Twenty-first century mainstream culture is infatuated with the idea and the practice of leadership. We love to dissect a president's popularity ratings, to analyze how a CEO turned around a floundering company into a Fortune 500 company, or how an athletic coach shapes an underperforming team into a world champion.
It is common wisdom that behind every leader are a team that executes the vision and many followers who support the leader's work. Yet, we rarely talk about the accountability mechanisms that make sure the leadership is on the right course. Any leader and all teams, organizations and nations succeed in the long run because of the strategic support and expert oversight they receive that keep them and their organizations on the right path. Governance, which includes boards, monitoring systems and signalling mechanisms like codes of conduct, ensures the success of leadership visions and organizational potential in the long run.
Corporate governance acts as an organization's "inner ear." Just as a person's inner ear is not visible to an outside observer when a person walks straight, an organization's governance structure and culture is rarely visible in the day-to-day operations of the organization.
However, when a person's inner ear is not functioning, we can see the symptoms and effects in the way a person walks: her trajectory seems haphazard, her pace is uneven and she is more likely to lose her balance and direction. Likewise, when an organization does not have good governance, we see the symptoms and effects of not having proper guidance and oversight. When an organization faces an accounting, regulatory or compliance problem, it is almost always linked to a lack of oversight. When an organization misses the mark on an important strategic milestone or growth opportunity, it is often because the management team did not receive the strategic guidance and support to ensure its success. In short, good governance may not be visible to the average person, but its absence is usually apparent when a social enterprise fails to reach its potential.
Last year, a task force of social entrepreneurs associated with the Schwab Foundation for Social Entrepreneurship spearheaded an effort to create leading insights and useful tools on governance for social enterprises. They convened at meetings to discuss the challenges their organizations face in the absence of good governance; during the Latin America Summit in April, social entrepreneurs talked mission drift, social impact and preventing burnout. They worked with the Schwab Foundation for Social Entrepreneurship, the Technical University of Munich and the European Business School to create a guidebook that can be a global public good for all mission-driven organizations. They worked with the Schwab Foundation for Social Entrepreneurship, the Technical University of Munich and the European Business School to create a guidebook: The Governance of Social Enterprises: Managing Your Organization for Success as a global public good for all mission driven organizations..
Just as we know that behind every successful leader lie a capable team and many followers, behind all good leadership is good governance. Not investing in good governance structures is a sure way to undermine your leadership and lose your followers. Infatuation often involves some mystery; we don't know why we are attracted to something or someone, but we are. Often, it is because there is something beyond sight that is creating the illusion. With good leadership, it is often good governance.