Quality Festival 2019

ISSN 2620-2832

Miloš Jelić1
HUMAN GOVERNANCE FOR EXCELLENT
Ana Aksentijević Jelić ORGANIZATIONS

Abstract: Every excellent organization derive from

leadership. Leaders in organizations accomplish their future
through core purpose that is grounded on vission, mission,
values and corporate behaviour. Organization values and
role models for integrity and ethical behaviour make part of
corporate governance that is primarilly aimed to raise profit
and enhance organisation’s reputation. However, leaders in
excellent organisations inspire people and create a culture of
involvement, empowerment and accountability. They also
promote a culture which incites the generation of new ideas
and new way of thinking what may lead to inovation and
organisational development. To be effective these leader’s
actions require people to possess two characteristics that are
not recognized within corporate governance: self-
consciousness and self-accountability, but they are the pillars
of other approach – human governance. Ostensibly, to be
successful excellent organization leader has to combine these
two distinct approaches what the authors of the paper try to
elucidate.
Keywords: Business excellence, HR, human governance,
corporate governance

1. Introduction which enable them to strive for economic,

social and ecological sustainability, (EFQM,
Excellent organisations meet their mission 2010, pp.11-18).
and progress towards their vision through As may be observed from the above
planning and achieving a balanced set of selection of business excellence principles
results that meet both the short and long term described by European Foundation for
needs of their stakeholders and, where Quality Management, the role of leaders
relevant, exceed them. They have leaders appears crucial to make an organization
who shape the future and make it happen, excell in its business surrounding. When
acting as role models for its values and leaders in organizations pursuing business
ethics. Excellent organisations value their excellence are concerned, their preferred
people and create a culture of empowerment performance noticeably changed upon the
for the balanced achievement of onset of the global economic crisis. Latest
organisational and personal goals. Also, they published EFQM model 2013 identified two
embed within their culture an ethical key leaders' virtues: their active role in
mindset, clear values and the highest shaping the future in which they will serve
standards for organisational behaviour, all of as a role model inspiring people both in

1
Corresponding author: Miloš Jelić
Email: [Link]@[Link]
3
internal and external environment, and also that should be taken care of, once an
their flexibility which will provide organization wishes to attain sustained
organization capability to foresee and timely success.
react to challenges on the market thus to
2. Corporate governance
secure on-going success of the organization,
(EFQM, 2012, p.4)..
When an organization meets the
FQCE model 2019 (the model recently
requirements of ISO 9001 (ISO 9001, 2015,
introduced in Serbia to serve in National
5.2.1), it means that the organizational policy
Award for Business Excellence)1 identifies
is aligned with the purpose and context of
following items against which the excellence
the organization and supports its strategic
in leadership is to be demonstrated:
direction. In this way quality management
A Leaders create conditions in which an system holds control under corporate
organization fulfils its mission and strive to management and a part of strategic
its vision in a way that people are committed management (more precisely – its
to reach organizational goals; implementation). Once the organization
B Leaders regularly monitor and review intends to excel, it is necessary to establish a
organizational management system by mechanism at a higher level. A
keeping track of organizational key commendable solution that may secure the
performances and processes they „own“, organization heads to its vision is the
C Leaders recognize stakeholders of the introduction of corporate governance.
organization and they maintain regular (Figure 1)
communication thus to manage stakeholders
needs and expectations are met;
D Leaders incite to develop and use their
potentials to a highest extent by nurturing
organizational culture to encompass:
empowerment, process ownership and true
partnership, (FQCE model 2019, 2019).
The adjacent concept of business excellence
is the concept of sustained success. Unlike
the business excelence concept which is not
formatted, the sustained success concept is
Figure 1. Corporate Governance vs.
embodied in ISO 9004 standard. To achieve
Management (Tricker R.I. 1984)
sustained success an organization should
head beyond the quality of products and
services meeting the expectation not only of Corporate governance is to be understood as
its customers but also of remaning interested the system of rules, practices and processes
parties aiming to intend their satisfaction. by which a company is directed and
The standard states that organization’s controlled. Corporate governance essentially
people are a vital resourse, and there should involves balancing the interests of many
be fair and ethical processes and approaches company's stakeholders, such as
in place to support their recruitment and shareholders, management, customers,
retention. (ISO 9004, 2018, 9.3). The suppliers, financiers, government and the
standard points out four issues: competence, community. There are three pillars of
engagement, empowerment and motivation corporate governance: transparency,
accountability, and security. When
integrated they define a company’s integrity.

