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Governance vs. Management
April 02, 2013

Governance vs. Management

Do you know the difference between governing and managing?

Do all of the members of your Governing Body understand this difference? Dysfunctional boards do not - and consequently they end up crossing the line into micro managing.

And what happens when you - as a board member - you stray into the business, make management decisions, and start trying to run the show?

Huge problems arise....

First - you reduce your own ability to perform as a member of the board.

Second - you undermine the CEO's credibility.

And third - you may drive away competent executives who don't agree with hands-on approach to governing.

To help you gain clarity about the interface and demarcation between the board and the management - here are some key distinctions about these two different roles....

The board represents the interests of the owners - the management makes sure those interests get met through execution.

Please note:

  • In a for-profit organization - the owners are the shareholders
  • In a government organization - the owners are the citizens
  • In a non-profit organization - the owners are the people served by the organization’s mission

    One of the main challenges for the board is to make sure that there is always an alignment between the owners' desires and the management's desires. Remember - the board must always zealously represent the owners' interests.

    However, the board exists to assist, guide - and challenge management at the same time. Hence, the governing body must not fall into an "us-versus-them" dynamic with the management they are supposed to help.

    The board appoints, assesses and supports the CEO and approves the top management - the management is the group of people who were given the power and authority by the board to achieve desired results.

    The board is accountable to the owners - the management is accountable to the board.

    The board must be faithful to the organization's mission - the management must be faithful to the expected results.

    The board works in the realm of high-level, future-oriented matters of organizational direction, strategy and policy - the management works in the realm of day-to-day operational decision-making for strategy execution and implementing those policies.

    The board directs management to achieve results that the owners want - the management leads the organization according to the board's direction and makes sure such results are actually achieved.

    The board oversees management and organizational performance - the management clearly and honestly communicates to the board to what degree the results have been met, backed up by transparent and contextual information.

    The board must ensure that the organization acts ethically, legally and prudently - the management must lead with integrity.

    Please note:

    Governance is about the organization's mission, big decisions, and the future - supporting top management and holding it accountable at the same time.

    Governance is NOT about micro management.

    If it is true that boards must be engaged - it is also true that engagement doesn't mean crossing the line into running the show.

    Board members stray into operations and away from big decisions, strategy and policy - for the following reasons....

    First - ignorance.

    Some board members believe they are doing their jobs by delving into management decisions.

    Second - familiarity.

    Some board members practice what is most familiar to them.

    Outside board members may bring ideas based on what works in their businesses – while inside board members think they know how things should be done in-house.

    But board duties are very different from management duties.

    Third - faith.

    Some board members lose faith in the CEO.

    But if you are a board member and you lose faith in the CEO - your job is NOT to start doing her job, your job is to manage her performance instead - and ultimately replace her if all evidence points to such direction.


    Governance pertains more to strategy - and management more to execution.

    The board verifies performance - and management reports it.

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    Questions? Feedback? Reply to this Newsletter and tell me what you would like future issues to be about.

    Feel free to re-send this "Leader Newsletter" to your colleagues.

    Most recent 12 "Leader Newsletter" issues:

    Are you humble?
    Your own Integrity
    How to Develop Trust within the Team You Lead
    Results-oriented Definition of Trust
    Decision Making Effectiveness
    Team Building Unknown Principle
    Productive meetings Vs. Time wasters
    Be a top notch Communicator
    Be Persuasive in 60 Seconds or Less
    Feedback Culture
    Inter-Departmental Problems

    See you next month!
    Jose Luis Romero - Publisher
    April 2, 2013. Copyright: All rights reserved
    I publish "Leader Newsletter" on the first Tuesday of every month
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