Agile Organization meets Corporate Governance: “I am not crazy; my reality is just different from yours”

If an agile organization had a personality of its own it would probably be the one of the Cheshire Cat: “I am not crazy, it is just that my reality is different from yours…” The dear and trickster Cheshire Cat, even though appears to be mad, actually gives strong glimpses of reality and logic to Alice in Lewis Carroll’s novel. Sometimes a guiding force for her, he seems to have some sort of privileged strategic knowledge and logic, otherwise he would not have been able to formulate the famous phrase “If you don’t know where you’re going, any path will take you there”.

It is not unknown that corporate governance is a good and robust system of rules, practices and processes to direct and control an organization. It is the kind of management system that is suitable and formulated for conventional hierarchical organizations with a mental infrastructure of mistrust, organizations that seek control and stability, and that empower vertical management decision lines. And just like the Queen of Hearts in Alice’s Adventures in Wonderland is preoccupied with absolute rule and execution, hierarchical organizations and corporate governance systems are worried with structuring authority, communication and monitoring, controlling business malpractices and, depending on the system, with providing accountability to shareholders and stakeholders at all levels. In contrast, agile organizations whose mindset is based on trust, are focused on open collaboration, adaptability, flexibility and resilience. In comparison to hierarchical organizations they may seem as crazy, elusive and uncontrollable as the Cheshire Cat seems to the Queen of Hearts. 

Corporate governance is better suitable for conventional hierarchical organizations that seek control and stability, and that empower vertical management decision lines

As experts on the topic have established, agile organizations leave as much responsibility as possible to their people… pretty much like the Cheshire Cat leaves for Alice. They are orientated to share knowledge, to support self-direction and self-control and to allow the development of corporate strategies from down to top. But while agile organizations have become rather common nowadays, corporate governance practices have remained the same, turning into a bumper block for their growth. Current corporate governance practices and frameworks seem to not recognize people’s autonomy and self-discipline, neither allow the development of strategies from down to top. 

In consequence, the inflexibility of corporate governance frameworks may lead to inefficiencies and low productivity and low job satisfaction. Furthermore, some patterns of operation in corporate governance may constrain the production and integration of new knowledge which is a major output for people-centered organizations and the input for strategy formation and innovation. And exactly as the Queen of Hearts represents a voice of fear, corporate governance frameworks may unfortunately end as a rhetoric treat for business development. 

Corporate governance practices need to recognize people’s self-direction and self-control, and allow the development of strategy from down to top

To avoid the negative effects of traditional corporate governance, new and different sets of practices and rules need to be promoted and allowed. Frameworks that reflect the mindset of trust, the multiple levels of leadership, transparency and open communication of agile organizations. A corporate governance that emerges not as a preventive control measure, but as fomenting strategy for development, that realizes that agile organizations are not crazy… they are just a different reality.

Corporate governance should emerge not as a preventive control measure, but as fomenting strategy for development