4 M. Jelić, A. Aksentijević Jelić

All three are critical in successfully running Proponents of corporate governance say
a company and forming solid professional there’s a direct correlation between good
relationships among its stakeholders what corporate governance practices and long-
includes board directors, managers, term shareholder value. Some of the key
employees, and most important, benefits are:
shareholders.  high performance Boards of
In simple terms, transparency means Directors;
claiming that processes and transactions are  accountable management and
observable to outsiders. It includes making strong internal controls;
necessary disclosures, informs everyone  increased shareholder engagement;
affected about company’s decisions and  better managed risk; and
complying with legal requirements.  effectively monitored and measured
Transparency is a critical component of performance.
corporate governance because it ensures that There are no strict rules on establishing
company’s actions may be checked at any corporate governance in an organization
time. However, transparency is even more since the organizations have to design and
important at the top of the company where implement such corporate governance that
strategies are created and decisons are made. will comply with legal requirements and
Accountability is major for building integrity meet particular needs. However, there are
of the company. Shareholders are very keen some practices that are regarded the best to
to learn who will take blame when yield benefit to every organization,
something goes wrong in any of company’s particularlz for excellent organization, (Jelić,
processes. On the other hand when things go 2018, p.28).
smoothly (as expected), knowing that
someone will be held accountable for future a) Build a strong, qualified board of
mistakes increases stakeholders’ confidence. directors and evaluate performance.
However, accountability covers not only Boards should be comprised of directors
failings, since it may yield merits, as well. who are knowledgeable and have expertise
When idea of accountability is approached relevant to the business and are qualified and
with the positive outlook, people will be competent, and have strong ethics and
more ready to carry out their tasks properly. integrity, diverse backgrounds and skill sets,
When people understand the weight of their and sufficient time to commit to their duties.
responsibilities, they are inclined to make  Identify gaps in the current director
certain that they carry out their tasks complement and the ideal qualities
properly. and characteristics, and keep an
While company is expected to maintain their “ever-green” list of suitable
process transparent and people accountable candidates to fill Board vacancies.
in performing tasks, the organizational data  The majority of directors should be
are to be secured from unauthorized access. independent: not a member of
The requirement is clear but simply management and without any direct
complying with security standards does not or indirect material relationship that
suffice. Organization needs to nurture a could interfere with their judgment.
culture of security to ensure that corporate  Develop an engaged Board where
data and client information are kept safe directors ask questions and
from unauthorised access both from inside challenge management and don’t
and outside. (Roman, 2014) just “rubber-stamp” management’s
recommendations.

5
  Give new directors an orientation to respect and compliance with laws and
familiarize them with the business, policies without fear of recrimination is
their duties and the Board’s critical. To create and cultivate this culture:
expectations; reserve time in Board  Adopt a conflict of interest policy, a
meetings for on-going education code of business conduct setting out
about the business and governance the company’s requirements and
matters. process to report and deal with non-
 Regularly review Board mandates compliance, and a Whistleblower
to assess whether Directors are policy.
fulfilling their duties, and undertake  Make someone responsible for
meaningful evaluations of their oversight and management of these
performance. policies and procedures.
b) Define roles and responsibilities. d) Evaluate performance and make
 Establish clear lines of principled compensation decisions.
accountability among the Board, The Board should:
Chair, CEO, Executive Officers and
 Set directors’ fees that will attract
management.
suitable candidates, but won’t
 Create written mandates for the
create an appearance of conflict in a
Board and each committee setting
director’s independence or
out their duties and accountabilities.
discharge of her duties.
 Delegate certain responsibilities to
 Establish measurable performance
a sub-group of directors. Typical
targets for executive officers
committees include: audit,
(including the CEO), regularly
nominating, compensation and
assess and evaluate their
corporate governance committees
performance against them and tie
and “special committees” formed to
compensation to performance.
evaluate proposed transactions or
 Establish a Compensation
opportunities.
Committee comprised of
 Develop written position
independent directors to develop
descriptions for the Board Chair,
and oversee executive
Board committees, the CEO and
compensation plans (including
executive officers.
equity-based ones like stock option
 Separate the roles of the Board plans).
Chair and the CEO: the Chair leads
the Board and ensures it’s acting in e) Engage in effective risk management.
the company’s long-term best Companies should regularly identify and
interests; the CEO leads assess the risks they face, including
management, develops and financial, operational, reputational,
implements business strategy and environmental, industry-related, and legal
reports to the Board. risks:
c) Emphasize integrity and ethical  The Board is responsible for
dealing. strategic leadership in establishing
Not only must directors declare conflicts of the company’s risk tolerance and
interest and refrain from voting on matters in developing a framework and clear
which they have an interest, but a general accountabilities for managing risk.
culture of integrity in business dealing and of It should regularly review the
adequacy of the systems and

