Agile or Adaptive Governance required?

As non-profit organisations have increasingly moved to use adaptive strategy to address the rapidly changing and complex environment in which they serve their purposes, the question of how these strategic style shifts fit in the governance model arises.

A ‘system of controls’

Much governance literature has promoted the view that governance is about establishing and maintaining a ‘system of controls’, so that guardrails are set to ensure effective compliance and risk management alongside strategy execution. Control systems and their associated performance metrics tend to reflect their origins in ‘assembly line’ industries, where quality control meant removing variability and ensuring the consistency of outputs.

This view of governance also supported models such as the GRC (Governance, Risk and Compliance) approach, and adherence to standards like ISO and Australian Standards.

Quality standards such as ISO9000, defined as “a set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements needed to maintain an efficient quality system”, help guide many organisations.

While they were intended to apply to any industry and to be applied to organizations of any size, their popularity waned (if they ever really took hold), especially in service and creative organisations where the use of template letters and pro forma approaches failed to recognise the dynamic and innovative nature of their work.

The tension between risk management and innovation has always existed of course, and we see ample evidence in business case studies and media stories where inadequate safeguards were used. Promoting judicious innovation (risk taking) while ensuring regulatory compliance and maintenance of client service standards is the more sensible approach.

Some nonprofit directors are finding themselves torn between traditional expectations of them as guardians of high level strategy, risk and compliance, and calls for them to be more agile or adaptive due to COVID, climate change, economic and cultural shifts, and technological disruptions. Consequently they have been exploring agile strategy, adaptive strategy and other ‘resilient governance’ models.

Move fast and break things

Much of the discussion about these experiments in governance, employs concepts and language sourced from the software industry. Agile for example was a response to the waterfall model of software development. It was later expressed by Facebook in their motto, “move fast and break things”. While Facebook ceased using this motto in 2014, it continues to inform those who like to promote ‘disruptive technologies’. It also tends to be the sub-text in agile strategy deliberations, implying that longer range strategy formation is no longer required, and that short term goals should be set continuously by ‘agile organisations’.

Such abuse of a valuable project management method misapprehends the purpose of agile methodologies, and therefore applies them inappropriately to governance. Boards using such an approach would be like puppies on the beach chasing new smells and anything that moves (hence the header image for this post).

Jumping from one thing to the next without an abiding focus on worthy outcomes is not good governance. ‘Moving fast and breaking things’ in an non-profit using agile governance would likely mean damaging the entity’s reputation and degrading service standards and strategic effectiveness.

Adaptive governance

‘Adaptive governance’ is more nuanced than ‘agile governance’, in that it recognises the importance of planning over the three strategic horizons, and shifting from the old metrics based on outputs (the ‘assembly line’ worldview) to outcomes. It promotes innovation, not simply as a reaction to changing external circumstances, but primarily motivated by the desire to continuously add value.

It also provides more latitude for staff and volunteers involved in strategy execution to work within more flexible performance buffers. Budgets are more rrealistically understood to be budget estimates, with uncertainty and volatility factors accepted as part of the operating environment. The outcome measures used for performance monitoring are not simple number targets, but also qualitative measures of client and stakeholder outcomes resulting from the organisation’s work.

Note: This post was triggered by valuable discussion of agile and adaptive governance models offered by Marijn Janssen and Haiko van der Voort, from the Faculty of Technology, Policy and Management, Delft University of Technology. While mainly targeting government responses to COVID-19, the observations made in this opinion article are also highly relevant to non-profit governance.

Agile and adaptive governance in crisis response: Lessons from the COVID-19 pandemic (International Journal of Information Management
Volume 55, December 2020, 102180)

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