Governance Model: Escalation and Approval Thresholds

Executive summary#

• Governance model defines escalation paths, approval thresholds, and exception processes that balance speed with control
• Three governance levels: Operational (line managers decide), Tactical (practice/delivery leads decide), Strategic (C-suite decides)
• Thresholds trigger escalation: cost, headcount %, risk, capability newness
• Good governance accelerates most decisions (80% at operational level) while protecting against high-risk decisions
• Without governance thresholds, either all decisions escalate (slow) or no decisions escalate (risk)

Definitions#

Governance Model: The framework of thresholds, escalation paths, and approval processes that determines which talent decisions require senior leadership approval vs. can be made by operational teams.

Escalation Threshold: The quantitative trigger (cost, headcount %, risk level) that moves a decision from one governance level to the next higher level.

Approval Process: The steps, timelines, and documentation required at each governance level to make and document talent decisions.

What's included: Thresholds for hiring, exits, build-buy-partner, promotions, contractor engagements, org changes, and capacity planning. Escalation paths for exceptions.

What's NOT included: Day-to-day operational decisions (project staffing, task assignment, 1:1 feedback). Those remain with line managers without escalation.

Key principle: 80/20 rule—80% of decisions should be made at operational or tactical level (fast), 20% escalate to strategic level (high-impact, high-risk).

Why this matters#

Business impact#

Governance balance drives both speed and safety:

Problem 1: Over-governance (everything escalates)

• Symptom: All hiring decisions require COO approval, even within approved headcount plan
• Root cause: No thresholds defined, senior leaders "want visibility"
• Consequence: 6-8 week decision cycles, senior leader bottleneck, operational team frustration

Problem 2: Under-governance (nothing escalates)

• Symptom: Practice leads hire 20% above budget without approval, COO discovers $500K overspend in quarterly review
• Root cause: No thresholds enforced, "move fast" culture without controls
• Consequence: Budget overruns, unplanned cost, reactive cost-cutting later

Problem 3: Unclear escalation paths

• Symptom: Team doesn't know when to escalate, escalates too early or too late
• Root cause: Thresholds not documented or communicated
• Consequence: Inconsistent decisions, surprises for senior leadership

Organizations with clear governance report:#

• 70-80% of decisions at operational/tactical level (no C-suite involvement needed)
• 50% faster decision cycles (clear thresholds = no guessing when to escalate)
• 30-40% fewer escalations (appropriate threshold-setting filters routine from strategic)

How it works#

Three governance levels#

Level 1: Operational (Line Managers)

Who decides: Hiring managers, delivery managers, project leads

Types of decisions:

• Hiring within approved headcount plan
• Project staffing (deploying existing talent)
• Promotions within approved budget and competency bands
• Contractor engagements below threshold ($50K/year or less)

Approval required: None (decision authority delegated)

Informed: Direct manager, talent team (after decision)

Speed: Same day to 1 week decisions

Level 2: Tactical (Practice/Delivery Leads)

Who decides: Practice leads, delivery leads, talent lead, finance lead

Types of decisions:

• Hiring above approved plan but below strategic threshold
• Build-buy-partner decisions for existing capabilities
• Contractor engagements above operational threshold but below strategic
• Promotions outside normal cycle or above budget
• Role changes, reorganizations within practice

Approval required: Peer review (finance confirms budget, delivery confirms capability need)

Informed: COO (after decision)

Speed: 1-2 weeks decisions

Level 3: Strategic (C-Suite)

Who decides: COO, CFO, CEO

Types of decisions:

• Hiring above strategic threshold (cost, headcount %, or new capability)
• Build-buy-partner for new capabilities (not in current competency model)
• Exits (layoffs, terminations with >$50K severance or >5% headcount)
• Capacity planning (quarterly headcount and budget)
• Organizational restructuring across practices

Approval required: C-suite alignment, board notification if >10% headcount change

Informed: Board (quarterly)

Speed: 2-4 weeks decisions (quarterly planning cycle)