6 M. Jelić, A. Aksentijević Jelić

 controls management puts in place business arrangement in which they operate.
to identify, assess, mitigate and For example, Court Experts will have the
monitor risk and the sufficiency of same approach in issuing findings and giving
its reporting. professional opinions irrespective of the
 Directors are responsible to person who issued the order for expertise,
understand the current and who are plaintiff and defendant, what is the
emerging short and long-term risks dispute value etc. Consequently, when
the company faces and the taking oath, court experts declare not only to
performance implications. They comply with the constitution and the laws
should challenge management’s but also to perform the task chastely,
assumptions and the adequacy of honestly and impartially. This vitrues may be
the company’s risk management enbedded into laws in declarative way, but
processes and procedures. they cannot be deployed into definite
requirements.
3. Human governance Hence, once an individual adopts the
position to be accountable to himself, society
No doubt corporate governance significantly and people, he will strengthen the belief in
sustainability of the organization and its
contributes to long-term shareholder value
long-term success. When such behaviour is
and yields stability to business operations.
guided by genuine justness, challenges to
However, for organizations where people are
material asets (that may compromise the
directed and held accounatable, striving to
values of profession) become less attractive.
business excellence requires addressing to
another mode of governance – human ISO 30408 claims that by aligning effective
governance. What are the core reasons? human governance with strategic planning,
an organization can benefit, as follows, (ISO
Human governance is an internal, inside-out
30408, 2016):
and values-based conviction to guide the
human as the sentient being to behave  Respond to organizational and
whereas corporate governance is an external, regulatory needs;
outside-in rules and regulations to legislate  Anticipate and manage human
the behavior of corporation, as a legal resource risks;
person. Human governance looks at the  Develop an organizational culture
axiology, encompassing the traits of values, which reflects organizational
religion, belief system, culture, and ethics in values;
order to foster a culture based on trust where  Foster increased management,
human within the organization is viewed as effective communication and
the soul of the organization. The belief is collaboration across all
that rightness-of-action by an individual is stakeholders;
not about being right according to some  Optimize overall performance.
codified rules or man-made laws but to Once strategic objectives are established and
conform such behaviour to genuine human communicated to relevant stakeholders,
nature. (Salleh, 2010, p.37) organizational management is to align
For each human oriented governance setting human governace principles thus to
the type and the structure of organization is encompass:
irrelevant since human individals are the  fairnes and transparency in the
issue that matters. In practice, professionals design and outcomes of the
that are assigned certain job to are guided by organizational processes and
the same value setting irrespective of practices;

7
  openness in organizational the sense of human reasons. The philosophy
processes, practices and outcomes; of human governance advocates the benefits
 accountability to the organization's the society may have if the main drive for
governing bodies, legal authorities running business is shifted: from gaining
and stakeholders. profit to serving to humanity. If leaders in
The concept of human governance sets stress organization started to think in human
on two characteristics that were not governance approach they would rather
recognized under corporate governance: incline to set some new values than simply
self-consiousness and self-accountability. follow established rules. Table 1 shows
When possessing the two virtues, an charateristics of corporate governance
individual is ready to take action even in against characteristics of human governance.
situations when he was not supposed to act (Salleh, 2010, p.38)
or he was not responsible to, just driven by

