The Difference Between Governance and Management

 

By Lynda Bourne

Stakeholders are becoming increasingly vocal in their demands for “good governance.” The rise of stakeholder activism (shareholders are stakeholders, too) is affecting the way organizations of all types are governed and managed.

This will in turn impact the way projects are initiated and managed—which could affect your career.

But when thinking about what good governance looks like, be careful not to confuse it with good management. They aren’t the same! Governance is firstly focused on creating the environment in which good management can flourish, and then on ensuring the organization’s management is good.

Global organizations are finding their stakeholders and shareholders less and less tolerant of governance failures that lead to bad management. This lack of tolerance manifests itself through government investigations and criminal prosecutions against organizations of all types and sizes—from FIFA on down.

All this means the project failures that may have been acceptable in the past are unlikely to be tolerated in the future. Stakeholders increasingly expect organizations to proactively and effectively manage their investments in projects and programs.  

This entails both the “management of projects,” focused on the full value chain from the initial investment decision through benefits realization, and the traditional domains of project, program and portfolio management.

Achieving excellence across the value chain will not be easy. The goal does offer an opportunity for the project management profession to expand its influence beyond the narrow confines of project management into the broader arena of the “management of projects,” which will involve project management advocacy in both senior management circles and governance circles. (Organizations such as PMI are already actively involved in this work .)

Know Your Functions

An understanding of the difference between management and governance is critical for such advocacy to be effective.

The primary focus of the governing body in any organization should be balancing the competing interests of its diverse stakeholder community. The six functions of governance are:

·         G1 - Determining the objectives of the organization

·         G2 - Determining the ethics of the organization

·         G3 - Creating the culture of the organization

·         G4 - Designing and implementing the governance framework for the organization

·         G5 - Ensuring accountability by management

·         G6 - Ensuring compliance by the organization

The functions of management focus on achieving the organization’s objectives within the framework established by the governing body. As defined by Henri Fayol in his 1916 book “Administration Industrielle et Generale,” the five functions of management are:

·         M1 - To forecast and plan

·         M2 - To organise

·         M3 - To command or direct (lead)

·         M4 - To coordinate

·         M5 - To control (in the sense that a manager must receive feedback about a process in order to make necessary adjustments)

This diagram plots the relationship between the governance and management functions. Management functions are assumed to be hierarchal with the governance inputs cascading down to lower-level functions.

The challenge for many organizations is establishing an effective governance framework to frame and oversee the work of its management,  thereby avoiding the scandals we read about all too frequently.

The question that interests me is: How can we start to influence the top end of our organizations to allow the efficient delivery of the right projects and programs, managed the right way?

If the project management profession doesn’t step up to this challenge, someone else will. How do you think you can start to build influence?