Inputs, Oversight, Outputs – the stuff that leaders work with.

Broadly speaking leaders should be concerned with three key things – they should be concerned with these things simply because ultimately responsibility for these things falls squarely onto their shoulders. These three broad categories can also be used to create the daily task and activity schedule for leaders.

The three broad categories that should take up the bulk of a leader’s time and attention are:

  • Defining and Managing Inputs
  • Overseeing Implementation
  • Monitoring and Measuring Outcomes

If leaders are ultimately responsible for the effective control of the organisation – and they do so by creating and maintaining a space for the business of the organisation to take place in – by building the organisational bucket – then the way they do so is summarised in these three key areas leaders should be involved in.

Defining and Managing Inputs covers all the resourcing elements required for an organisation to fulfil its objectives. The danger is to too narrowly define these around money and people as key resources. They are certainly included but the scope of inputs is far, far wider than these elements. Inputs would include everything from the organisation’s business model, the strategy over the next one, two, five, ten years, a robust risk framework and core organisational policies covering each and every area of the business of the organisation – from finances to people to operations to marketing etc.

In summary all the inputs relate primarily to the “space creating” elements, tasks and activities that leaders can and do focus on. Anything on the leadership agenda that has an effect on the space within which the business operates, on either the edges of the space or the area within the edge, would fall into this broad category.

A critical part of this would also include that “authorising policies” that would mandate the executives to perform their roles accountably within the business space. This would include both the job descriptions (that would constrain each position and outline the “space” for each and every position) but also the mandates that would actually authorise the individuals to act within that space.  It is often not merely enough for people to know what they should be doing – i.e. the parameters of the part of the organisational space they are expected to fill – but it is also vital for them to know that they are entitled and authorised to act within this space. Imagine getting to the top of the Eiffel tower, stepping out of the elevator (or off the top step for the energetic ones) and noticing that the platform you were now on, high above Paris, had no safety barrier. One of two scenarios would unfold! Either you would simply freeze – wait for the elevator and get straight back in, or you would move toward the edge and run a serious danger of falling right off. This is similar in organisations that lack clear mandates delineating the boundaries and authorising them to act within those boundaries. Either every time a decision is to be made another party is roped in – normally a superior who can ill afford the time requirements of this extra work, or without clear limits of authority the individual oversteps the boundaries – normally to their own and often to the organisations detriment!

Inputs therefore tend to look forward (in time) and provide not only resources but also enable or activate the use of these resources in the pursuit of the organisational objective. In a sense the primary question leaders need to ask about identifying and managing inputs is, “what do we have and what are we going to do with it?”

Some of the tools organisational leaders would use to define and manage inputs include:

  • The organisation’s business model, strategy and business plan;
  • Governance frameworks, guidelines and policies;
  • Operational frameworks, guidelines and policies covering the entire range of the organisations operations;
  • People documents, including job descriptions, performance criteria and mandates;
  • Financial frameworks and budgets.

Defining and managing inputs is really all about identifying and managing the organisation’s capabilities. The organisational capability is the combination of everything it has and everything it can do – it would comprise all the physical assets, all the people assets and everything else that combines to deliver a specific and unique offering.

Monitoring and measuring outputs on the other hand tends to look back on what has happened and relate to whether the organisational objective was achieved, if so how well were the resources utilised to this aim, if not how did the lack of inputs or the lack of proper implementation based on the inputs affect the outcomes negatively.  Key tools in monitoring and measuring outputs would include audit, reporting across the whole range of activities within the organisational bucket, for example operational reporting, remuneration elements based on achievement of objectives, compliance issues and ultimately (in a for profit environment) dividends paid to shareholders. To be effective the monitoring and measurement of outputs would need to be firstly linked very clearly to the organisational objective or strategy – without this there would simply be no way to properly assess the success (or not) of the organisation over the reporting period. Secondly the organisation would need to look back comprehensively over the whole scope of the organisation’s business over the reporting period. The entire organisational bucket needs to be monitored and measured since reporting is not only concerned with what happened but also, and more importantly, why it happened. Too many organisations simply tick the boxes in their reporting – they seldom examine the underlying reasons – for either success or failure – in enough depth to properly use this information to better inform the management and control of inputs going forward. The only rational reason to look back in an organisation is to be able to better look forward.

