Governance is a system and process, not a single activity and therefore successful implementation of a good governance strategy requires a systematic approach that incorporates strategic planning, risk management and performance management.  Like culture, it is a core component of the unique characteristics of a successful organization.

The fundamental reasons why organizations should adopt good governance practices include:

To preserve and strengthen stakeholder confidence – nothing distracts an organization more than having to deal with a disgruntled stakeholder group caused by a lack of confidence in the governing body. And on the positive side, a supportive stakeholder base can generate benefits for the organization though social and emotional support, intangible but very valuable attributes that all organizations should strive to achieve and sustain;

To provide the foundation for a high-performing organization – the achievement of goals and sustainable success requires input and support from all levels of an organization. The Board, though good governance practices, provides the framework for planning, implementation and monitoring of performance and without a foundation to build high performance upon, the achievement of this goal becomes problematic.  Achievement of the best performance and results possible, within existing capacity and capability, should be an organizations on going goal. Good governance should support management and staff to be “the best they can be”; and

To ensure the organization is well placed to respond to a changing external environment –business today operates in an environment of constant change.  Technology has created an information age that has transformed our world, and for business to both survive and remain profitable to enable it to fulfil its mission and achieve its vision, a system has to be in place to assist an organization to identify changes in both the external environment and emerging trends.  This process of understanding our changing world does not happen by chance, it requires leadership, commitment and resources from the governing body to establish and maintain such a system within the organization.  Change generally does not happen “over-night”, it is there for all to see if they have in place a system for looking. Governing bodies, as the ultimate leaders of an organization, should take prime responsibility for this activity. 

In summary, governance encompasses the processes by which organizations are directed, controlled and held to account.  It includes the authority, accountability, leadership, direction and control exercised in an organization. Greatness can be achieved when good governance principles and practices are applied throughout the whole organization and that’s why governance is important.