Escalation thresholds#

Hiring thresholds

Example escalation:

• Hire at $140K, within plan → Operational: Hiring manager decides
• Hire at $180K, +1 FTE above plan → Tactical: Practice lead decides (finance confirms budget)
• Hire at $280K, new capability (machine learning, not in plan) → Strategic: COO decides

Build-Buy-Partner thresholds

Example escalation:

• Contractor at $120/hr, 500 hours ($60K) → Tactical: Delivery lead decides
• Contractor at $180/hr, 2,000 hours ($360K) → Strategic: COO decides
• Agency partnership for new AI capability, $150K → Strategic: COO decides (new capability)

Promotion thresholds

Example escalation:

• Level 2 → Level 3, within promotion cycle, 12% raise, within budget → Operational: Direct manager + practice lead decide
• Level 3 → Level 4, off-cycle, 18% raise, above budget → Tactical: Practice lead decides (finance approves budget impact)
• Level 3 → Level 5 (skip level), 30% raise → Strategic: COO decides

Exit thresholds

Example escalation:

• Voluntary resignation, $90K role → Operational: Manager handles, informs practice lead
• Performance termination, $130K role, $30K severance → Tactical: Practice lead decides (HR confirms process, Finance confirms severance budget)
• Layoff of 5 people, $450K total severance → Strategic: COO decides

Example: CaseCo Mid#

{
  "canonical_block": "example",
  "version": "1.0.0",
  "case_ref": "caseco.mid.v1",
  "updated_date": "2026-02-16",

  "scenario_title": "Right-Sizing Governance: From 100% Escalation to 80/20 Model",
  "scenario_description": "CaseCo Mid's COO approved every hire. After implementing governance thresholds, 80% of decisions stayed operational/tactical, freeing 15 hours/week of COO time.",

  "problem_state_2024": {
    "governance_model": "COO approves all hiring decisions",
    "decision_volume": {
      "total_hiring_decisions_per_quarter": 24,
      "coo_approvals_required": 24,
      "coo_time_per_approval": "30-45 minutes (review business case, discuss with hiring manager, approve)",
      "total_coo_time_per_quarter": "12-18 hours (3-4.5 hours/month)"
    },
    "consequences": {
      "decision_speed": "2-3 weeks from req to COO approval (COO bottleneck)",
      "missed_candidates": "8 candidates accepted other offers while waiting for COO approval",
      "hiring_manager_frustration": "High—felt they couldn't act without COO blessing",
      "coo_frustration": "High—spending 15-20% of time on routine approvals"
    }
  },

  "implemented_governance_thresholds": {
    "operational_level": {
      "hiring_authority": "Hiring manager decides",
      "conditions": [
        "Within approved headcount plan",
        "Cost rate <$150K",
        "Existing capability (already on competency model)"
      ],
      "approval_required": "None (inform talent team and finance after offer accepted)",
      "percentage_of_decisions": "60%"
    },
    "tactical_level": {
      "hiring_authority": "Practice lead decides",
      "conditions": [
        "Cost rate $150K-$250K OR",
        "1-2 FTE above approved plan OR",
        "Contractor engagement $50K-$250K"
      ],
      "approval_required": "Finance confirms budget, delivery lead confirms capability need",
      "percentage_of_decisions": "25%"
    },
    "strategic_level": {
      "hiring_authority": "COO decides",
      "conditions": [
        "Cost rate >$250K OR",
        ">2 FTE above plan OR",
        ">5% headcount change OR",
        "New capability (not in competency model) OR",
        "Contractor engagement >$250K or >6 months"
      ],
      "approval_required": "CFO alignment, CEO informed",
      "percentage_of_decisions": "15%"
    }
  },

