Governance
and management are terms we use interchangeably, but they are different. Both
are essential but they serve distinct purposes. Understanding the differences
is necessary for leaders of organizations big or small, simple or complex,
for-profit or nonprofit.
What Is Governance
Governance
sets the framework for an organization. It means establishing its strategic direction
and accountability structures. It involves:
1. Planning strategically and defining the
organization's mission, vision, values, and goals.
2. Ensuring
that the organization operates ethically and legally by providing oversight.
3. Holding
individuals and groups responsible for their actions.
4. Managing
risks by identifying and mitigating potential risks to the organization.
Governance
typically rests on a governing body like a board of directors. Even in small
businesses, a group (formal or informal) of owner(s), investor(s), or adviser(s)
must exercise governance. Each organization needs to operate responsibly and sustainably.
My first
experience with a Board of Directors was with MegaLink. Composed of the CEOs of
the banks in the consortium, they gave me one simple direction at the start:
launch ahead of its rival consortium. After the successful launch, they guided
me in making the consortium the largest in the country with 32 member banks.
For about an
hour every month, I had to report on the progress and answer questions from these
highly experienced bank CEOs. One of the most memorable meetings was when they scrutinized
my recommendation to launch despite some bugs in the system. I argued that no
system ever reaches perfection. They grilled me about my plans to mitigate
risks. In the end, they agreed with me.
Running
MegaLInk with that Board became one of the best experiences of my career. They inspired
me to aim for growth but grounded me in my actions. I looked forward to every
Board meeting and I learned so much. They were a whole bunch of welcoming father figures.
What Is Management
On the other
hand, management involves the day-to-day execution of the organization's
strategy. It involves:
1. Developing
and implementing plans to achieve organizational goals.
2. Structuring
the organization and assigning tasks.
3. Motivating
and inspiring team members to achieve their best.
4.
Monitoring performance and taking corrective action as needed.
Management usually
rests on the shoulders of executive leaders and teams. They must have planning,
organizing, leadership, and controlling skills. The required management level
depends on the organization's size and complexity.
My first
management job was in I/ACT. As a young inexperienced marketing manager, I was
thrilled to hire three people to help me. And what good people I found! Working
alongside the operations team, we moved I/ACT to be the leader in computer
education.
Contrast
this with my stint as Deputy Commissioner of the BIR where I led a thousand people in the IT group. Three people directly reported to me: two Assistant
Commissioners and a Chief of Staff. But I had relationships with the next level
of management called Directors and the two groups of consultants for hardware
and software.
At the same
time, I had to engage with the Commissioner and the three other Deputy
Commissioners, and the next levels below them. Because of the massive change we were
implementing, I also had to reach over a hundred Revenue District Offices under
several Regional Centers around the country. In addition, we had to set up
seven new Regional Data Centers to manage the new system.
It was a
complex organizational structure to steer over ten thousand employees. I was
glad I had enough management experience to handle the huge challenges a large
organization presents.
Which is More Important?
The
nonprofit sector differs from the private sector (for-profit businesses) and
the public sector (government agencies).
While I worked, I had my first experience in this sector in professional associations. Now that I am retired, I am even more involved in alumni associations.
Although they differ in purpose, stakeholders, and legal structure, the nonprofit sector benefits as much from governance and management to ensure long-term success as the public and private sectors. They are equally important in the latter two and become more involved as the organization becomes more complex. However, governance is of a higher priority in non-profit organizations.
They can survive without a dedicated management team but a good governing board is essential. Their stakeholders usually involve many volunteers in large geographical areas and demographic sectors. A good governing body must speak for all these diverse loosely held members.
Governance takes precedence because of the need for:
1. The continuing alignment of mission and vision to focus on social impacts and prevent mission drift.
2. The consistent oversight of ethical guidelines for maintaining accountability and transparency and eliminating conflicts of interest.
3. The constant shaping of future and long-term trajectories.
4. The regular oversight of fiduciary responsibilities for monies involved.
5. The growing requirement to build public trust and ensure proper representation.
In the
associations where I have been a part, I can cite three key instances when governance
was more important than management:
1. In the UPAA
in America (please see headline photo) fundraising campaigns, the Board became more important in securing
major donations to build its endowment fund due to their connections and
credibility.
2. When responding
to a crisis at the UPAA in America, the Board used its experience to make
difficult decisions and deliver delicate messages to the respondent and the
membership.
3. At the
Philippine Computer Society, the Board used its influence to advocate for elevating
the role of IT in the nation’s progress. As President, I was invited to speak
alongside President Fidel Ramos at the National IT Summit in Malacanang. That
was the start of the road towards a cabinet position for IT.
Management can
rest on a small staff led by an executive director, active key volunteer
working committees, or a combination of both. However, an engaged Board of
Directors is of utmost strategic importance in nonprofit organizations.
The experience,
influence, and credibility of the Board of Directors will enable the
organization to focus on its mission, provide ethical oversight, and safeguard the
public interest. Doing so consistently will allow it to use its strategic
direction to grow.
Literally, this never even crossed my mind. WOW!
ReplyDeleteBut it's important!
DeleteI think both are very importance, but that management can only happen effectively if solid governance is in place -- and governance can continue to succeed with proper management. One compliments the other, in many ways.
ReplyDeleteTrue.
DeleteThank you for the in-depth explanation of the differences between government and management. It was an interesting read that provided new insights I hadn't considered before. Stephanie
ReplyDeleteThat is good I was able to help.
DeleteOh, wow. I've never actually thought about the difference before. I've usually just thought about them as the same thing. Very enlightening.
ReplyDeleteThat is good I was able to help.
DeleteThis was a really educational read for me. I'm one of those people who has always used the terms interchangeably.
ReplyDeleteThat is great I was able to clarify!
DeleteVery interesting and informative review of how you executed your role with Megalink. Governance and management both play critical roles in any organization, though I think if one had to take precedence, I'd go with governance (though in business, they're equal.)
ReplyDeleteThanks. That was exactly my point!
DeleteI do believe they both are crucial, as effective management depends on robust governance. Likewise, governance flourishes with effective management. They truly complement one another.
ReplyDeleteYes, they are equally important but in nonprofits, it's of higher priority.
DeleteThe distinction you make between governance and management is insightful, especially how governance sets the foundation for long-term success while management handles the day-to-day operations.
ReplyDeleteYes, exactly!
DeleteIt's important to know the difference between governance and management for an organization to do well. Governance sets the direction and rules, making sure things are ethical and legal, managing risks, and being accountable. Shows how both things are important and how good governance matters a lot for non-profit organizations. Thanks for sharing this valuable perspective!
ReplyDeleteYou got it all right!!!
DeleteVery informative to know about these two, this is good for business owners to know. Learned something new from your post, thank you.
ReplyDeleteI am glad!
Delete