What is Good Governance?

What is good governance? It starts with ‘why?’

High-functioning and effective governance exists in an organisation’s inner core, acting as a control centre that confidently leads the organisation in the right direction. It quietly but steadily alters the course when things start to veer off track and it always drives the organisation forward. Good governance means establishing the ‘why’ and the ‘what’ before getting into the nitty gritty of the ‘how’ and the ‘right now,’ which can often mean taking a step back to look at the bigger picture.

An organisation’s governance isn’t meant to be outwardly seen by its customers, but they will see it reflected in its overall success. While corporate ‘governance’ in a wider sense is defined as the practices, policies and processes that help guide an organisation along its strategic path, establishing good governance for your organisation means so much more.

If governance is prioritised, you’ll find yourself spending just as much time working ‘on’ your organisation as you do ‘in’ it - if not more. And with results like improved performance, reduced risk, growth and enhanced reputation and trust, why wouldn’t you drop everything to make it happen? Because good governance is built, not born. It might not always be easy but with the right tools any organisation can get there.

Clarity of Purpose

Many organisations start out with a clear goal to produce something of value for their customers but over time, this purpose can waiver or even be lost. Have a solid understanding of what you want your organisation to provide, build it into a purpose statement that defines it, and then apply it to every decision you make in its day-to-day running. If it doesn’t serve the purpose, it doesn’t serve your organisation. A good place to start is to finish the sentence “We exist so that…” This simple statement will align an organisation’s strategy with its end goal and allow you to create a system of checks and balances to track your progress. For a purpose statement to have real effect, it must be well-articulated and above all, well-applied.

Strategic Direction

While purpose sets your destination, strategy is your map. Without it, any number of mishaps can lead an organisation astray, resulting in wasted resources, unfulfilled staff and a team culture that pushes the brightest talent away. The strategy should take a few important factors into consideration including the organisation’s financial situation, feedback from its stakeholders, market trends, and ultimately where the organisation wants to be in the future. Strategy should be discussed at every governance meeting, and it should be shared with employees in management positions alongside a clear operational plan that can keep them accountable. If you want to keep your strategy on track, try linking employee incentives to it and watch as you hit milestone after milestone!

The Right Team

Whether the governance of an organisation sits with its owner, an executive team or an independent board, having the right voices to provide counsel will ensure ultimate success. The best leaders know when to ask for help, so seek expert advice on matters you’re not sure about, plus support when weighing up big decisions. A governance team might look a little different for every organisation but they each share the core purpose of being critical to setting future direction. The ability to do this relies on having a diverse composition of unbiased, capable people who deeply understand the organisation and its needs.

Self-evaluation

What’s the best way to know if your organisation is working? Self-evaluation. It’s understanding what the standard is and measuring yourself against it in an effort to improve the overall performance of your organisation. When you find a gap, you can work to boost your capabilities in that area. Self-assessment can also aid in securing investment by creating formal reporting procedures that lay out everything a would-be-investor needs to know. More organisations could stand to benefit from a proper assessment of governance maturity to understand where they are exposed, and how they could be adding more value.

A certain level of governance is necessary to be compliant with requirements, but putting emphasis on building good governance as a priority will drive your organisation towards success. The Govn365 White Paper found that many organisations see governance as a regulatory burden that adds little value when in actuality, sound corporate governance can make or break an organisation’s outcomes. The organisations that excel are those that link their strategy back to their purpose, confer with the right people and regularly assess governance performance. Good governance can be the difference between an organisation that thrives and one that merely survives.

- Govn365