Every well-run business or team requires governance. Governance comes in two main forms: formal controls and social norms. If a business is well-governed, then some combination of these two will provide the governance required. Let’s take a look at each.
Formal controls: These are the rules, policies, and procedures established to ensure control and order. These are often “top down” in nature, and they comprise some of what people refer to as “bureaucracy”. Formal controls are inherently static. In a dynamic environment, if they are not regularly revisited and updated, they can become a burden to the organization.
Social norms: These are the consistent ways of operating and behaving that are woven into the culture of the business. They are the principles and “mental guardrails” that people consider—consciously or subconsciously—when they make decisions, determine priorities, and as they filter what they say and do. Social norms are flexible and adaptable, and they evolve naturally, organically over time. They can be extrapolated to new situations for which rules or policies have not yet been written.
If the “required amount of governance = the sum of formal controls + social norms”, then having more of one means less is needed of the other. What is the right balance? Most people—especially high performers—prefer a lighter reliance on formal controls, in part because they prefer more autonomy to less. We’ll likely always need at least some level of formal controls, but for most people, generally less is better. But the key to reducing reliance on formal controls is to strengthen social norms. If our social norms are weak, our reliance on formal controls will necessarily be heavy to ensure that the business is sufficiently governed. As our social norms grow stronger and clearer, we can lighten our reliance on formal controls.
Where do our social norms come from? The key sources are the mission, values, and role models (i.e., what, how, and who) of the business; these are the key sources of the culture of an organization. The clearer and the stronger our culture, the more we can rely on social norms, and the better a place it is to work.
Culture, if developed it to its fullest, is a very powerful source of strength and guidance for a business. Every honest effort you put into building your culture will be paid back many times over. It’s worth it to work every day to build and strengthen your culture. Do it on a strong foundation, with rock-solid construction, from an inspired design, and with optimism for the future.
And culture can be a very positive and powerful source of governance. One way I have heard this described is as follows: “Culture is what helps people know what to do even when no one is telling them what to do.”