For every complex problem there is an answer that is clear, simple, and wrong.
(H. L. Mencken)

GENERALLY ACCEPTED PRINCIPLES OF SOUND MANAGEMENT (GAPSM)

Why might one want to determine whether a particular organization is managed soundly? Here are just some of the possible reasons:

as part of an investment decision;
as an accountability measure following a delegation of authority;
to plan a program for improving some aspect of this organization;
to ensure that you want to ensure that this organization can continue to carry out its mission.

How can one determine whether an organization is being managed soundly?

Should one look at quarterly or annual financial results? Of course. But what if the organization is earning high short-term profits by ignoring its most critical long-term interests?
Should one look at whether its clients are satisfied? Yes. But what if it is satisfying its clients while ignoring the needs of other stakeholders like employees and shareholders?
Should one look at how good a job it does at research and development? Certainly. But once the organization has developed intellectual property, how well does it succeed at turning this property into marketable goods and services?
Should one make sure that the organization has not been involved in any major public scandal? Sure. But does that mean that the organization is actually behaving ethically, or just that it is good at covering its tracks?

There are many ways of determining whether an organization is soundly managed, but one of the best is based on the system of Generally Accepted Principles of Sound Management (GAPSM) that has been developed by the professional corporation governing certified managers in Quebec: the Ordre des administrateurs agréés du Québec (OAAQ). The main works that discuss these principles are in French. They include the Guide de l'administrateur agréé, published by CCH Canadian, as well as Bernard Breault's book Exercer la saine gestion, Théorie appliquée à l'audit de saine gestion (2nd edition, also published by CCH Canadian). The OAAQ's standards of sound management are founded in law and based on six fundamental principles and five functions of management.

Fundamental Principles

Management Functions

TRANSPARENCY
Transparency means that the organization is managed so as to let the full reality of its situation be seen without any alteration or distortion. Transparency is the ultimate virtue in managers who exercise authority that has been delegated to them by other people and who must be accountable to these people for their actions.

CONTINUITY
Continuity means that the organization is managed so as to ensure smooth, uninterrupted operations. It means that all managers ensure that their successors will receive all the authority required for the position and everything else they need to exercise their authority.

EFFICIENCY
Efficiency means that the organization is managed both effectively (that is, so that it achieves results) and economically. Efficient managers achieve optimal performance while minimizing the resources they use to do so.

BALANCE
Balance is a state of stability stemming from a desirable mix of opposing forces and ideas. The resulting harmony contributes to the sound management of the organization. Managers show balance in the exercise of their authority by making wise choices about the resources they use and the actions they take to achieve the results or objectives expected of them.

EQUITY
Equity means that the organization is managed in a way that is fundamentally fair. Equity derives from the underlying principles that must govern every action taken by everyone in the organization. These principles imply and produce effects on other people. Many examples of these principles are entrenched in the Canadian Charter of Rights and Freedoms, the Canadian Human Rights Act, and the Quebec Charter of Human Rights and Freedoms. All managers should be guided by these principles in all their dealings with other people, so as to ensure sound management of the organization.

SELFLESSNESS
Selflessness means that in carrying out their duties, the organization's managers intentionally forego any personal interest or advantage beyond that which is granted to them by contract or in some other explicit way, acting instead in the best interests and for the benefit of the organization.

PLANNING
Planning is the process of identifying not only the objectives to be achieved in a project, but also the steps that have to be followed and the operational infrastructure that will be needed to achieve them.

ORGANIZING
Organizing is the process of mobilizing the resources needed to achieve the objectives defined in the planning process. Organizing generally involves the following activities: identifying, obtaining, and allocating human, physical, and financial resources; assigning tasks and responsibilities; ensuring that realistic schedules are set; monitoring ongoing activities; and preparing to deal with the unexpected.

DIRECTING
Directing is the process of deciding, on behalf of an organization, group, or individual, on the actions to be taken to achieve the objectives set using the methods and resources defined in the planning process. Directing also involves coordinating all resources, skills, and activities so as to to meet the objectives and schedules set. Directing means coping with limited, imperfect resources every day while maintaining and encouraging enthusiasm, motivation, and productivity.

CONTROLLING
Controlling is the process of ensuring that the organization runs smoothly and that instructions are followed, schedules are met, and principles of sound management are adhered to. Controlling basically consists of overseeing, inspecting, and auditing specified activities and transactions, comparing them with the original plans to identify any discrepancies, and making any necessary corrections or improvements. Controlling also involves measuring the results of an organization's activities and the performance of its managers.

COORDINATING
Coordinating is the process of synchronizing the organization's efforts and its use of resources so that it achieves its goals. Coordinating is a management activity that takes places in every aspect of the management process.

Source: Principes et normes de saine gestion, Ordre des administrateurs agréés du Québec

What is distinctive about the GAPSM system is that it combines fundamental management principles with management functions to define 41 different areas of sound management—for example, transparency in planning, balance in directing, selflessness in controlling, and so on. Within each of these areas, it then identifies best practices (règles de l'art) that define sound management.

In the GAPSM system, the key activity consists in analyzing the strengths and weaknesses of the organization's management processes in light of the challenges that the organization must face over the short, medium,and long term.

In addition to helping guide managers in their decision-making, the GAPSM system includes a specific procedure for auditing management practices within organizations. As specified by Quebec law, these audits must be conducted by practitioners who have been certified for this purpose by the OAAQ. If in the auditor's opinion, the organization does comply with the Generally Accepted Principles of Sound Management, the auditor may issue a certificate of sound management, analogous to the auditor's statement issued after a financial audit.