It is not uncommon, when a conversation about governance is initiated within the general population, that one of the first questions is: what does the word governance actually mean? If you Google the words “corporate governance”, you will be advised that there are 98,400,000 references to these words in the stratosphere, however in this article I will try to provide a simple definition and then explain why it is so important that organisations, both in the public and private sectors, incorporate good governance principles and practises into their daily business activities.
What does Governance mean?
Governance can be defined as: “The system by which entities are directed and controlled. It is concerned with structure and processes for decision making, accountability, control and behaviour at the top of an entity. Governance influences how an organisation’s objectives are set and achieved, how risk is monitored and addressed and how performance is optimised”. Governance is a system and process, not a single activity and therefore successful implementation of a good governance strategy requires a systematic approach that incorporates strategic planning, risk management and performance management. Like culture, it is a core component of the unique characteristics of a successful organisation.
Why is good governance important?
The fundamental reasons why organisations should adopt good governance practises include:
In summary, governance encompasses the processes by which organisations are directed, controlled and held to account. It includes the authority, accountability, leadership, direction and control exercised in an organisation. Greatness can be achieved when good governance principles and practises are applied throughout the whole organisation and that’s why governance is important.