Brexit, Risk, and the Governance Problem

Again and again when you talk with non-profit leaders and employees, the problem of governance arises. While there are certainly incompetent, malicious, and corrupt boards, the main problem seems to center more around boards who are risk-averse and unwilling to take chances -- not realizing that there is no risk-free move available, as taking no obvious risk is still a risk.

"If the rate of change outside an organization exceeds the rate of change inside an organization, the end is near."

This famous Jack Welch quote misses the mark in one way -- there can be differential rates of change within the same organization. For non-profits, which are famous for having silos and many moving parts that move at different rates, governance often moves either the slowest or the most unpredictably. This creates friction, jerkiness, or breakdowns.

Brexit exhibits some of these traits, with the metropolitan centers of the UK moving more rapidly than the rural areas, changing faster, becoming more European -- with the breakdown occurring when the playing field was leveled through referendum. However, even calling for a referendum shows how out-of-touch and arrogant the PM and others had become.

The unpredictability of governance is often an underlying problem in nations and organizations.

In our world, some non-profits have presidents who rotate in on an annual basis, bringing with them initiatives that divert staff and resources, slowing and warping the organization. Others have board terms that are too short or too long. Some see activist boards micromanaging, which only causes strain and often bad decisions.

One innovative solution worth trying would be to have the board indicate to management where they would like the organization to be in three years, in general terms, and then step back, attending only to the most basic duties possible -- signing off on the audit, for instance. Three years hence, I would bet most organizations and boards would have a happy meeting to toast the success -- while the board would have to ask itself hard questions about what value it truly adds.

As the UK grapples with the Brexit outcome, perhaps this approach could work with both Parliament and the UK population in general -- simply state that in 5-10 years, it would be best for the UK to be more inclusive, more prosperous, and more influential. Then it will become clear that Brexit is not the path toward these future traits.