What is governance management and why is it important?

Good governance is something that all board members strive for. When boards use good governance practices in performing their duties, their organisations thrive. It helps organisations weather unexpected crisis and puts them on the path to quicker recovery. However, consistently following good governance practices requires dedication and discipline.

Good governance doesn’t happen automatically. Governing bodies must establish policies and procedures to ensure they are following best governance practices. These procedures must call for the board to continually monitoring proper implementation.

This governance management includes the processes that are necessary to balance the powers of the leaders and their duty to enhance the prosperity and sustainability of the organisation.

What is governance management for mission-driven organisations?

Governance management encourages efficient use of resources and accountability for the stewardship over those resources. It encompasses setting goals and objectives, setting and following ethical standards, creating the culture, ensuring compliance, and designing and implementing a governance framework.

As Emmy Tsang points out in Invest in Open Infrastructure’s literature review on nonprofit governance, “To realise the value of governance, the internal and external factors must all be considered for how they help the organisation achieve its mission and vision. Organisational leadership needs to honestly acknowledge their situation, communicate their intentions, and then hold themselves accountable to their stakeholders to abide by the governance practices they put in place.”

“To realise the value of governance, the internal and external factors must all be considered for how they help the organisation achieve its mission and vision. Organisational leadership needs to honestly acknowledge their situation, communicate their intentions, and then hold themselves accountable to their stakeholders to abide by the governance practices they put in place.” – Emmy Tsang, Invest in Open Infrastructure

Determining the organisation’s goals and objectives

An organisation’s goals and objectives define the purpose of the organisation 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 strategic planning.

Determining the organisation’s ethical standards

Ethics are based on the morals and values of the organisation. An ethics policy defines the rules or standards for the behavior of the people who work in an organisation, as well as the governing board. Among other policies, the board establishes a  Code of Ethics,  Code of Conduct, and Conflict of Interest policy, which outline the behaviors they believe are important to the health of the organisation. Ethical standards are set by the top leaders, who set the example for others to follow.

Determining the organisation’s culture

The board established the organisation’s culture, which refers to how people within the organisation 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. Organisational culture is largely influenced by the organisation’s mission, vision and values statements.

It’s essential for all employees, volunteers, and other stakeholders to support the governance system because it has a great effect on the organisation’s culture. Issues that fall under the umbrella of culture include innovation, transparency, maturity, professionalism, risk tolerance, and environmental, social and governance issues.

Ensuring compliance

All organisations must know and understand the laws and regulations that govern them. Boards have a legal obligation to work toward the best interest of the organisation, ensuring that the organisation is in good legal standing at all times. The board must comply with legal and regulatory rules with working within the organisation’s ethical and cultural framework.

Overseeing the governance framework

The board of directors is responsible for establishing a framework that governs all departments, people and operations of the organisation. They’re also responsible for ensuring that management is carrying out the tasks that will lead to sound performance, profitability and sustainability.

Boards may elect to delegate some of their work to various individuals, groups, or committees. Along with any delegated responsibility, the board also grants the appropriate levels of authority and responsibility to managers. While managers have the authority and responsibility to carry out the board’s strategic plans, the board must still oversee the work of the managers and hold them accountable for results.

Governance management matters

Managing governance creates efficiency in the work of boards. In addition, good governance practices make it easier to uncover errors and problems. By flagging potential issues, boards can 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.

When a crisis does occur, the board can act rather than react because they have proper time to be responsible in their acts and decision-making. Organisations that have a culture that supports good governance practices are more likely to meet the demands and expectations of the public.

Good governance lends assurance to donors, volunteers, and business partners that the organisation 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 organisations can measure themselves against.

Good governance reduces risk and helps to prevent fraud and unscrupulous behavior. It leads to growth and success.

The role of technology in governance management

The board is directly responsible for governance management. It 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 organisation’s ethical and cultural boundaries. Governance management provides a straight and steady path for them to work together for the good of the organisation.

Technology, like BoardEffect board management software, 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. The platform is also instrumental in providing a safe online space for board communications and collaboration. Request a demo today to find out how we can help your mission-driven organisation with managing its governance.