Although governance and management are often used interchangeably, they have distinct meanings. Understanding the differences between the two is crucial for leaders in organizations, whether they are large or small, straightforward or intricate, for-profit or nonprofit.
Defining Governance
Governance provides a framework for an organization, establishing its strategic direction and accountability. Key aspects of governance include:
1. Strategically planning and defining the organization’s mission, vision, values, and goals.
2. Overseeing that the organization operates in an ethical and legal manner.
3. Holding individuals and groups accountable for their actions.
4. Identifying and managing risks to the organization.
Governance is typically guided by a governing body, such as a board of directors. In smaller organizations, this could be a formal or informal group of owners, investors, or advisors. Effective governance is essential for responsible and sustainable operations.
My first encounter with a Board of Directors occurred at MegaLink, which included the CEOs from member banks. They set a clear directive: to launch ahead of our competitors. Their guidance helped establish MegaLink as the largest consortium in the country, with 32 member banks.
Each month, I updated these experienced CEOs on progress and responded to their inquiries. One notable meeting revolved around my recommendation to launch despite existing system bugs, which I defended by stating that no system is perfect. After a robust discussion regarding risk mitigation, they ultimately supported my decision.
Leading MegaLink under that Board was a highlight in my career. They encouraged me to pursue growth while ensuring my actions remained grounded. Each meeting was a valuable learning opportunity, and I appreciated the nurturing environment they provided.
Understanding Management
Conversely, management pertains to the daily implementation of an organization’s strategy and involves:
1. Creating and executing plans to meet organizational objectives.
2. Organizing the structure of the organization and assigning responsibilities.
3. Motivating and engaging team members to perform at their best.
4. Monitoring performance and implementing corrective actions when necessary.
Management responsibilities typically fall to executive leaders and their teams, who must possess skills in planning, organization, leadership, and control. The level of management needed correlates with the organization’s size and complexity.
My first management role was at I/ACT, where, as a young and inexperienced marketing manager, I eagerly hired three talented individuals to support me. Together, we helped I/ACT become a leader in computer education.
In contrast, during my tenure as Deputy Commissioner of the BIR, I managed a thousand employees in the IT division. While three individuals directly reported to me, I maintained relations with directors and consultant groups. I was also required to communicate with the Commissioner and the three other Deputy Commissioners, along with various levels of staff below us. Given the extensive changes we were implementing, I needed to coordinate with over a hundred Revenue District Offices across multiple Regional Centers nationwide, in addition to establishing seven new Regional Data Centers for the new system.
This complex organizational structure presented challenges for overseeing more than ten thousand employees, but my management experience equipped me to tackle these significant demands.
The Importance of Governance vs. Management
The nonprofit sector operates differently from private businesses and government agencies. Having begun my journey in professional associations, I now find myself even more actively engaged in alumni groups during retirement.
While governance and management serve distinct purposes and have unique stakeholder groups and legal structures, nonprofits require both for long-term success, just as for-profit and public entities do. The interplay between governance and management grows more significant in complex organizations. However, governance takes precedence within nonprofit organizations.
While nonprofits may operate without a dedicated management team, a competent governing board is indispensable. Their stakeholders often comprise numerous volunteers across vast geographic and demographic regions, necessitating a governing body that accurately represents and advocates for these varied members.
The prioritization of governance arises from the following needs:
1. Continuing to align the mission and vision to focus on social impact and mitigate mission drift.
2.Consistent oversight of ethical guidelines to ensure accountability, transparency, and the elimination of conflicts of interest.
3.Continuous shaping of long-term strategic goals and trajectories.
4.Regular oversight of fiduciary responsibilities pertaining to financial matters.
5.An increasing need to foster public trust and ensure proper representation.
In the associations I’ve been part of, I can highlight three significant instances where governance outweighed management:
1. In the fundraising efforts of the UPAA in America, the Board played a crucial role in attracting major donations to bolster its endowment fund due to their extensive connections and credibility.
2. During a crisis at the UPAA in America, the Board’s collective experience proved invaluable in making tough decisions and communicating sensitive information to the membership.
3. While at the Philippine Computer Society, the Board utilized its influence to enhance the role of IT in national progress. As President, I was honored to speak alongside President Fidel Ramos at the National IT Summit in Malacanang, marking a pivotal step towards establishing a cabinet position for IT.
Management can rest on a streamlined staff led by an executive director, a dedicated team of volunteers, or a combination of both. However, an actively engaged Board of Directors is critically important in nonprofit organizations.
The expertise, influence, and credibility of the Board enable organizations to concentrate on their mission, maintain ethical oversight, and protect the public interest. By consistently applying these principles, organizations can effectively utilize their strategic direction to foster growth.
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