| Matrix organization working on the basis of owner directives |
Corporate governance is about the objectives of a company or authority. You can think of it as a manual or instruction that says what the organization should achieve.
- For a private organization, there should be an 'owner's directive' with performance targets.
- A government agency is given a "letter of appropriation" that sets out how the agency will support the policy.
These governance documents are contracts for a CEO and a Managing Director of the organization, respectively, what its purpose (mission) is and the owner's goals (vision).
In a private company, business lines are defined. Each business area has a budget, often for one financial year, which is used for different "initiatives". This budget is used for different "initiatives", which can be day-to-day activities or special projects. A budget can be divided into several portfolios with different focuses, e.g. earmarked for product development. An authority defines areas of responsibility in a similar way and then allocates the budget according to the priority of an area.
To guide the activities within a budget and a portfolio to the right objectives, the Objectives and Key Results (OKR) structure is applied strategically for the portfolio and tactically for the initiatives. It is basically a list of important things to achieve and how to know if you have achieved the goal. Based on this, the portfolio's budget is allocated to the initiatives created to implement the governance. When initiatives are managed as projects, the scope and end date are specified. In agile governance, the initiatives constitute value streams and a distribution of the portfolio budget is made between its initiatives (value streams). The allocation is reassessed e.g. every 6 months according to what is currently to be prioritized based on expected customer benefit or other compelling circumstances such as legal requirements etc.