also be identified from looking at demand levels and response capacity. The control systems established by the board through policies and procedures include reporting arrangements which ensure that business intelligence is continuously provided to them.

Strategic analysis tools

Effective governance requires more than a loose recognition that internal and external developments deserve attention. Directors need to use tools and models that have stood the test of time.

The chart below highlights 11 strategic analysis tools, with the traditional SWOT analysis featured because it integrates internal and external perspectives. Five inward-looking and five outward-looking tools are also identified – although there is much commonality between a number of approaches (especially when looking outward).

Links to more information on these models and approaches:

https://en.wikipedia.org/wiki/SWOT_analysis

prsmith.org/sostac/

https://en.wikipedia.org/wiki/5S_(methodology)

https://www.mindtools.com/pages/article/newSTR_91.htm

https://www.heflo.com/blog/process-mapping/5w2h-method-examples/

https://www.smartinsights.com/marketing-planning/marketing-models/how-to-use-the-7ps-marketing-mix/

https://ceopedia.org/index.php/STEEPLE_analysis

https://www.mindtools.com/pages/article/newTMC_09.htm

https://pestleanalysis.com/what-is-pestle-analysis/

https://business-docs.co.uk/downloads/project-crisis-management-dashboard-and-excel-log-raidar-template/

STEEPLE Analysis

Of the various environmental scanning models suggested by governance and strategy advisers, I have always found the STEEPLE framework offered the most helpful insights. The inclusion of the ethical dimension ensures that social responsibility and the social license to operate are considered alongside other key trends. This chart illustrates only some of the factors and data types such an approach can encompass.

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Duty of care, skill and diligence. Part 3. Governance capability development

 (Part 1 and 2 - https://cutt.ly/G04R1JA)

“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”

Abraham Maslow

While it may seem obvious that non-profit directors require a set of skills to perform their duties, elections or appointments to these roles rarely involve scrutiny of the skill profiles or levels of individual candidates, or indeed the mix of skills across the board.

Associations are frequently bound by their constitutions to elect only members, with no guarantee that the members who succeed at the ballot possess any of the skills that might be objectively described as ‘sufficient’. To that extent, they can be at risk of being governed by boards that view everything through the relatively narrow lens of members’ business needs. These constraints don’t apply to commercial boards, which are obliged to appoint directors with the range and depth of skills required to effectively govern their organisation.

Charities more often tend to appoint or elect directors with an eye to their qualifications and skills (beyond being interested in the cause, or being a donor). From my observations, they are usually more careful than associations, despite which the ACNC reports of poor governance in various charities provide evidence that director skills were often lacking.

As noted in Part 1 of this series on the ‘Duty of care, skill and diligence‘, common law (determined by courts) dictates that in performing the ‘duty of care and diligence’, a reasonable person will exercise a level of skill or expertise commensurate with their responsibilities.

Competency frameworks

While various competency frameworks have been devised to describe the skills required of directors (see links below), I found the governance capability framework for community organisations developed by the Victorian Department of Health and Human Services offered the most relevant reference for the non-profits I deal with.

This framework is supported by resource materials which help explain the skills required for effective governance, and ways they may be utilised.

The header image above blends this governance capability framework with the prism of clinical competence developed by Dr G. E. Miller (slightly modified by me to separate ‘attitudes’ into ‘attitudes and beliefs’). Under Miller’s model, it is only in the ‘Does’ triangle that the doctor truly performs, and of course, that is just as true for non-profit directors.

The framework referenced by the AICD was devised by Prof. Geoffrey Kiel et al, and highlighted in their valuable reference Directors at Work. In that model, the key areas of competence are listed as:
• Industry: Experience in and knowledge of the industry in which the organisation operates.
• Technical: Technical/professional skills and specialist knowledge to assist with ongoing aspects of the board’s role.
• Governance: The essential governance knowledge and understanding all directors should possess or develop if they are to be effective board members. Includes some
specific technical competencies as applied at board level.
• Behavioural: The attributes and competencies enabling individual board members to use their knowledge and skills to function well as team members and to interact with key stakeholders.

Kiel G, Nicholson G, Tunny J A, Beck J, Directors at Work: A Practical Guide for Boards, Thomson Reuters Australia, 2012, p 203-4

Director development policy

A board comprised of directors who only possessed ‘industry’ skill sets would be like a tradesman with only a hammer at his disposal – everything would look like a nail. Decisions made by such a board would be more likely to serve ‘narrow sectional interests‘ than to take broader compliance, social and environmental considerations into account. Such a board may therefore be at risk if it failed to develop the directors’ skills in the other key domains.

Director development is therefore an essential aspect of good governance. Recognising that non-profit directors will have a range of governance experience and expertise, the developmental programs you offer your directors will desirably be calibrated to their individual needs. When framing your Director Development Policy, as well as outlining the competency framework applicable in your organisation, you may want to consider where each of your directors sits on the scale from novice to expert, and choose programs likely to promote skills beyond the foundation level for those with some experience. (As an aside – in my opinion, some of the competency frameworks promoted in the marketplace are designed as much to promote revenue generation from recommended course fees as they are an objective analysis of skills required for effective governance).

The ‘sledgehammer‘ of novice-level skills will not help your board to make complex strategic and risk management decisions, which require the ‘scalpel‘ of high level judgment and governance insight.

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The shared purpose mirror: Ideal decision and execution triangles

 

It has been widely recognised that good governance decisions involve identification of the ‘sweet spot’ where cost, risk, and benefit trade-offs can be achieved. A ‘mirror’ set of balancing factors is involved however when management is charged with implementation of those decisions – as illustrated above.

Best practice strategy execution requires management to identify the most efficient and effective systems and methods of achieving the desired outcomes, whilst also ensuring that security and compliance requirements are addressed. The ideal combination of people, processes and technology will be a product of the trade-offs between productivity, security and system control measures.

The ‘iron triangle’ is a familiar concept when engaging consulting or other third party solution providers, where cost, scope, and time are the major factors determining the quality of the project outcomes. In that case, it is understood that each side of the triangle impacts on the others. Allowing less time is likely to increase project costs if you want to maintain high quality outcomes (assuming these are realistic in the time remaining). Scope creep can increase costs and cause delays. Lower budgets are also likely to reduce the time allocated, and the quality of the project outcomes.

The Iron Triangle

The ‘ideal decision triangle’ (illustrated on the left side of the header image) used to guide board deliberations recognises that to undertake new ventures, some level of ‘acceptable risk’ will need to be agreed, along with the allocation of sufficient resources. Under-funding a project may sabotage the outcome, while allowing insufficient time also puts the potential benefits and outcomes at risk. ‘Bending rules’ or breaching compliance obligations may achieve a short term advantage, but will be likely to lead to fallout with stakeholders, and possibly with regulators as well.

In the same way, management needs to use the ideal system/process triangle (illustrated on the right of the header image), recognising that achievement of the board’s goal/s involves a trade-off between productivity and use of required security and compliance protocols. Such protocols may be instituted to ensure compliance with internal policies, procedures and other controls, and/or to ensure adherence to regulatory obligations. Another consideration when executing board decisions relates to the level of supervision required (potentially reducing the productivity of the supervisor) depending on the risks, complexity or sensitivity of the activities.

Using these triangles helps to ensure that ideal governance decisions and management systems/processes mirror each other, and so enables alignment of these two key parts of your organisational structure in achieving your shared purpose.

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