• Corporate Governance Designed With Long-Term Mission In Mind
• Public Benefit Company Status Alone Is Not Enough
• Engineering Leadership Selection
• Parallels In Product Development
• System Modeling Workshop for Corporate Governance
• Feedback Requested
• Key Reference Materials

Companies often claim one set of values, but their actions demonstrate otherwise. Similarly, significant improvements in company culture and value delivery are often destroyed by a change in executive management. In practice, any promise is only as good as the longevity of the current management, which seldom lasts all that long.

This pattern rings true at multiple levels within an organization. How often have you observed the product quality and customer value an organization provides erode over time, especially in the face of ownership and executive management changes?

Remember when Boeing was known for building some of the best passenger planes around? Yet, with changes in executive management the engineering and quality focused culture at Boeing was slowly destroyed in pursuit of short-term profits. This precipitated the 737 Max MCAS related disasters, which deeply damaged the public’s trust in the company.

A similar pattern is also seen within product development groups. Efforts to improve a product development group seldom survive a change in senior engineering management. The most effective product development organizations tend to be designed around self-managing, cross-functional, cross-component teams which directly collaborate with users and customers. For all the lip-service to the contrary, this is seldom seen in practice. Yet, in spite of the odds, I have frequently been successful in helping clients build radically more effective product development organizations. Unfortunately, I have also seen such improvements be rapidly eroded when senior engineering management changes.

In large measure, structure drives culture. As long as certain structural elements are left in place, organizational physics will drive behaviors counter to the pursuit of delivering the greatest long-term value. I have long known this to be true within product development groups. I now see the same is true within corporate governance. The solutions in both cases are structural, and are far more entwined than I once realized.

Corporate Governance Designed With Long-Term Mission In Mind

There is an on-going effort to address mission drift at a corporate governance layer. The idea is to create companies which can be trusted to do the right thing over the long-term, and which are resistant to the forces of “financial gravity” which otherwise destroy long-term value creation for most everyone involved.

A mission-locked company tends to result in greater long-term profitability, and protects the company from short-term profiteering. The end result is designed to be better for long-term investors, better for employees, better for the community, and better for customers.

Eric Ries’s new Incorruptible book is driving far greater awareness of how to protect mission within the tech startup community, while still being able to attract funding. Ries’s book was my first exposure to these ideas. As I have dug deeper, I have discovered the legal infrastructure for addressing these concerns has been maturing for quite some time. Hopefully the reference content listed below will help you to become more familiar yourself.

Public Benefit Company Status Alone Is Not Enough

It is important to realize there is far more to creating effective mission-lock than just incorporating as a Public Benefit Company.

Incorporating as a Public Benefit Company allows a board of directors to make holistic mission focused decisions which consider more than shareholder primacy alone. Yet, far more is needed to avoid purpose washing.

In theory, the board of directors of a traditional corporation is allowed to make decisions based on long-term as well as short-term shareholder interests. Unfortunately, various system forces focused on short-term shareholder benefit tend to consume the ability of a board to focus on long-term value. This might not be true of a tightly held family owned enterprise, yet it does tend to be true once a company becomes publicly owned, has venture capital shareholders, or is owned by a private equity fund.

As an example of the additional layers of mission-lock protection, governance mechanisms included in the Incorruptible/Virgil legal templates include:

• PBC status
• Director & Officer Oath
• Mission Guidance Entity Bridge
• Various protective provisions
• Quorum requirements
• Dual-class voting
• N+1 board formula

The books and whitepaper in the reference section below cover each of these in great detail, so I won’t spend any time on them here. The key point is to realize multiple layers of protection are needed to provide effective protection.

The good news is the legal templates available within the Incorruptible community are sufficient for an early-stage startup founder based in the United States to quickly put the necessary protections in place with minimal cost, while safely deferring the more involved decisions until later.

Engineering Leadership Selection

I will now try and illuminate how corporate governance structures tend to influence what happens within the product development groups of a large corporation.

Many of the changes required to create more effective product development groups require optimizing for long-term value delivery, and accepting some degree of momentary short-term cost. Executive management willing to focus on long-term value rather than short-term value is very important if any improvements are to be sustainable over the long-term.

The personal values of a senior engineering executive, the incentive systems in which he/she finds himself/herself, and his/her depth of understanding of the nature of the work; tends to drive the organizational design decisions he/she makes. Below those with the authority to change the design of the product development group, structure generally drives culture far more than the reverse. When a company’s corporate governance layer is primarily focused on extracting immediate short-term value, the selection criteria and incentive systems of the executives tend to follow.

I have often seen radical improvements within a product development group be lost due to a change in executive engineering management. A more insightful long-term focused engineering executive is generally responsible for sponsoring and supporting improvement efforts, but they are seldom replaced by someone with a similar value system. It seems the selection of an executive with the personal desire and depth of understanding to focus on long-term over short-term value is often an anomaly, rather than the norm.

There definitely isn’t a one to one mapping between effective corporate governance and effective governance within a product development group. But, I think there is a greater hope of more lasting improvements when executive selection is biased towards long-term value delivery.