Table 1. Corporate governance [Link] governance

CORPORATE GOVERNANCE HUMAN GOVERNANCE

For the legal person For the sentient person
• Discovery • Disclosure
• Translucent • Transparent
• Conformance • Beyond conformance
• Caveat emptor • Edico venditor
• Dead • Emergent
• Symbol • Meaning
• Label • Essence
• Form • Substance
• Rule-based • Principle&values-based
• Legal enactments • Innate
• Rules & compliance • Good conduct & beyond compliance
• Newtonian classical • Quantum science
• Fragmented • Wholeness

5. Conclusion holds true to the fact that humans are

the drivers of society regardless of fields
Human governance is a philosophy that or subject areas. Human governance
captures and respects the essence of the starts with an open acknowledgement
human spirit, celebrating our unique that organization is committed to ne ver-
belief systems and values that shape ending pursuit of societal value through
our internal constitutions. Its application is realizing the full potential value of its
thus not limited to any specific subject – entire human capital.
it transcends such boundaries because it Regarding human governance as specific

8 M. Jelić, A. Aksentijević Jelić

ethical compass, the integrity as an issue problem derives from the fact that values
comes to be regarded first. Since the and ethics are unmeasurable characteristics
integity symbolizes only internal values unlike real world constituted by objects
state, in order to enhance it its internal that may be observed and measured.
character need to be elucidated. The Ethical values, for example, can't be
approach must be holistic what derives measured but they may get certain
from the term etimology (Lat. entire, meaning only in a referent framework.
complete). It means that the development However, any attempt of prescribing (what
of integrity is the question of re-integration one must do and what mustn't) would be
of all components: religion, culture, useless unless internal belief of ethical
system of belief, ethical values and legal behavior exists.
requirements. As Samuel Johnson claimed Such non-prescriptive character of human
in 18. century: "Integrity without governance makes it suitable for
knowledge is weak and useless, but organizations pursuing excellence. It paves
knowledge without integrity is dangerous way for a new dimension in organizational
and frightening." (Johnson, 1759). On the culture in which people can develop their
other hand, only relying on legal potentials to include self-consiousness and
requirements and coercion the integrity self-accountability. Since such virtues are
cannot become the corner-stone of man's genuine, they may be easily identified by
behavior. However, laws and legislation leaders in organization as a good
may serve to complete the integrity in its oportunitity to head to business excellence.
complexity.
Although the acceptance of human Acknowledgements: The work presented
governance looks promising as a means to here was supported by Serbian Ministry of
establish sustainable ethical behavior Education, Science and Technology
among professionals, the question on how Development (Project III-44006).
to incite human governance
implementation remains open. The

References:
EFQM. (2010). Introducing the EFQM Excellence Model. European Foundation for Quality
Management, Brussels. Belgium
EFQM. (2012). An Overview of the EFQM Excellence Model. European Foundation for
Quality
FQCE. (2019). FQCE model 2019, Foundation for Quality Culture and Excellence, Beograd,
Serbia
ISO 9001. (2015). Quality management system - Requirements
ISO 9004. (2018). Quality management – Quality of an organization – Guidance to achieve
sustained success
ISO 30408. (2016). Human resource management – Guidelines on human governance
Jelić M, Aksentijević-Jelić A. (2018). Human governance and corporate governance - the same
or the opposite, 19th International Symposium on Quality, Croatian Society of Quality
Managers, CRO, 21-23 March, Plitvice, ISBN 978-953-8067-10-5, pp. 27-37
Johnson S. (1759), The Image of Orient,
[Link]
_Johnson's_Rasselas_1759

9
Roman A. (2014) The Three Pillars of Corporate Governance, Azeus Convene
Tricker, R.I. (1984). Corporate Governance, Gower. London. UK
Salleh A., Ahmad A. (2010). Human governance: Bringing the Meaning of Integrity in the Life
of Professinal Accountants, In Articles of Merit E-Book (pp. 30–39). New York:
International Federation of Accountants (IFAC)

Miloš Jelić Ana Aksentijević Jelić

R&D „ALFATEC“, R&D „ALFATEC“,
Niš, Niš,
Republic of Serbia Republic of Serbia
[Link]@[Link]

10 M. Jelić, A. Aksentijević Jelić