Governance & Management
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Governance & Management
Division of Labour
The assignment discusses the relationship between governance, strategic management and organisational performance in terms of the division of labour.
Strategic Management
High performing businesses lead the market by defining sustainable unique propositions. They aggressively pursue market leadership position with the help of strategic management processes. Strategic Management is a set of managerial decisions and actions that defines the long term strategic plan of the organisation and then align that to the functional/operational management of the organisation. (Wheelen & Hunger, 2002). This demands collective responsibility from both Governance and Management team.
Governance is about setting strategic goals and priorities, aligning the organisational policies to the environment and monitoring the management performance in order to maximise the shareholder expectations. In short, governance is about “doing the right thing”. The board aims to achieve the objectives in an efficient and transparent manner by balancing the ethical and legal perspectives.
Management focus on the day to day operations of the business managing the strategies and processes set by the governing body. In short, management is about “doing things right”.
The Boundary
There is no universally accepted boundary between the Governance and Management. Each organisation adopts the degree of separation based on the applicable national laws, regulations, financial constraints and accepted code of practices. A combination of Companies Act 1993, Financial Reporting Act and Securities Act provides the basic responsibilities of Directors (Parliamentary Counsel Office, 2012). Almost all of the good performing companies (e.g Infratil) have a Board Charter which defines the roles, responsibilities, delegated functions, limitations etc. specific for the organisation (Infratil, 2012).
Role of Governance and management functions can be explained based on the five facets of Strategic Management. (Grant, Butler, Hung, & Orr, 2011)
Goal setting process is about constantly asking questions such as Who we are, Who do we serve, What are we doing, Where do we go etc. The goal setting process, ideally looking 3-15 year ahead (“Third Pillar”) is one of the primary functions of Governance. The Governance team will also define the ethical and legal policies of the organisation and demonstrate the code they crafted. Some companies work with their employees to collect all possible information before making this goal. In this case, management team is responsible for the employer-employee interaction (Renjen, 2012).
The second facet of strategic management -Analysis- looks at internal and external factors such as economic, technological, political and social forces. This task is led by Management team with feedback from Governance team. Management team will better understand internal factors such as resources, strengths and weaknesses etc.
The third task of Strategic Management -crafting the organisational strategy- sits with both Governance and Management teams. Governance