Governance can often be an elusive topic in the project management sphere due to a lack of an agreed-upon definition. However, good governance is the critical element for an effective project-based organisation. If your organisation can make the right decisions faster, you set yourself up well in our increasingly fast-paced and turbulent world. Conversely, poor governance can lead to project delays, communication breakdown and increased risk exposure. So, what are the critical elements that make up good governance?
Defining Good Governance
Governance is a hotly discussed term with many different definitions in different disciplines. Though we may be discussing governance in terms of project management, the concept of good governance has more universal roots that can be applied to the project management field.
Merriam-Webster defines governance as ‘the action or manner of governing a state or organization, and the verb to govern is defined as to conduct the policy, actions, and affairs of a state, organization or people with authority.’
Governance can be roughly understood as the process of decision making and the process by which decisions are implemented. Whether it is states or organisations, everyone needs to make decisions. Having a clear framework the defines priorities and establishes clear communication lines are critical to effective governance. But good governance needs to go a step further than simply establishing processes and meeting compliances.
Read more: Project Governance
The United Nations suggests that ‘good governance ’ has eight key characteristics or elements: participatory, consensus-oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive, and follows the rule of law
8 Elements of Good Governance
Good Governance Element 1: Participatory
Good governance considers different perspectives both inside and outside of the boardroom. When governance frameworks and decisions are made without a diversity of perspectives and opinions, governing bodies can fall into groupthink.
Groupthink occurs when individuals value group consensus over critical reasoning and evaluation. In these siloed echo chambers, key decision-makers within the governance committee often do not receive external perspectives, critiques or unique out-of-the-box ideas that can be critical to improving governance processes and activities within the organisation. With governing bodies and board positions historically held by men, bringing in gender and ethnic diversity into governance committees and boards is critical for good governance.
Good Governance Element 2: Consensus Oriented
Bringing people to participate and have a seat at the discussion table is not enough, their opinions and ideas need to be properly acknowledged. While some may view a diversity of perspectives as a potential point of conflict, an organisation with good governance that clearly defines its culture, value and practice ensure that debates and differences are handled in a respectful and constructive manner. When a diverse board reaches a consensus, it is more likely to better serve the broader interests of stakeholders.
Good Governance Element 3: Accountability
Accountability can refer to the obligation or responsibility of an organisation to provide an explanation or justification for its actions and conduct. However, more than merely being a compliance measure, establishing clear lines of command and accountability allows for organisations to make decisions faster and for issues to be escalated to the right people in the most appropriate manner. Good governance stems from individuals knowing exactly what they are responsible and accountable for at all times.
Good Governance Element 4: Transparency
Transparency refers to the willingness of an organisation to provide information to stakeholders. If good governance is all about unity, then transparency is the critical factor that enables organisational unity.
Internally, transparency allows employees to be aligned with the strategic objectives of the organisation and understand their role within the greater organisation. Externally, transparency is becoming increasingly important as stakeholders demand greater social, economic and environmental efforts from organisations. Transparency is a critical factor that builds trust in an organisation and its brand.
Good Governance Element 5: Responsiveness
Governance is all about making better decisions faster. Good governance needs to be responsive, especially in our increasingly fast-paced and turbulent economic environments. Organisations that have proper governance structures in place are able to respond to changes in a quick and effective manner without leaving out critical stakeholders and making sure all relevant parties are in the loop.
Good Governance Element 6: Effectiveness and Efficiency
One of the greatest benefits of good governance is that it reduces the amount of time and resources spent scrambling for answers. Good governance is not only able to achieve the most optimized use of resources, but it is also able to accommodate the needs of stakeholders.
Many organisations can be consumed with achieving efficiency in their processes but forget that while efficiency is beneficial, it can become redundant if it does not offer strategic value to the organisation. This focus renders governance into a mere cost-saving technique rather than a strategic function.
Read more: Organisational Governance Explained
Good Governance Element 7: Equity and Inclusivity
Governance is frequently branded as mere rules and regulations that many forget its inherent ethical and moral dimensions. It is no question anymore that social and environmental responsibility plays a critical role in future business strategy. Equity and inclusivity are more than bringing people to the table. It is about making sure that whatever decisions are made considers the wellbeing of involved stakeholders, particularly the most vulnerable groups.
Good governance enables organisations to balance the conflicting needs of different stakeholders and interests to achieve the most equitable solution with the most inclusive practices possible.
Good Governance Element 8: Follows Rule of Law
Compliance, while not the entire focus on governance, makes up a big part of good governance. Good governance requires organisations to abide by and implement fair legal frameworks that can be enforced impartially. As environmental and social compliances continue to grow, bringing in third-party expertise may be necessary to make sure organisations are acting ethically, honestly and with the utmost integrity.
Take your governance activities to the next level
Want to take your organisations governance maturity to the next level? Make sure to download our free Organisational Governance Maturity Checklist to better evaluate your current position and identify opportunities for growth.
If you want to continue to deep dive into the topic of governance, make sure to check out our blog and extended posts such as the 7 Elements of Good Organisational Governance and the Top 5 Signs of Poor Governance.
