How to fix a problem like FIFA

Who was minding the store?

The arrest of seven Fifa executives in May for corruption at the highest levels of football’s world governing body has raised alarm bells worldwide. Sepp Blatter has announced he is stepping down, but remaining as President until at least December. How could this corruption and poor leadership have been allowed to happen, and for many years?  Who was overseeing the overseers?

Fifa is a perfect example of a fundamentally broken organisation.

While the magnitude of Fifa’s alleged malfeasance and dysfunction is stunning in its longevity and scale, it is a cautionary tale of the potential risks for groups which are governed solely by their members.

These membership organisations come in many forms, such as professional bodies and clubs, associations made up of multiple groups like Fifa, co-op boards of buildings and even parent-teacher associations.

For all organisations of this type, it is important that members hold key roles in their governance, but there is a danger that if they are governed only by members (as they determine the strategy and provide  the oversight on its execution), the atmosphere becomes an echo chamber — a place where the self-interest of individual members overrides actions that are best for the organisation as a whole.

Concern over problems that can arise from this governance structure are hardly limited to Fifa. The Co-operative Group, the UK’s largest cooperative group which operates a wide range of businesses including supermarkets, a bank, travel agencies, funeral homes and much more, has been forced to transform its governance structure. The change was prompted by a serious crisis in the group’s banking business, followed by multiple headline grabbing leadership catastrophes and a badly dented balance sheet.

Find the root

What can go wrong? One of the biggest issues is related to self-interest. Organisations such as Fifa can suffer when members, driven by their own wants, needs, and desires, enable group decisions that benefit themselves to the detriment of the organisation.

Organisations can also suffer from wilful blindness, where people look away from problems, or even ignore opportunities that might benefit the organisations, as long as their own needs are being met.

If these issues are left to fester, it can mean nothing short of the very destruction of the organisation.

There is some good news, however. While endemic rot may be rooted in poor governance and lack of solid governance principles, so, too, are the solutions.

Leadership sets the tone. The board and the executive team can’t simply proclaim that the decisions they are making are unbiased and for the good of the organisation as a whole. They must actually act with integrity, transparency and a willingness to be held to account if something goes wrong.

Above all else, they need to put in place concrete measure to ensure that that is the case now and always.

New governance for Fifa

This can sometimes be a painful process, depending on where an organisation finds itself. There are three stages where change must be made: Broken, bent, and clean slate.

Fifa is a perfect example of a fundamentally broken organisation. Sepp Blatter has announced he is stepping down and an extraordinary congress will be held to elect a new president. That won’t be enough. Nothing short of root and branch change is needed. An entirely new governance structure needs to be put in place. The role of chief executive and chair of the governing body should be separated. Importantly, a full and unflinching investigation must be done. To conduct such a thorough investigation, trusted outside advisers need to be called in. By trusted I don’t mean trusted by the people currently running the organisation. Rather it needs to be a neutral party with a strong global reputation, who will investigate, report, and help create a pathway to restructuring and resurrection.

One urgent question: Who will these advisors report to? Blatter has said he will remain until the new president is selected, and the earliest time that will happen will be December, 2015. He should really step aside now and allow an interim head named, or a council of people who are untainted by the previous scandal.

If he stays, Blatter will be “managing from the grave”. There is a danger that he will be concerned with his own individual legacy rather starting the real change that needs to happen.

One other “nuclear” option if it seems the problems are just too deep to fix: disband the organisation completely and start from scratch. That is one way to jump from the broken category to the clean-slate category and sometimes it is the only way forward.

What about an organisation that is bent but not broken? Perhaps one that shows signs of trouble, but isn’t as systemically damaged as Fifa is? There are plenty of organisations that fall in this category. Some started down a path with a governance structure that made sense at their inception but is no longer fit for purpose. For others, things have just gone wrong. It is time to boldly and bravely make a change. I have been involved in several organisations that have gone through this process and it can be painful and arduous to institute such a turnaround. But, on the upside, almost all of them have come out much stronger and more capable organisations and have benefited as much from the process of change as they have from the change itself.

Co-op is in the midst of such a transition. They have introduced new governance structures, an independent chair, new independent board members to sit along member directors and a new chief executive. The whole thing has played out under the glare of the public spotlight, and there is no doubt that it has been a difficult journey, and it is one that is far from over. The jury is still out, but the push for change is certainly impressive.

And what of new organisations? They are in a great position because they begin with a clean slate, and they have the opportunity to learn from the mistakes of others. There are several key things to institute and clarify right from the start. The first is to appoint one or more independent members to their boards. Just as independent directors in start-up companies play an important role in offering an unaffiliated and unbiased voice in the room. The same reasoning applies for membership organisations.

Term limits, and not just for board members, but also for the board chair, should also be instituted from the beginning.

Separating the chair and chief executive roles is important. If something goes wrong and one or the other leaves, the organisation will remain relatively stable. Separating the roles also protects members who speak up to try to bring about change since they are less susceptible to retaliation if their bid for change is not successful.

One other key thing is often forgotten: it is important to clarify the roles of those sitting around the board table. Are they there as representatives of their own organisations and interests, or do they leave that direct affiliation at the boardroom door and become board members of the organisation they are stewarding on that day?

Membership organisations, like Fifa and Co-op, as well as many of the boards of organisations we belong to on an everyday basis, are best run when they abide by sound governance principles and have educated and engaged board members.

Often these organisations are created for the public good. Whether they are huge complex organisations that touch many people, like Fifa, or small organisations that touch only a few, good intentions are not enough. Fixing them can sometimes be a daunting task, but it is one that is best faced head on and as early as possible, when changes can be less painful and the benefits will be many.

This column originally appeared on BBC Capital. To see more Above Board with Lucy Marcus columns, please click here.

Author: Lucy Marcus is the CEO of Marcus Venture Consulting.You can also follow her on Twitter @lucymarcus.

FIFA President Sepp Blatter leaves after his statement during a news conference at the FIFA headquarters in Zurich, Switzerland, June 2, 2015. REUTERS/Ruben Sprich