Parallels In Product Development

As part of my journey towards becoming a Certified LeSS Trainer & Coach I came to realize how deeply structure drives culture. I had a sense of this early on, yet the more time I spent being mentored by Craig Larman, Viktor Grgic, and Bas Vodde; the greater my conviction became. I know this to be true within product development, so I find it very easy to believe the same is true at a corporate governance level.

The system-modeling-based backbone of my Certified LeSS Practitioner workshop is largely modeled after Craig Larman’s design. The main objective of the extensive system modeling activities is to help people understand for themselves how the organizational design of a product development group influences value delivery. This helps them to see what needs to change in their own organization if they wish to achieve different results than they see today. This has nothing to do with this or that framework, it is simply organizational physics.

Optimizing for value delivery within product development typically requires all of the following in one form or another:

• Accepting the natural variability of the work and managing within that.
• Placing the people doing the actual work in direct collaboration with the users and customers, so as to ensure clarity of understanding of the business problems being addressed.
• Creating a culture which embraces technical excellence and the fast feedback loops that enables. Doing so typically requires embracing an organizational design which is supportive of the personal safety required for engineers to spend time on quality. Failure to address the structural issues creates artificial delivery pressures which very predictably destroy trust and morale, destroy long-term quality, destroy adaptability, and destroy forecast accuracy.
• Formation of cross-functional, cross-component, self-managing teams which are empowered to create changes across the entire product architecture in service of customer needs.
• Mechanisms for creating focus and alignment across teams, without counter-productively introducing layers of coordination roles which distance engineers from the customers.

LeSS is one organizational design for achieving all of the above. Change the nomenclature, and the underlying ideas remain the same. Organizational physics is agnostic of nomenclature.

I should note there are situations in which the greatest value is delivered by determining whether or not a product idea is worth pursuing further. In a startup situation, the pursuit of technical excellence might result in different technical standards than what would be appropriate for an established product with known product market fit.

System Modeling Workshop for Corporate Governance

A system-modeling-based workshop design would likely be just as relevant to helping people understand different corporate governance design choices as it is to helping people understand how to design effective product development groups. As you will see from reading the books and whitepaper listed above, there is a lot of situationally dependent nuance as to the optimal choices when setting up a Mission Guidance Entity.

Taking the time to model the design of a system with causal loop diagrams facilitates far deeper group discussions and insights than otherwise occur. In terms of depth of understanding, reading through some of the design choices in the reference material is one thing. Slowly reasoning through the various system forces involved as part of an extended system modeling workshop is quite another.

With enough systems thinking to internalize the consequences and side-effects of different choices before finalizing any decisions, the resulting decisions should be much better. Attendees would then be all the better prepared to make concrete choices in collaboration with their legal council.

If there is enough interest to justify doing so, I think it would be interesting to build out just such a workshop. The overall design and logistics for such a workshop would be very similar to my existing Certified LeSS Practitioner workshop. The system modeling content, reference materials, and focus of discussions would be substantially different; but the instructional design patterns and logistics would be largely identical.

I also think it would be important to have a lawyer experienced in mission-locked corporate governance structures join me in leading the workshop.

One of the challenges of in-person workshop is likely to be the cost. By the time one is done with the all the cost calculations, workshops of this nature tend to cost at least $1000/person/day. So a 2-day event would likely need to cost at least $2k/person. There is also the overhead of having appropriate legal council co-lead the workshop, which might push the price up a little more.

To be economically viable, it is likely the workshop will need to focus on founders of later-stage startups incorporated as Public Benefit Companies who are yet to establish a Mission Guidance Entity. I believe the workshop would also be very valuable to early-stage founders, but it would likely be cost prohibitive for many of them without some sort of sponsorship.

Feedback Requested

If anyone is interested in attending or sponsoring such a workshop, please let me know.

You can reach me at james@agilecarpentry.com.

Please also consider filling out my PBC Workshop Interest Survey.

If enough people are interested at a price I can afford to do it, I am very likely to build and launch it.

Key Reference Materials

Three great references for learning more about mission protection at the corporate governance layer include the following:

• Incorruptible by Eric Ries: I like Eric Ries’s book from the perspective of motivation for change, and for the emphasis on the needs of startup founders. It is also accompanied by some great legal templates. As Eric Ries is actively promoting this book, you will find him being recently interviewed on a large number of podcasts. There is a section of the associated Incorruptible community website which organizes links to these interviews and other related content. Eric Ries’s interview on Lenny’s Podcast is one of the better videos to start with.

• Becoming a Public Benefit Company by Michael Dorff: Explores the legal considerations of different governance design choices in more detail than Ries’ book. Dorff’s book also addresses the motivational aspects, although it is somewhat less startup focused. The book reads like it was written by an articulate and thoughtful lawyer.

• Mission Preservation Governance Mechanisms for Startups whitepaper by Halcyon Futures: Provides a quick overview with a startup founder focus. This whitepaper is a nice supplement to Eric Ries’s Incorruptible book.

Both books and the whitepaper largely assume a company is incorporated in the United States. Much of the advice would still apply to companies outside of the United States, although the legal specifics would vary.