David’s Articles

David has been writing and publishing since 2006.  

This post was written and published prior to September 2023 when David and his prior firm, Family Capital Strategy, merged with Greycourt.  Views expressed reflected David’s personal views at the time and do not necessarily reflect the views of Greycourt.  Posts and information may be out of date and should not be relied upon for investment advice.

Organizational Governance and Its Discontents

Jun 9, 2023 | Family Wealth

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Since joining student government in 9th grade, I have seemingly been doing governance work for my entire adult life.  Over the course of time, I have been fortunate to serve in a governance role for a wide variety of organizational types – non-profits, professional peer groups, and even several private companies.  I’ve read many of the books on good governance, completed training classes, and even attended governance focused conferences.  Across all that, what I’ve learned is that talking about governance is hard.  

There is a certain amount of ineffability to it – which makes pinning it down and describing it even more challenging.  We know that most often, governance happens in a meeting.  While minutes of the meeting may reflect discussions had and decisions made, this is a part, but not the whole of what governance is.  Any good director will tell you that minutes may capture the facts, but little of the substance of what transpired during the events of the meeting.

For the conflict-seeking / drama-enjoying types, it is easy to mentally jump from governance to politics.  And certainly, while politics may be a part of governance, it is not the same thing.  

So, what then is governance, why does it matter, and how can it be done well?  To explore this, we are beginning a series of blog posts looking specifically at organizational governance, a specific form of governance that is widespread in modern life.  

At a societal level, we have agreed and institutionalized this type of governance as being important.  For non-profit organizations, generally some sort of board structure is required to get 501c3 status.  The same is true for most types of corporations, especially if the corporation has accepted investment from outsiders.  

A quick aside – I have often written about a specific type of governance pertinent to my work, namely family governance.   This blog post will examine governance from a broader level and will not be just specific to the governance matters of wealthy, long lineage families.

So, our task then is organizational governance.  Let’s begin first by considering what an organization is.  W. Richard Scott in his Organizations: Rational, Natural and Open Systems first posits that organizations are “social structures created by individuals to support the collaborative pursuit of specified goals.”  This definition is exceptionally helpful in laying out a reasonable framework for the consideration of governance.

First, organization are social structures created by individuals.  Social structures deal with the relationships that exist between the people involved.  Governance will naturally deal with the dynamics of how these relationships are managed and exist.  This may be reflected in items like organizational charts outlining reporting hierarchy or policies addressing a specific matter of social relationship.  

The second half of the definition is important as well, ‘the collaborative pursuit of specified goals.’  Under the rational theory of organization, it is the goal-seeking orientation of organization that makes them particularly unique from other sorts of social groups. Thus, it seems reasonable then to consider that governance also has a role to play in the identification and selection of goals, as well as the pursuit (aka the how) of their achievement.  

Here quickly we have arrived at largely the most common elements that governance is tasked with, namely:

  • Identification of organizational goals – aka organizational purpose and vision
  • Pursuit of those goals – aka strategy
  • Social structures – how the players must be coordinated to accomplish the strategy. 

These are three critical bullet points for any organization to consider and thoughtfully address.  But if you are thinking critically, it is easy to also see that those are often common priorities for those in management.  So, what then is the difference and dividing line between governance and management?  

We will consider that question in our next post.


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