DLMA analysis is a structured way to analyze the four management disciplines involved in running a company - Directorship, Leadership, Management and Assurance (alternatively corporate governance).
The premise is simple.
The tool gives company directors and executives a straight forward way to categorize their roles and create a shared insight into where they're putting their time and energy and asking whether they've got the balance right.
DLMA analysis uses a quadrant based matrix to evaluate how well a firm is performing in each of these areas:
DLMA analysis does for organizational design what SWOT analysis does for strategy. It provides a solid framework to analyze how board and executive roles produce positive and negative effects on business performance and reveals the competitive tensions between them.
The Dilemma in DLMA ANALYSIS
There's a dilemma at the heart of every business model. A company needs all four management disciplines to grow and prosper. But, the forces of value protection pull in a different direction to value creation and they're all competing with each other for energy and attention.
The battle between protection and creation is played out in the c-suite and the boardroom. Directorship and Assurance are in tension on the left of the matrix and Leadership and Management are in tension on the right. And, to some extent, all four are on a collision course. For example, directors are faced with a dilemma of monitoring the executive in their Assurance role and inspiring the executive in their Directorship role. Academics and experience tells us that one role creates distrust and the other relies on trust.
The key to addressing the dilemma is the idea that boards and executives work above and below the line.
Below the Line
Below the line represents the quadrants that focus on value protection.
Assurance in the form of "best practice" corporate governance involves formulas and processes; monitoring and oversight, setting risk appetite, formulating risk tolerances, adopting standards, delegating responsibilities, establishing risk committees, implementing risk programs etc.
What those who put risk in the center of the boardroom don't seem to realize is that Assurance shares managerial characteristics captured in the phrase “things right”.
Whilst most directors don't think they're managing there's a distinct managerial feel to corporate governance. Not that there's anything wrong with managing. There's a vital role for boards to ask "what if" and for executives to ask "what to do now". But not all the time.
To be clear, when the board is working below the line in their Assurance role they're not micro managing. Instead their "macro managing". Doing different managerial type activities but with a similar state of mind.
Above the Line
Above the line represents those quadrants that focus on value creation.
Both Directorship and Leadership share the characteristics of leading captured in the phrase “right things”. The Board and executive have complimentary and collaborative "leadership" roles. They make different decisions, pull different leavers, but boards that lead and executives that lead share the same objective of creating the greatest possible value for their firm.
The big challenge for many firms is that what passes as "best practice" in the boardroom falls almost entirely below the line. This can leave the Directorship quadrant empty and companies exposed and suffering. Worse still, if the board never gets above the line, the constant challenging and questioning of the executive can create an unhealthy adversarial relationship. Undermining the conditions required for board to get above the line to embrace its shared leadership role.
HOW TO USE DLMA Analysis
DLMA Analysis is a brainstorming tool. It is designed to provide shared insights and not individual solutions.
Its value is that it provides a simple, structured and effective way to have a refreshingly new conversation at your next board retreat. After 30 years of the same corporate governance discussion, perhaps it's time to ask some different questions.
Here's a list to get you started:
- Where is our organization focused? What % of time, energy, thinking is devoted to each quadrant?
- Are we dividing our time between our Directorship and Assurance functions? Do we understand the difference between governing and directing?
- Are we looking beyond the forest or are we stuck in behind the trees?
- Are we asking "what if" before we've agreed "what will be" and have we considered "what could be better"?
- Are we conscious of the tension between our Directorship and Assurance roles and how are we dealing with it?
- What's our SWOT Analysis in each of quadrant of the DLMA Matrix.
The process doesn't have to be fancy or need facilitation (you might struggle to find one for awhile, though as the first "expert" in DLMA Analysis I'm available). Just jot dot down where you believe your organization fits in each category and discuss.
What you'll discover is your firm's own DLMA profile and be able to ask, perhaps for the first time, whether we're getting the balance right or whether we need a re-balance.
I hope you find DLMA analysis useful. If you have any suggestions on how it can be improved and even whether I've got the colors right please add a comment below.
In the meantime, if you're interested in learning more about DLMA analysis you can read more here and see how the idea has developed over the years. Alternatively, there will be DLMA Analysis App soon to help capture, analyze and share results. Subscribe to ondirectorship.com to get updates on the release date.