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The Need for Governance

The Need for Governance
Business
Author
Author Photo Ziad Rayess
Last Update: 03/05/2023
clock icon 3 Minutes Economics
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Governance has emerged as a critical component for organizations to achieve long-term success in the fast-paced business world of today. Businesses use the rules, laws, and foundations that govern how their operations work to evaluate staff, motivate them, and encourage them. However, implementing a system of governance is not without its challenges and pitfalls, including, to name a few, bureaucracy, a lack of initiative, and bloated governance systems, to name a few. Ziad Rayess, in his book "Shortcut for a Better Life," discusses the importance of governance and its benefits, as well as the potential obstacles that businesses might run into.

Author
Author Photo Ziad Rayess
Last Update: 03/05/2023
clock icon 3 Minutes Economics
clock icon Save article

Article link

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In his book "Shortcut for a Better Life", the writer Ziad Rayess mentions: Governance is the set of rules, laws, and foundations that regulate companies’ work. Staff are monitored through governance, and governance regulates the relationship between staff and stakeholders. The aim is to achieve transparency and fairness and combat ideological deficiencies among employees.

Major technological advances have resulted in modernization and development in all areas of life, including management of companies and organizations that put all available energy and reinvigorated theories toward management. This includes technological development with the aim of improving performance and monitoring and creating new units of measurement. All of this is used for evaluating staff on the one hand, and motivating, encouraging, and rewarding them on the other.

Using a system of governance entails creating rules and internal regulations that work in favor of the owner’s goals. These regulations help the owner develop and sustain the entire system while averting human errors and the effects of ethical defects among staff.

It’s clear how crucial governance is in vast organizations with lots of departments and activities. It’s difficult to monitor all these divisions without a regulated system of governance applied to all areas of work.

On the other hand, there are some challenges and pitfalls that the owner or even the management that’s implementing the governance might encounter. These include:

1- Selecting staff to implement governance:

Many businesspeople tend to appoint competent directors with the goal of kickstarting development and implementing governance systems. They woo leaders from large organizations known for their governance and performance quality to take CEO positions at their new, medium-sized organizations in a different line of work. The new organization is more active and effective, but the new CEO’s past work was limited to certain clearly delineated activities within a large structure. They don’t have experience with the rest of the activities of the new organization, even though it’s smaller or in a different location with a variety of activities.

Read also: 6 Behaviors that Distinguish Innovative Leaders

2- Governance and potential fallout:

Governance, using high standards, down to the smallest details may lead to a type of bureaucracy that hinders the progress of work unless it’s addressed properly.

3- Lack of initiative and killing the spirit of responsibility:

If the system of governance is inflexible or is enforced rigidly at small or medium enterprises, it may create negative feelings among employees and kill their spirit of initiative and responsibility. This turns them into robots that lack the added value that the human mind provides.

4- A bloated governance system:

To implement a system of governance, you need oversight staff and a follow-up protocol to establish systems and regulations and monitor their implementation. But if there is not much work and it’s not very profitable, the huge costs entailed for that will exceed the returns for the company.

5- Importing the governance system:

Many people turn to major, well-known consulting firms that have been successful in the past and put into place the same systems they previously implemented at their organizations without changing them. Every organization has certain needs determined by the nature and size of the organization’s activities, and not taking that into account will hinder or bring down the organization.

Read also: How to Start a Consulting Business - Part 1

6- Governance regulations:

At any organization, governance regulations should be established and implemented by a party with operational, financial, and legal expertise. However, most businesspeople rely on financial directors who have banking expertise or specialized investment firms and ignore the operational aspect, leading to issues with the system.

Governance is necessary and important. It has numerous important benefits, including:

  • It helps companies achieve long-term success.
  • It preserves investor confidence, which requires increasing the capital generously or improving confidence among those who hold market shares.
  • It provides clearer controls for risk management and reduces waste and corruption.
  • It provides a clear direction for the owners of the company in creating a management strategy.
  • It creates a valuable reputation for the company’s brand.

Governance is important, but it is subject to rules and requirements for success that must be followed to gain the desired result.

Conclusion:

Governance is crucial in today's business world as it is essential to a company's long-term success, investor confidence, and risk management controls, among other benefits. However, to avoid potential pitfalls, the implementation of a system of governance necessitates careful thought and attention. Business leaders must take into account their organization's nature, size, and activities when implementing governance regulations, and they should rely on experts with operational, financial, and legal expertise. With the right approach, governance can provide a clear direction for business owners and create a valuable reputation for the company's brand.

+ Sources

  • This article is from the book "Shortcut For a Better Life" by Ziad Rayess.
Disclaimer: This article is not allowed to be copied as it is or used anywhere else under legal liability. However, paragraphs or parts of it can be used after obtaining official approval from Annajah Net administration.

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