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A Systems Approach to Governance

By Karl Sommers November 20, 2014

The purpose of this article is to answer the question: What is a governance system? Readers of Board Leadership are quite familiar with Policy Governance® as a governance system, but what makes this approach to governing a system? By what criteria should one judge whether governance is a system? And if it is indeed a system, by what criteria should one judge how well it is working?1

What Is a system?

Definition

A system is defined as a set of components that work together for the overall objectives of the whole.2 We use mechanical and electronic systems in our daily lives and the natural world is filled with living systems. In this article, we’ll focus on human systems that are necessary for groups and organizations to function effectively. The primary focus here will be on the effective functioning of the whole system, and not just each of the parts.

Levels

James Grier Miller describes eight levels of living systems.

Table 1. The Eight Levels of Living Systems
Level Name Description
1 Cell The basic unit of life
2 Organ Grouping of cells that perform a specific function within bodies
3 Individual Person
4 Group Team, department, family
5 Organization Company, nonprofit, government agency
6 Community City, neighborhood
7 Society Country, state, province, tribal group
8 Earth Everyone on the planet

The usual organizational focus is on Levels 3 through 7. Each level is composed of the preceding levels as subsystems. This is similar to the nested set principle in Policy Governance. Organizational work begins with Level 3, an individual person. For a group to be effective in its work, each individual person must also be able to contribute effectively. When working with organizational issues, it is important to first be clear on what level we’re working with. A board of directors is a group (Level 4) composed of individuals (Level 3). A board functions on behalf of an organization (Level 5) and its owners, who can be outside the organization (Level 6).

Systems Characteristics

Twelve characteristics of living systems have been identified from the work of the Society for General Systems Research.4 The first six of these describe the functioning of a system within its environment. It may be useful to view a diagram of these concepts, where the dotted line depicts the boundary for a system that is open to its environment.

1. Holism—Living systems are whole entities with unique characteristics. The whole system is able to achieve more than the sum of its parts.

2. Open systems—Living systems are open to their environment. This means they exchange information, energy, or material with their environments. In contrast, a closed system is one that is isolated from its outside environment.

3. Boundaries—Living systems have defined boundaries that separate them from their environments. Relatively closed systems have rigid impenetrable boundaries, whereas relatively open systems have more permeable boundaries between themselves and a broader higher-order system.

4. Input/Output—Living systems receive inputs from their environment, transform these inputs in some way with various processes, and send outputs back into their environment.

5. Feedback—Living systems require feedback to continue living. Information about system outputs feeds back as inputs into the system, leading to changes in transforming inputs to outputs. Feedback enables achieving more effective future outputs; it is essential for stimulating learning and change.

6. Multiple outcomes—Living systems pursue multiple outcomes. For example, in social systems, multiple outcomes stem from the fact that they are composed of people with personal as well as group objectives. All living systems also have standard internal relationships and dynamics, which are described by six additional characteristics. These reflect what actually goes on inside the system (the box labeled throughputs/processes.

7. Equifinality—Living systems are capable of using different means to reach their desired outcomes. Equifinality reflects the principle that the same results can be achieved with different initial conditions and through different means and pathways.

8. Entropy—Living systems have the natural tendency to run down over time. They slowly break down, deteriorate, and eventually die.

9. Hierarchies—Living systems are hierarchical. Any given system is composed of lower-order systems (subsystems) and is itself part of a higher-order system (suprasystem).

10. Relationships—Living systems have interrelated components. Systems that work optimally have their elements coordinated to maximize the power of the whole.

11. Dynamic equilibrium—Living systems tend to reach a steady state in which continuous inflows of materials, energy, information and feedback produce a dynamic yet steady state. In this state, they tend to resist change.

12. Internal elaboration—Living systems tend to move in the direction of greater differentiation, complexity, and higher levels of potential effectiveness.

What Is Governance?

The key concepts embodied in governance are directing and controlling. The purpose of governance is to see to it that an entity achieves what it should achieve while avoiding unacceptable behaviors and situations.5 The function of governance is necessary at each of the eight levels of living systems. It is fascinating to ponder the role of governance as applied to an individual person, and how each of the 12 systems characteristics applies to a person. The same could be said about groups, organizations, and communities. The focus of this article is on the role of governance as applied to organizations. Since each of the levels in an organization includes the lower levels, there are numerous collaborations, collisions, and relationships among, within, and between levels. The farther out one travels through these rings, the more complex the systems because more relationships occur.

What Is a Governance System for an Organization?

If governance of an organization is to be a system, it should at least satisfy the first six characteristics of living systems.  An effective governance system will not only satisfy the first six characteristics, but also strive to achieve best practices in relation to the six internal characteristics. These characteristics as applied to effective governance along with the criteria for each. A governance  system should satisfy all six of the criteria.6

Table 2. Governance System Criteria
# Characteristic Criteria
1. Holism A governance system sees the whole entity as its primary concern (Level 5). It speaks as a team with one clear voice to that entity (Level 4).
2. Open systems A governance system assures that it is open to its ownership and its environment so that information can be exchanged.
3. Boundaries A governance system has a clearly defined boundary between itself and management or operations. In addition, a governance system establishes controls by setting behavioral boundaries that clarify what is not acceptable.
4. Input/Output A governance system takes inputs from its owners and the environment and sees to it that these are transformed into customer value as it sets the direction for the future.
5. Feedback A governance system receives feedback in the form of actual performance against acceptable measures based on delegated authority and responds to it. Feedback is critical to stimulating learning and effecting positive change to ensure that future goals are achieved.
6. Multiple outcomes A governance system enables the pursuit of multiple outcomes through clear delegation. Those most impacted by an action have a voice in setting the most appropriate goals to achieve the desired customer value.

Karl Sommers can be contacted at: karlsommers@karlsommers.com

Notes

1. The systems concepts in this article stem from the work of the Society of General Systems Research founded in 1954 by Ludwig von Bertalanffy, an Austrian biologist, who is often referred to as the father of General Systems Theory. James Grier Miller’s book Living Systems (1978, revised 1995) made a significant contribution to this field. The International Society for the Systems Sciences (www.isss.org) carries on this work today.

2. Stephen G. Haines, The Manager’s Pocket Guide to Systems Thinking & Learning (San Diego, CA: Centre for Strategic Management, 1998).

3. James Grier Miller, Living Systems (New York, NY: McGraw-Hill, 1978, revised 1995).