The tools organisational leaders would work with to monitor and measure outputs would include:

  • Reports encompassing the entire range of organisational activities, in particular;
  • Audit and related reports;
  • Performance reports;
  • Compliance reports.

Unfortunately there has typically been far too much focus of the backward looking elements of running an organisation at the expense of the forward looking elements. One symptom of this has been the, often exclusive, focus in corporate governance handbooks on the elements of audit, risk management and compliance that simply act as an “add-on” to an organisation. These functions are not properly embedded in the actual organisational operations but act as a policeman to check that there is sufficient compliance. Thankfully this is changing as the emphasis on governance has highlighted the priority of actually changing the way things are done to ensure compliance, risk management etc as a matter of course.

Leaders who tend to use monitoring and measuring more than identifying and managing will end up with an overly retrospective viewpoint. They will often develop a tendency to overreact to problems encountered and try to fix them by simply doing more of the same – this seldom if ever works. The key question leaders need to be asking themselves when faced with reports and audits that look backward at a previous periods activity is firstly, “is this a true and complete reflection of the organisation and is the information actually useful and usable?” and the second question that should follow quickly is, “what are we going to do about it into the future?” There is no use looking backward unless it has an impact on what lies ahead.

Before elaborating on this further there is obviously a critical gap between the management and control of inputs and the monitoring and measurement of outputs – this is the ongoing challenge of overseeing implementation.

One of the fiercest debates in corporate circles is where the division of roles and responsibilities lies between a board of directors and the executive team. This has been, continues to be and I am sure will remain a debate into the future. Part of the reason for this is the way that organisations (in particular the private for profit company) have evolved and developed – and in particular how they have been used and abused by those who control them.

A brief history of the corporation, as a separate legal entity from its owners, begins essentially in the mid 1800’s. At this time owners of assets and businesses saw the need to appoint another layer of people to whom they could delegate some of their controlling powers. Thus began the gradual journey toward a clear separation of ownership and control – and by default a distinction between the parties that owned and those that ran these entities. In a sense the board of directors emerged as the key connection between owners and managers – representing the interests of the owners, delegating their power and control to the corporation and being held accountable for the direction and performance of the corporation. As corporations grew and strengthened a stronger and stronger case arose for increased levels of accountability (and associated liability) for directors, recognition that an independent perspective would enhance accountability and a shift toward more and more formalised corporate structures to enhance this accountability. The result of this one hundred and fifty plus years of development have left us on the one hand with incredibly large and powerful organisations the largest of which are more valuable than many nations and on the other end of the scale multitudes of tiny, small and medium companies. The result is an elegant type of structure that recognises the rights and responsibilities of the various parties involved and the legal framework for these entities seeks to place these rights and responsibilities in the right place – and allow for resolution of disputes between the parties should they arise.

If legal responsibility and therefore potentially liability lies with both the executive leadership team and with the board of an organisation then surely both should have a joint interest to ensure the effective running of the organisation. While there is certainly value in differentiating between the differing roles of governance and management too often this differentiation establishes an unhealthy separation that promotes an adversarial approach. This is reflected in an “us versus them” attitude that can lead to both ineffective and inefficient behaviour but also, and with potentially worse consequences, the covering up and selective filtering of critical information.

A helpful analogy is that the board should not be acting as a jet plane flying over the company every two months or quarterly and attempt to gather all the requisite information at high speed and from a dizzy height. Boards should act more like a helicopter hovering at an appropriate altitude to enable the continuation of the business but being able to land when required – i.e. when critical issues arise. This could certainly involve directors, especially non-executive directors, more than they may be accustomed to but surely if they are as liable as anyone else on the board and leadership team they should also have a right of access. This shifting between the role and responsibility of the board and the role and responsibility of the executive is what I call the “challenge of the dotted line”. This is one of the biggest challenges especially in the often highly politicised organisational environment. This challenge requires mature individuals supported by robust policies that facilitate the requisite information flows and decision making – and this challenge is not restricted to the large multinational organisations but often as evident in the smallest organisations.

In many senses the two extremes of massive powerful corporations and tiny, small and medium sized corporations are identical. They comprise a separate legal entity housing the business that is owned by some parties and controlled by (possibly) others. In another sense these two extremes look so different that it is difficult to imagine any similarities between them.

One of the key similarities is that each type of entity is led by a team of leaders and that team of leaders is a team of individuals – a group of people balancing the circles of ME, US and WE.

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