The letter 'G' in GRC stands for Governance, a term that is often causing confusion among beginners. If you are just getting started in GRC, chances are that this term is causing you some trouble. Beginners often confuse governance with management. Although the two are related, they are distinctly different concepts. To help solve some of the confusion, this article explores the definitions of governance and management, provides examples for both of them, and describes the differences between them.
What is Governance?
Governance refers to the frameworks, policies, and rules that guide, control, and monitor an organization. It is an overarching term that includes aspects of accountability, regulation, and ethical guidelines that ensure an organization operates transparently and in accordance with its goals and societal norms. There are different types of governance that focus on different aspects of an organization’s needs, such as IT Governance or Information Security Governance.
Governance involves indirect control, influencing an entity through setting constraints, guidelines, and boundaries within which management operates.
Examples:
Corporate Boards: A board of directors overseeing a company’s management to ensure compliance with shareholder expectations and regulatory requirements.
Government Regulations: Public sector governance involving legislation and regulations that guide how businesses operate, such as environmental laws and labor regulations.
What is Management?
Management, in contrast to governance, is directly involved in the day-to-day operations and tactical administration of an organization’s resources. It includes planning, organizing, directing, and controlling an organization's resources to achieve specific objectives.
Management involves direct contact and control over an entity, process, or resource. It includes arranging and operating resources to achieve specific objectives.
Examples:
Operations Managers: Who directly supervise production lines, manage workflows, and handle personnel issues to ensure efficient operations.
Chief Information Officer (CIO): Who is responsible for the direct oversight and implementation of IT strategies, aligning them with the organization's objectives.
Differences between Governance and Management
While governance and management are both essential for the efficient functioning of organizations, they differ significantly in their approach to problem solving and the scope of their actions.
Level of Contact
Management has direct contact with the operations and the resources being managed. For example, a line manager directly controls resources, making decisions on production processes and shift planning based on immediate organizational needs.
Governance on the other hand involves indirect contact, shaping policies and creating frameworks within which management operates. For instance, a Board of Directors sets the overall strategy and policy guidelines but does not involve itself in day-to-day decision-making.
Scope and Focus
Management focuses on tactical, day-to-day execution of tasks and direct supervision of resources to meet organizational objectives.
Governance concentrates on strategic oversight, ensuring compliance, ethical governance, and alignment with long-term goals and stakeholder interests.
Summary
Despite the potential for overlap, distinguishing between governance and management is essential for understanding how organizations function. Governance sets the foundation for management activities by defining boundaries and establishing guidelines, while management operates within these limits to achieve governance objectives.
Both functions are essential and must be effectively aligned to ensure organizational success and integrity. Without the proper guidelines set by governance, management activities lack the needed direction to ensure that the measures taken align with the organization’s long-term interests and avoid unnecessary risks. Management on the other hand is needed to ensure that governance frameworks are put to good use. This clear delineation ensures that both governance and management requirements are met, contributing to the overall success and effectiveness of an organization.