  "results_6_months_later": {
    "decision_distribution": {
      "operational_level_decisions": 15,
      "operational_percentage": "60%",
      "tactical_level_decisions": 6,
      "tactical_percentage": "24%",
      "strategic_level_decisions": 4,
      "strategic_percentage": "16%",
      "total_decisions": 25
    },
    "coo_time_savings": {
      "decisions_requiring_coo": 4,
      "coo_time_per_quarter": "2-3 hours (was 12-18 hours)",
      "time_saved": "9-15 hours/quarter",
      "percentage_reduction": "75-80%"
    },
    "decision_speed": {
      "operational_decisions": "1 week average (was 3 weeks)",
      "tactical_decisions": "1.5 weeks average (was 3 weeks)",
      "strategic_decisions": "2.5 weeks average (unchanged, but appropriate)",
      "overall_improvement": "50% faster decisions"
    },
    "missed_candidates": {
      "q1_2024": 8,
      "q3_2024_after_governance": 1,
      "reduction": "88%"
    },
    "key_insight": "80/20 rule worked: 84% of decisions stayed operational/tactical, freeing COO to focus on strategic hires (new capabilities, >$250K, large teams). Hiring managers felt empowered, COO time freed for strategic work."
  },

  "strategic_decisions_coo_reviewed": [
    {
      "decision": "Hire Principal Consultant (Machine Learning)",
      "cost_rate": 285000,
      "trigger": "Cost rate >$250K + new capability (ML not in competency model)",
      "outcome": "COO approved after reviewing capability investment case",
      "rationale": "This is exactly the kind of decision COO should review—new capability, high cost, strategic investment"
    },
    {
      "decision": "Hire 4 Cloud Architects in one quarter",
      "cost_rate_average": 185000,
      "trigger": "4 FTE = 10% headcount increase in cloud practice",
      "outcome": "COO approved after reviewing demand pipeline and $3M revenue opportunity",
      "rationale": "Large team expansion, >5% practice growth, strategic capacity decision"
    }
  ]
}

Action: Governance Threshold Worksheet#

Use this template to define governance thresholds for your organization:

Governance Levels and Thresholds#

Operational Level (Line Managers Decide)

Decision types that stay at operational level:

• Hiring within approved headcount plan, cost rate <$_______
• Contractor engagements <$_______ /year
• Promotions within cycle and budget
• Project staffing (deploying existing talent)

Approval required: _______________________________

Informed (after decision): _______________________________

Target % of decisions at this level: _______% (aim for 60-70%)

Tactical Level (Practice/Delivery Leads Decide)

Decision types that escalate to tactical level:

• Hiring: Cost rate $_______ to $_______ OR +_____ FTE above plan
• Contractor engagements: $_______ to $_______ /year
• Promotions: Off-cycle or _____ % above budget
• Build-buy-partner: Existing capabilities, <$_______ investment

Approval required: _______________________________

Consulted: _______________________________

Informed (after decision): _______________________________

Target % of decisions at this level: _______% (aim for 20-30%)

Strategic Level (C-Suite Decides)

Decision types that escalate to strategic level:

• Hiring: Cost rate >$_______ OR >_____ FTE above plan OR >_____ % headcount change
• New capability: Any new capability not in current competency model
• Contractor engagements: >$_______ /year or >_____ months
• Exits: Layoffs, terminations >$_______ severance, or >_____ people
• Capacity planning: Quarterly headcount and budget

Approval required: _______________________________

Consulted: _______________________________

Informed (after decision): _______________________________

Target % of decisions at this level: _______% (aim for 10-20%)

Escalation Decision Tree#

START: Talent decision needed

↓

Question 1: Is this within approved headcount plan and <$_______ cost rate?
  → YES: Operational level (hiring manager decides)
  → NO: Continue to Question 2

↓

Question 2: Is this an existing capability and cost rate $_______ to $_______ ?
  → YES: Tactical level (practice lead decides, finance/delivery consulted)
  → NO: Continue to Question 3

↓

Question 3: Is this >$_______ cost rate OR new capability OR >_____ FTE above plan?
  → YES: Strategic level (COO decides, CFO/CEO informed)
  → NO: Review thresholds—edge case, escalate to next level

END

Exception Process#

When to use: Decision doesn't fit standard thresholds or urgent need

Exception request must include:

1. Why this is an exception (describe edge case)
2. Business case (revenue at risk, cost of delay)
3. Proposed decision and rationale
4. Urgency (timeline needed)

Exception approval authority: _______________________________

Exception review frequency: Review all exceptions quarterly to identify new threshold needs

Pitfalls#

Pitfall 1: Thresholds too low (everything escalates)#

Early warning: >40% of decisions escalate to strategic level, C-suite becomes bottleneck.

