Governance vs. Management: Which Is More Important?

 

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.