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What Is Governance Management And Why Is It Important?

What Is Governance Management and Why Is it Important?

Governance is a term that most people have some familiarity with, but they don’t necessarily know what it means. There are others who think they understand what it means, but they confuse at least parts of it with the duties and responsibilities for management. Good governance and good management aren’t synonymous. They have different functions, but they are related. The regular practice of good governance principles leads to good outcomes in governance.

What Is Governance Management?

Governance management refers to establishing policies and continually monitoring proper implementation of them by the governing body of an organization, which is usually the board of directors. It includes the processes that are necessary to balance the powers of the leaders and their duty to enhance the prosperity and sustainability of the organization.

Governance management encourages efficient use of resources and accountability for the stewardship over those resources. One of the key components of governance management is to align the interests of individuals, the organization, and society. Governance management encompasses setting goals and objectives, determining ethical standards, establishing the intended culture, ensuring compliance, and designing and implementing the governance framework.

Determining the Organization’s Goals and Objectives

An organization’s goals and objectives define the purpose of the organization and how the board will fulfill that purpose. It’s the board’s responsibility to ensure that the goals and objectives are aligned with the mission and vision and to implement them through the strategic plan.

Determine the Organization’s Ethical Standards 

Ethics are based on the morals and values the company wants to project. An ethics policy defines the rules or standards for governing the behavior of the people who work in an organization. The board establishes a Code of Ethics, Code of Conduct, and Conflict of Interest policy, among other policies, which portray the aspects of corporate behavior they believe are important to the health of the organization. Ethical standards are set by the top leaders, whereby they set the example for others to follow.

The Code of Ethics policy creates a vision of the level of importance that the company gives to factors such as sustainability, corporate social responsibility, and stakeholder engagement over their efforts to increase profits and reach their goals.

Determine the Organization’s Culture

The board also established the organization’s culture which refers to how people within the organization interact with each other. The leaders decide on what the culture should entail and like the Code of Ethics, top leaders are expected to model the culture they set as shown by their acts, decisions, and behaviors. Organizational culture is largely influenced by the organization’s mission, vision, and values statements.

The term, government-ability, refers to the willingness of people to be governed. It’s essential for all employees, volunteers, and other stakeholders to support the governance system because it has a great effect on the organization’s culture. Various Issues can fall under the umbrella of culture including innovation, transparency, maturity, professionalism, risk tolerance, environmental, social, and governance issues, and much more.

Ensuring Compliance

All organizations must know and understand the laws and regulations that govern their organization. They have a legal obligation to work towards the best interest of the organization and part of this means that the board must ensure that the organization is continually in good legal standing at all times. The board must ensure legal and regulatory compliance with working within their ethical and cultural framework.

Overseeing the Governance Framework Defined by the Board of Directors 

The board of directors is responsible for establishing a framework that governs all departments, people, and operations. They’re also responsible to see that management is carrying out the tasks that will lead to sound performance, profitability, and sustainability. In the course of their duties, boards may elect to delegate some of the work to various individuals, groups, or committees. Along with any delegated responsibility, the board also delegates the appropriate levels of authority and responsibility to managers. While managers have the authority and responsibility to carry out the board’s strategic plans, they must still oversee the work of the managers and hold them accountable.

Why Is Governance Management Important?

It is important for boards to manage governance because it creates efficiency in the work that they do. In addition, good governance practices highlight instances of errors and problems. By flagging potential issues, boards have the chance to respond quickly and appropriately. A focus on good governance holds the board accountable for improving efficiency, which also lends itself to reducing costs. When boards practice good governance, all processes run smoothly. There is less chance of crisis where the board needs to react rather than act and they have the proper time to be responsible in their acts and decision-making. Organizations that have a culture that supports good governance practices are more likely to offer quality products and services that meet the demands and expectations of the public.

Good governance lends assurance to shareholders and stakeholders that the organization is being transparent about their finances and conduct and that they’re treating all people with dignity and respect. Best practices result from good governance and create a framework where all companies and organizations can measure themselves against.

Good governance assures us of many things including that it reduces risk and prevents fraud and unscrupulous behavior. When we put it all together, good governance leads to growth and success which is the whole reason for organizations to form in the first place.

What is the Role of Technology in Governance Management?

Technology, like a BoardEffect board management software program, uses automation for streamlining governance processes. A board portal assists boards in creating efficiency, accountability, and transparency, as well as ensuring compliance, as they fulfill their board duties. BoardEffect offers a highly secure digital platform for storing documents electronically. The platform is also instrumental in providing a safe online space for board communications and collaboration.

Governance management is a function of the board of directors. The board makes the rules and establishes the goals and objectives as outlined in the strategic plan. The management team is the arm that sees the operations through to the finish. Boards and managers must fulfill their responsibilities within the organization’s ethical and cultural boundaries and governance provides a straight and steady path for them to work together for the good of the organization.

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