Posted by: knightbird | February 22, 2015

Reducing the Cost of Governance Support Through Lean Thinking

An article in the Alaska Dispatch News about the cost of the Legislative Cafeteria started me thinking more about how to reduce the costs of governance. By governance, I mean the elected or appointed body that is constituted to consider significant questions and search for answers. My reading for the day gives me a couple of examples.

The Alaska State Senator from Soldotna is on the Senate Finance committee, a governance body charged with putting together a budget for the State. He is quoted in todays Juneau Empire responding to Governor Walker’s budget proposals: “there will be a level of discomfort and a need to pull back to essential services.” The Legislature is an expensive governance cost, and helping them solve problems often relies on hiring consultants to advise them. For example, the Alaska Legislature hired former DHHS Commissioner Bill Streur to advise them on the expansion for Medicaid at a cost of $45,000.

I have been the CEO of organizations that take up a lot of staff time by governance. Governance officials in Alaska receive rather significant compensation. Profit and non-profit corporate board members, Tribal Council members and others like corporate secretaries come at a cost. We don’t know what the cost should be, but it is significant. You can look at any Form 990 (available for free at http://www.guidestar.org), a federally required report on annual financial activity for non-profits, and see how much compensation board members receive. For fiscal year 2012, for example, Alaska non-profit Southcentral Foundation paid its 7 board members a total of $221,704 in meeting fees.

But meeting fees constitute just a portion of total governance expense. Every board seems to have a board room, at a per square foot cost depending on whether the building is owned or leased by the organization. The controls put in place by the board also consume considerable staff time. If a meeting is 4 days in length, as happened at one of my past employers, my time and the time of my executive and other involved staff are considerable. We often had 10 highly staff in the meeting for the entire 8 hours per day, or 32 hours for 4 days. Preparation time for the meeting also consumed a lot of time, as did follow up. Board travel and support costs including meals, hotel and transportation costs also contribute to the costs. Training and Conference attendance was also significant. The governance portion of my budget was in excess of $2.0 million. That was only direct cost, and didn’t include the many other costs we incurred. We had to plan and prepare reports for the board meeting. That meant we kept data and aggregated it for every meeting. And for another example, I had to approve staff travel to conferences and retreats for the sole purpose of driving board members around. I wasn’t able to calculate support costs for governance, but it was substantial.

What are the options for reducing this cost? My approach would be to introduce Lean Governance, with a goal of achieving outstanding service to the governance body by reducing defects, errors and improving Value Streams that serve them. How can we do this? We accomplish it just like we do for any Lean problem statement.

First, a Lean managed organization has fewer problems and issues to report. If we train a governance body in Lean, and have a strategic approach to the products and services we offer, reporting changes. Instead of developing reports and custom product for the governance body, we build the Visual Management System up one more level and the reporting is done for us. While I would recommend a stand up meeting for the Governance Body at the CEO’s VSM Board, you could do the report in the board room through an internet camera of high quality focused on the CEO VSM Board. Because board initiatives would be listed in an X-Matrix, and linked to A-3’s with project teams working on the project, reporting doesn’t have to be separated from regular VSM reporting.

And meetings are shorter. At my first CEO engagement, we would spend about 1½ days on organization reports. At the end of my tenure, we would finish in 3 to 4 hours. And lot of the meetings were focused on socialization.

Having a lean VMS and focused A-3’s addressing issues of concern to the Governing Body reduces the time required to prepare for meetings, and the level of participation required by other staff. They can continue with their regular duties when the Governing Body is meeting. They can also meet less frequently. And think about this possibility. The board can see updates to the CEO’s VMS board if the camera is accessible through their IT links. Imagine that. Any time you want to view progress on a project you are interested in, you sign in to your VPN and select the camera you want. If you can move the camera and focus, then any A-3 and the X-Matrix are visible to you.

Now here’s a crazy recommendation. Why not include a board member or 2 in Kaizen to help them learn what is possible and how to achieve it. My major problem with both boards I reported to is that they were limited by their education, knowledge, training and experience to what was possible. To be fair to them, so are most other leaders I have tried to engage in Lean Management: Governors, legislators, University leaders, Mayors, healthcare administrators and business leaders. They don’t get the potential.

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