Governance is the act of governing or administrating something. By far the most common form of governance is that of an organization. A system of governance is therefore generally a type of organizational system. For example, a society uses an organizational system to govern a public community. A company uses an organizational system to govern its own internal community.
A system for organizational governance exists as a meta-decision system. In other words, it is not just a means by which the organization makes decisions, it is the means by which the organization makes decisions about decision-making.
Within this context, a governance system:
- places constraints on decisions
- determines who has responsibility and authority to make decisions
- establishes constraints and parameters that control, guide, or influence decisions
- prescribes consequences for non-compliance
At the highest level in society, governance is established by a constitution. Within a company, it may be declared in the form of a business charter. Founding documents such as these establish a parent level of authority and constraints from which all other decision-making authorities and structures are derived. At deeper levels within the organization, a governance system can further influence the definition of policies, standards, and processes that guide and control day-to-day decision-making activities.
A good system of governance helps the members of an organization carry out responsibilities in a manner supportive of the organization’s business goals and vision. It mitigates conflict by clearly defining responsibilities and assignments of authority, and further reduces ambiguity by articulating constraints and parameters in practical forms (such as rules and decision guidelines). It also helps balance tactical and strategic goals by expressing the intents and purposes of its rules.