5B. Governance Overview

5B1. Governance is how the organization manages the business. It is how the organization translates strategy into action.
- 5B1i. “Business” does not just refer to profit organizations but is used generically for any organization that is working to fulfill its mission.
5B2. Governance in VM 1.0:
- 5B2i. Governance occurs within the vertical structure and is conducted within each function.
- 5B2ii. The leader of the function uses the staff meeting as the primary governance vehicle. He may collect input on decisions from the functional group members and in some cases reach consensus with the group, but ultimately, the decisions are made by the person with the individual accountability for the functional area and thus with the authority to carry out the resulting decisions.
5B3. Governance in MM 1.0:
- 5B3i. Governance in MM 1.0 is still within each vertical area, but some vertical functions take their direction from other vertical areas.
- 5B3ii. These vertical functions are typically centralized groups like business units (BUs), product groups, support groups, etc., that need to align with other functions to achieve their goals.
  - 5B3iia. Groups that support a business unit, but are in separate functions, end up receiving direction from two sources—the specific area and the business unit, which is a form of dual reporting.
5B4. Why governance in VM 1.0/MM 1.0 doesn’t work:
- 5B4i. Support groups that serve multiple BUs or product groups are typically receiving direction from the multiple areas they serve. This results in a lack of alignment.
- 5B4ii. The groups affected by a decision made by a vertical function are not included in the decision-making process.
- 5B4iii. Vertical functions that serve other vertical areas have no clear overall direction because there is no cross-BU or cross-product governance.
5B5. Governance in MM 2.0:
- 5B5i. Governance in MM 2.0 is conducted through horizontally structured Steering Councils.
- 5B5ii. Governance is a collaborative activity conducted by the Steering Council team, led by the Steering Council team leader.
- 5B5iii. The Steering Council is the main unit of governance structure.
  - 5B5iiia. A Steering Council oversees a strategically important segment, such as a sector or a vector.
  - 5B5iiib. Everyone on the governance team shares team accountability for the outcomes of the Steering Council and has organizational accountability for the strategic plan of the organization as a whole.
- 5B5iv. Key functions of a Steering Council:
  - 5B5iva. Define strategy.
  - 5B5ivb. Define shared goals for the segment.
  - 5B5ivc. Govern and manage the segment.
  - 5B5ivd. Decompose segment goals into subgoals or deliverables, which are in turn owned by individual members of the Steering Council.
  - 5B5ive. Define projects that will translate goals into deliverables.
  - 5B5ivf. Make decisions and solve problems.
  - 5B5ivg. Resolve interdependency issues.
  - 5B5ivh. Coordinate with other Steering Councils.
  - 5B5ivi. Liaise with stakeholders.
  - 5B5ivj. Prioritize within the context of higher level goals and priorities.
  - 5B5ivk. Provide oversight to ensure strategy is executed.
  - 5B5ivl. Integrate separate segments into a whole.
  - 5B5ivm. Fund projects to support segment initiatives/projects.
  - 5B5ivn. Support other councils in line with organizational accountability.
  - 5B5ivo. Manage interdependencies.
  - 5B5ivp. Resolve conflicts.
- 5B5v. Not all governance happens within Steering Councils. Segment owners also govern their segments, but within the context of the sector that the segment falls into.
  - 5B5va. Every segment must be part of at least one sector.
- 5B5vi. Governance is a key responsibility of the leaders of the organization.
  - 5B5via. Leaders set direction for the organization. They define priorities. They decompose goals into manageable deliverables.
  - 5B5vib. Decisions on how to do the work are made at the deliverable team level and are not considered part of governance.
5B6. There are three levels of governance: executive, strategic, and operational.
- 5B6i. Executive steering is the highest level of governance. Decisions that affect the enterprise as a whole are made within the Executive Steering Council (ESC), which owns the strategic plan (its development and execution).
  - 5B6ia. The strategic intent is defined by a broad team of leaders, and then the ESC defines specific strategic goals (the strategic plan) based on that intent.
  - 5B6ib. The strategic plan (its development and accomplishment) is the shared accountability of the members of the ESC.
- 5B6ii. Strategic steering makes high level, longer-term decisions related to sector goals. It translates goals into subgoals, or in the case of vectors, into initiatives.
  - 5B6iia. Strategic goals for sectors/vectors are set in collaboration with the ESC.
  - 5B6iib. The sector or vector steering council assumes accountability for its strategic goals. Members of the council also share ownership of the overall strategic plan as part of their organizational accountability.
- 5B6iii. Operational steering makes shorter-term decisions and translates segment goals into deliverables (or initiatives into projects).
5B7. There can be more than one level of strategic steering and more than one level of operational steering if the size of the segment warrants it.
5B8. There are no reporting relationships between levels of steering. Instead, Steering Councils are linked by interlocking membership, sponsor/team leader relationships, or liaison relationships (which is the least preferred method for connecting levels). (See Section 3I.)
5B9. MM 2.0 governance rules:
- 5B9i. Steering Councils are accountable for governing the segment they oversee.
- 5B9ii. If a segment is too big to manage with a single Steering Council, create a tiered system of Steering Councils (subcouncils for smaller segments).
- 5B9iii. Steering Councils should make decisions that are aligned with their spans of accountability.
- 5B9iv. Conflicts between two or more Steering Councils that cannot be resolved between them should be raised to the next higher level council that has a span of accountability that encompasses both councils.
- 5B9v. There should be a single point of contact or interface between two related Steering Councils.
- 5B9vi. Councils should push decision making down to the lowest level Steering Council or deliverable team whose span of accountability covers the decision to be made.
- 5B9vii. Councils should define goals and deliverables that minimize complexity.

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