Why this happens: Fear of mistakes, senior leaders "want visibility," thresholds set too conservatively.

Example: CaseCo Mid initially set strategic threshold at >$120K cost rate (equivalent to mid-level consultant). Result: 60% of hires escalated to COO, 4-6 week delays.

Fix: Raise thresholds gradually:

• Start: Strategic threshold at >$150K cost rate → 40% escalations
• 6 months: Raise to >$200K → 25% escalations
• 12 months: Raise to >$250K → 15% escalations

Target: 80% operational/tactical, 20% strategic. Adjust thresholds to hit this ratio.

Pitfall 2: Thresholds too high (no escalation, high risk)#

Early warning: Senior leaders surprised by decisions after the fact, budget overruns, unplanned costs.

Why this happens: "Move fast" culture, no governance defined, operational teams have unlimited authority.

Example: CaseCo Mid practice lead hired 6 contractors at $180/hr ($1.9M annual cost) without COO awareness. COO discovered in quarterly review: "Why didn't I approve this?"

Fix: Set thresholds that escalate high-impact, high-risk, or new-to-org decisions:

• Cost >$250K (high cost)
• >5% headcount change (high impact)
• New capability (high risk—we haven't done this before)
• Contractor >6 months (convertible to FTE territory)

Strategic level should see 10-20% of decisions—enough to catch big bets, not so many that it's overwhelming.

Pitfall 3: Thresholds defined but not enforced#

Early warning: Operational teams escalate decisions below threshold "just to be safe," or skip escalation above threshold and hope no one notices.

Why this happens: Thresholds documented but not communicated, no tracking, no consequences for violations.

Example: Governance model says practice lead has authority for $150-250K hires, but practice leads still escalate to COO "to get buy-in" even when below threshold.

Fix: Three enforcement mechanisms:

1. Training: Teach operational teams the thresholds and when to escalate
2. Tracking: Finance tracks all decisions by governance level, reports quarterly
3. Consequences:
   • Under-escalation (should have escalated, didn't): First time = warning, second time = approval authority reduced
   • Over-escalation (escalated unnecessarily): Coach to build confidence, remind of authority

Pitfall 4: No exception process for urgent or edge-case decisions#

Early warning: Urgent hire can't wait 2 weeks for strategic approval, but no fast-track process exists. Or edge case doesn't fit thresholds, team stuck.

Why this happens: Governance designed for "normal" decisions, no flexibility for urgency or exceptions.

Example: CaseCo Mid had $2M engagement starting in 2 weeks, needed to hire senior contractor ($280K, above strategic threshold). COO was traveling, unreachable for 10 days. Engagement at risk.

Fix: Define exception process:

• Urgent exception: COO delegates authority to CFO or practice lead for time-sensitive decisions (document afterward)
• Edge case exception: If decision doesn't fit thresholds, escalate one level up with exception rationale
• Post-exception review: Review all exceptions quarterly to see if thresholds need adjustment

Example: "COO authorizes practice lead to approve hires up to $300K when COO is unavailable and engagement start <2 weeks away. Practice lead must notify COO within 24 hours."

Next#

• Decision Ownership — RACI for talent decisions
• Operating Rhythm — When governance decisions happen
• Financial Scenarios — Economic analysis for strategic decisions
• Cost of Risk — Quantify impact of decision delays

FAQs#

Q: How do I know if my governance thresholds are set correctly?

