Discover the key differences between governance vs. managements and what their core responsibilities would be within an organization.
In the business world, organizations can be thought of as ships. And leadership isn’t just about steering the vessel; it’s about knowing where it’s heading and why.
To lead any successful business, you have to juggle multiple, interconnected elements simultaneously. Smoothly run organizations require a complex balance to be struck between optimizing operations, driving excellence in team performance and ensuring growth. But the effort is worth it—studies have long shown that companies with effective management practices outperform their competitors across several metrics, including profitability, employee retention and setting and achieving goals.
Meanwhile, strong corporate governance structures have been linked to better financial outcomes. According to a 10-year survey of 100 FTSE 350 companies, good governance can boost profits by 29% or more. Businesses with such frameworks are also more likely to prioritize social impact and attract today’s increasingly socially and environmentally conscious consumers.
Management vs. governance—many people use these terms interchangeably, but in reality they’re quite different. So, what do they mean, and how can you leverage each to boost your own leadership and create sustainable value?
What’s governance all about?
In the corporate arena, governance means the policies, processes and frameworks that dictate how a company is directed and controlled. Good governance sets the blueprint for organizations that last: it ensures transparency, accountability and ethical practices while keeping everyone aligned with the business’s strategic goals.
In most companies, the board of directors is the main driving force behind governance. The governing board influences many key decisions, such as appointments, executive compensation, dividend policies and even financial considerations in the face of social or environmental concerns.
Good governance can be a powerful resilience-building tool, but only when the framework is well-designed and implemented purposefully. It plays several beneficial roles in organizations:
- Providing clear-cut insight into the company’s direction.
- Building stakeholder trust—strong ESG policies are a key metric in adding value, as McKinsey has pointed out.
- Promoting long-term financial viability and returns.
- Facilitating capital raising.
- Boosting brand reputation, customer retention and share prices.
- Reducing financial loss and risk.
On the flip side, bad governance can destroy a company’s reputation, cripple growth and erode stakeholder trust—along with stock prices.
Management: solving problems hands-on
Management is a different matter altogether. In a nutshell, it’s the art of execution—of planning, organizing and coordinating people and resources to achieve a company’s objectives.
Managers are responsible for day-to-day operations that keep the business running. They handle resource allocation, lead teams and ensure everything is on track to achieve short-term goals within set time frames. They also resolve issues, monitor performance, make strategic decisions, contribute to hiring and retaining talent and create strategies to ramp up productivity and efficiency.
Management is the engine that turns ideas into action, one task at a time. Consistent management practices are vital for organizational success and can create a bridge between businesses and communities, fostering social impact. The latter, in particular, opens up many avenues for sustainable innovation in business; after all, managers can play a significant role in nurturing CSR activities or promoting eco-friendly production methods.
Effective management practices—especially reliable leadership and talent development programs and strong DEI support—lead to better business outcomes and play a critical role in:
- Goal setting and achievement—well-managed companies are 50% more likely to attain their goals.
- Financial performance.
- Attracting and retaining top talent.
- Improved decision-making.
- Enhanced customer satisfaction.
- Overall organizational growth.
Governance vs. management: big picture vs. daily grind
Generally speaking, governance asks, “Where are we going, and how will we get there?” While management asks, “Why are we heading in this direction, and what steps can we take to reach our common end goal?” There are several clear areas of difference between the two:
- Focus: Governance focuses on long-term vision and strategy, but management revolves around day-to-day execution.
- Approach: Governance takes the big-picture approach while management zeroes in on the nitty-gritty of implementation and operational efficiency.
- Accountability: Governing boards are accountable to the stakeholders, while management takes accountability for projects and teams before the board of directors.
Governance vs. management: shaping sustainability & social impact
Here’s another metaphor for you: when it comes to sustainability and social impact, think of governance as planting the seed and management as nurturing the seedling with everything it needs to grow. The former establishes ethical, impactful decision-making frameworks, while the latter sets the tone for company-wide culture and tangible results. Done well together, governance and management work harmoniously to drive change and help organizations thrive.
IENYC: Where purpose meets practice
As an ambitious business leader, you’ll need extensive practical tools to bridge governance and management. It’s an art requiring adaptability, systemic thinking and well-honed communication skills. The Master of Science in Business for Social Impact & Sustainability will equip you with the skill set to balance vision and strategy with execution and performance.
This program shapes stand-out professionals who can think like a director and act as effective managers. Offered at IE New York College, it takes students to the vibrant streets of SoHo, home to a large community of businesses and other organizations, nonprofits and startups working in the sustainability and social impact spheres. It’s a chance to establish valuable contacts and launch or accelerate a career with the potential to spark positive change.