Whether you're an educational facility, a non-profit organisation or a major international business, good governance matters because ultimately it will improve your organisation’s performance. It’s vital that the structure behind governance is sound and conducive to success.
What Does Good Governance Start With?
Good governance starts with a strong and clearly defined structure or framework to provide definitions of roles and objectives. This enables teams to be effective, and this runs from the boardroom to the back office.
Without robust, secure and carefully planned foundations, your organisation will be in danger of failing, so a good governance framework supports business activity and provides strength and stability on which to build for the future.
Good governance varies between organisations, depending on their nature, size and type, but has four things in common:
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Accountability
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Roles and Responsibilities
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Fairness
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Transparency
Accountability
A clear accountability structure is vital, so that everyone within the business is clear on who could or should have accountability for precisely what, in defined areas. This includes delegated authorities. This helps to explain decisions and actions to everyone, whether they’re shareholders, employees, customers or other stakeholders, and builds confidence in the organisation. Part of the accountability process is about determining risks within a risk management strategy and should not simply be a reactive response to events.
Roles and Responsibilities
Clearly defined roles and responsibilities for senior management are vital, and it’s also important that the collective responsibilities align to the overall framework and accountability process, as well as each other, so that no gaps or cracks which might lead to ineffective practices open up.
Fairness
Mervyn King wrote a seminal piece for the Good Governance Institute in which he said that ‘Fairness is one of the four key criteria of good governance’. Fairness towards all stakeholders engenders increased performance, improving relationships between employees and management, offers a proportionate voice for shareholders, and encourages more accountability within the community in which an organisation works.
Transparency
Transparency builds trust and confidence in an organisation, demonstrating that it has nothing to hide, and revealing how it works. Organisations that are transparent, they trust and empower their employees to improve when things go wrong, are open to constructive feedback, and are fully accountable for their actions. To achieve full transparency and make the right decisions, good and timely Management Information is critical (see Blog 3). Proper documentation and evidence supports a strong audit trail and which also supports long-term business development, regulatory confidence and a better outcome for all stakeholders.
If you’re looking to make your governance arrangements more effective, or you need some assurance or support, we can help. At Brighter we have years of experience of helping clients address their governance frameworks, and their operational practices. To learn more about how we can support you, contact Simon Davies today.
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