A: Track decision distribution quarterly:

• Operational level: 60-70% of decisions (target)
• Tactical level: 20-30% of decisions (target)
• Strategic level: 10-20% of decisions (target)

If strategic level is >30%, thresholds are too low (everything escalates). If strategic level is <5%, thresholds are too high (not enough oversight).

Also measure decision speed: Operational decisions should be 1 week, tactical 1-2 weeks, strategic 2-4 weeks. If all decisions take 3-4 weeks, governance is too heavy.

Q: Should thresholds be based on absolute dollars or % of budget?

A: Use both, appropriate to context:

• Absolute dollars for cost rate and contractor engagements (e.g., >$250K cost rate escalates)
• % of budget for headcount and capacity changes (e.g., >5% headcount increase escalates)

Why: A $250K hire is "strategic" for 50-person firm, "tactical" for 500-person firm. But 10% headcount increase is strategic for both.

Combine: "Strategic threshold is cost rate >$250K OR >5% headcount change OR >10% of quarterly budget."

Q: What if operational teams complain that governance slows them down?

A: Two possibilities:

1. Thresholds too low: If routine decisions escalate, raise thresholds so operational teams have more authority
2. Teams escalating unnecessarily: If teams escalate decisions below threshold "to be safe," train them on thresholds and build confidence

Measure: % of decisions at each level. If 80%+ stay operational/tactical, governance is working. If <60%, thresholds need adjustment.

Q: Should governance thresholds be the same across all practices/departments?

A: Start with uniform thresholds for simplicity, then customize if needed:

• Uniform thresholds: Cost rate >$250K escalates (applies to all practices)
• Practice-specific: High-cost practice (e.g., specialized consultants avg $200K) might have higher threshold ($300K) than lower-cost practice (avg $100K, threshold $200K)

Only customize if practices have materially different economics (>50% difference in average cost rates). Otherwise, uniform thresholds are simpler.

Q: How do we balance "move fast" culture with governance controls?

A: Good governance enables speed by clarifying who decides, not slowing decisions:

• 80% of decisions stay operational/tactical (1-2 weeks)
• Only 20% escalate to strategic (2-4 weeks)
• Clear thresholds = no guessing, no unnecessary escalation

"Move fast" doesn't mean "no oversight"—it means fast operational decisions (within thresholds) and appropriate strategic oversight (above thresholds).

If governance feels slow, thresholds are likely too low (too many escalations).

Q: What happens if someone violates governance thresholds (hires without approval)?

A: First time: Warning. Explain thresholds, clarify what should have happened.

Second time: Consequences:

• Reduce approval authority (e.g., future hires require one level higher approval)
• Formal performance feedback
• Finance flags all their future decisions for compliance review

Repeated violations: Remove hiring authority entirely, all decisions escalate until trust rebuilt.

Most violations are ignorance (didn't know thresholds), not malice. Train first, enforce second.

Q: Should we publish governance thresholds to everyone, or keep them confidential?

A: Publish widely—transparency enables self-governance:

• All hiring managers know when to escalate vs. decide
• Finance knows when to flag decisions for review
• Operational teams feel empowered to decide within thresholds

Confidential thresholds create confusion and unnecessary escalation ("I'm not sure, better ask COO just in case").

Exception: Board-level thresholds (e.g., >$5M investment requires board approval) can stay at executive level.

Q: How often should we review and adjust governance thresholds?

A: Annually as part of planning process, or when pain points emerge:

Annual review triggers:

• Has average cost rate changed >10%? (adjust cost thresholds)
• Has headcount grown >20%? (adjust headcount % thresholds)
• Are we entering new capability areas? (add new capability to strategic threshold)

Mid-year adjustment triggers:

• Decision distribution off target (>40% strategic → raise thresholds)
• Budget overruns from under-escalation (missed >5 strategic decisions → lower thresholds)
• Senior leader bottleneck (COO spending >20% time on approvals → raise thresholds)

Thresholds aren't static—evolve as organization grows and matures.