Leadership versus management captures the executive's side of the story. If company directors have a broader role to play, the way we think about who's in control and their role in creating and protecting value needs to evolve.
The following introduction to the Value-Control Matrix is based on an article that appeared in the 2016 Better Boards Magazine.
it’s hard to see beyond the forest from behind the trees: rethinking organisation design.
Peter Tunjic | Organisational Design
Ansel Adams' iconic photograph of The Tetons and Snake River is a symbol of the past and future of organizational design.
To see the past, scroll down to remove the mountains.
The half image captures the current state of management thinking - Leadership and management draws the executive's focus onto the forest and the trees. Whereas governance or assurance, draws the eye of the board to the predators hidden in the shadows.
Now scroll back. The complete image becomes a metaphor for the future of organizational design - leadership, management, governance and what has been missing - the focus on what lies beyond the forest.
To transform this natural metaphor into a diagnostic tool I created the value-control matrix. A quadrant based framework that allows directors and executives to evaluate their competence when it comes to their focus.
The two axis of the matrix are value (divided between the extremes of creation and protection) and corporate control (divided between the extremes of the board and the executive).
The Value-Control Matrix turns the traditional governing, leading, managing pyramid into a dynamic 2x2 business framework. It exposes the dilemma inherent in organizational design and gives rise to the alternate acronym - DLMA Analysis:
Directorship = Board + Value Creation
Leadership = Executive + Value Creation
Management = Executive + Value Protection
Assurance = Board + Value Protection
The framework is designed to show that each discipline is important and compelling in its own right but pulls the organization in a different direction.
The simple tool provides a way of exploring and measuring these tensions within an organization starting with the role of the board.
Getting Beyond the Pyramid
In the boardroom leadership is directorship. That's the key. Without directorship, organization's can lose sight of distant mountain summits and the boundless horizon .
Traditional governance approaches focus almost entirely on the board looking for what's hiding in among the trees - Independent directors managing risk through maintaining control, exercising managerial oversight and ensuring that risk systems are in place.
Experts agree boards need to be looking at what lies beyond the forest. Here the focus is on value creation and directorship – culture, strategizing, communicating vision, appointing the CEO and then inspiring the executive.
Directorship and assurance are both necessary but require a fundamentally different approach and mindset. Assurance is about protecting value, directorship is about creating it. Assurance concentrates on risk oversight, directorship requires risk taking. Assurance focuses on process, directorship is focused on people. Assurance is about control, directorship is about innovation.
For decades the c-suite has been debating the difference between leadership and management. It turns out that the same distinction can be made in the boardroom. The Value-Control Matrix highlights the need to split corporate governance in the same way – one discipline focused on value protection and the other on value creation. Healthy competition between directorship, leadership, management and assurance is integral to an organization's success.
It all starts with a simple question - Where is the board and management focused.
Above the Line – Directorship and Leadership
Above the line represents those quadrants that focus on value creation - the forest and what lies beyond.
Directorship and leadership are focused on doing the “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 organization.
Below the Line – Assurance and Management
Below the line represents the quadrants that focus on value protection and the trees.
Assurance or governance sets a managerial tone in the boardroom. Assurance, in the form of best practice, involves formulas and processes, monitoring and oversight, setting risk appetite, etc. From this standpoint, the board and the executives share similar characteristics captured in the phrase "things right".
Challenge yourself to answer whether your organization has got the balance between value and control right. Is the board stuck below the line, looking at what’s hiding behind the trees or are they also looking out beyond the forest? Is the board asking what if when they should be considering what else?
And if you're wondering about what the river symbolizes read this post that describes how corporations get direction.
To learn more about DLMA Analysis download my presentation from the better boards conference.