Whether you know it or not, you have heard of governance. Some terms or phrases that imply governance are administration, bureaucracy, red tape, guidance, authority, or tone at the top. While people often toss these words around, many organizations—especially smaller ones or startups—don’t take the time to figure out what governance really means for them. When done right, governance isn’t something to avoid; it can actually help clarify where the organization wants to go, reduce confusion, and set the stage for growth.
Governance Definition
Let’s start with a general definition of governance and then move on to how governance can be applied to different specialties. According to Merriam-Webster, governance means “the act or process of governing or overseeing the control and direction of something (such as a country or an organization).” When those in business speak of governance, they usually refer to corporate governance. Brittanica defines corporate governance as, “rules and practices by which companies are governed or run. Corporate governance is important because it refers to the governance of what is arguably the most important institution of the capitalist economy.” Corporate governance is the framework that regulates not just the aspects of the overall business but any other governance that is put in place for any other areas. For example, Gartner says IT governance is, “the processes that ensure the effective and efficient use of IT in enabling an organization to achieve its goals.” In other words, if corporate governance stipulates how the organization operates, then the IT governance will provide specific guidance and rules for IT in support of the overall organization. The same thing can be said of all other specialized governance, such as data governance, privacy governance, or environmental governance.
Governance Importance
You might think corporate governance is only important for corporations and large orgs, but that is not true. Governance matters and is essential for all kinds of organizations, no matter how big or small they are. For really small organizations, it’s a good idea to set some basic rules for how things should be done. Whether you’re working with a vendor, bringing in contractors, or managing a small team, having these guidelines will make things run smoother. It helps everyone know what you expect when getting things done. As you grow, governance helps steer you in the right direction. You could be growing because you are offering more, getting more customers, or hiring more. These changes would change how governance works, but they shouldn’t make it feel heavier. Still, it’s important to share what the governance looks like now, along with any updates and the reasons for those changes. Nothing is worse than going in the wrong direction and having to backtrack to where you belong.
Governance Execution
Governance is something most people have come across, whether they realize it or not, often with mixed results. To get better outcomes, it’s important to communicate governance clearly, apply it consistently, and make sure it fits the organization’s vibe and needs. Instead of seeing governance as a rigid set of rules, you should think of it like a scale that can be adjusted. Organizations that are simpler or still finding their way may not need a lot of rules; for them, governance acts like a roadmap to help them grow. On the flip side, bigger and more complex organizations might need a heavier set of guidelines and procedures along with a strong way to handle exceptions. No matter where an organization sits on this scale, having governance as a solid foundation is key.
So, what happens when governance is executed poorly or inconsistently? Picture an organization like being in a family, especially one with children or pets. Each family is different and has a unique dynamic, so the governance of each family would be different. The governance would be based on what the adult(s) want for the family, what everyone needs, and their unique culture. If a family needs more consistent behaviors or activities but has a relaxed setup, they might miss out on the guidance they need to really thrive, which can lead to making avoidable mistakes. On the flip side, if things are too strict, family members can feel suffocated and untrusted, which might cause them to act out. Plus, if the adults aren’t on the same wavelength, one might say one thing while the other says something completely different, leading to confusion and frustration for everyone involved.
No matter how you think about it, governance, however you see it for your organization, is a critical part of the foundation and growth. If you skip out on it, negative stuff is bound to happen. It’s just a matter of time.