Governance Structures

(OBJ 5.1)

Organizational Governance

• Complex, multifaceted concept essential for successful organization operation
• Comprises various components, each with unique functions and significance

Governance Structures

• Boards
  • A board of directors is a group of individuals elected by shareholders to oversee organization management
  • Responsible for setting strategic direction, policies, and major decisions
  • Example:
    • Might include industry experts who provide strategic guidance on technology trends and market opportunities.
• Committees
  • Subgroups of boards with specific focuses
  • Allows detailed attention to complex areas
  • Example:
    • An audit committee oversees the organization's financial reporting process,
    • A governance committee ensures that the board functions effectively and adheres to governance principles.
• Government Entities
  • Play roles in governance, especially for public and regulated organizations
  • Establish laws and regulations that organizations must comply with
  • Example:
    • Federal Trade Commission (FTC) which enforces laws related to consumer protection and competition
• Centralized and Decentralized Structures
  • Centralized
    • Decision-making authority at top management levels
    • Ensures consistent decisions and clear authority lines
    • Slower response to local/departmental needs
  • Decentralized
    • Decision-making authority distributed throughout the organization
    • Enables quicker decisions and local responsiveness
    • Potential for inconsistencies
    • Example:
      • Might be used to encourage innovation and agility.
  • Whether the structure is centralized or decentralized is going to majorly depend on the organization, its goal, and size.