ESG | The Report

What is a Governance Structure?

What is a Governance Structure?

As businesses increase in size and scope, it becomes increasingly important for them to develop an organizational structure capable of managing its complexity. A governance structure helps ensure that decision-making processes remain structured, transparent, and focused on the overall objectives of the business. By establishing clear models for making decisions, a governance structure can help business teams stay coordinated while fostering trust within an organization. In this blog post, we’ll explore what a governance structure is, the benefits it offers, and how to create one in your organization.

Who Needs a Governance Structure?

It is no secret that most businesses have some form of governance structure in place, and for good reason: it helps guide decision-making, ensures compliance with regulations, and imposes accountability for decisions made by company leaders and shareholders. Such a structure can help companies prioritize tasks and identify key areas where the organization needs to focus its efforts in order to achieve positive outcomes. But who actually needs a governance structure? To answer this question it’s important to understand what kind of organization would benefit from one as well as how they can go about developing one. In this blog post, we will explore these topics in further detail so you can determine if your business could benefit from having such a system in place.

Governance structures are especially important for larger companies that involve multiple departments, managers, and external stakeholders. Governance structures ensure that all considerations about the company are taken into account, not just those of one department or individual. Good corporate governance includes all elements of a company’s entities. Whereas the exclusion of any structure could lead to bad corporate practices and issues.

What Does a Governance Structure Look Like?

A governance structure outlines the governing body’s roles, responsibilities, and relationships in an organization. It clearly states who is responsible for making decisions and how those decisions are made. At the top of a governance structure is usually the board or executive managers of a company that oversees strategic decision-making. Other levels of middle management can also exist depending on the size of the organization, which works to implement strategies set by leadership. Then there are individual contributors such as staff members tasked with carrying out consistent procedures and operations on a daily basis. The governance structure serves as a guide for all members to ensure their individual roles contribute to the overall goals within an organization.

A governance structure is documented in a set of organizational documents like job descriptions, meeting minutes, corporate codes of conduct, and decision-making checklists. The governance structure also dictates enforcement strategies which are implemented through HR processes like performance reviews, compensation decisions, promotions, and terminations.

Why Do Companies Need a Governance Structure?

Establishing clear governance structures in organizations is essential to help ensure maximum efficiency, compliance with regulations, and the ethical functioning of the business. By formalizing the roles of each individual or group within a company and implementing appropriate policies, procedures, and guidelines that prescribe how decisions will be made and by whom, there can be an effective system for holding company leadership accountable for their actions. Governance structures also provide a tangible roadmap for addressing internal debates or disputes before they onset, as well as key strategies for mitigating risk associated with operations. In general, boards and other governance bodies foster collaborative working environments which yield improved corporate performance overall.

Having a robust governance structure in place helps employees stay committed to company goals despite obstacles or opposition from other employees. It also helps companies avoid costly negligence lawsuits by clearly establishing that policies and processes have been considered carefully, documented where appropriate, and enforced consistently across the company.

4 Steps to Create a Governance Structure

1. Write a one-page summary of your organization’s purpose and its core values as they relate to the role of governance structure in your business.

2. Identify and prioritize the factors in your industry that will determine how to structure your governance system, including budgeting, deadlines, number of employees, and dependence on outside partners or suppliers.

3. Create a team to build your organizational documents (job descriptions, meeting minutes, etc.). This should include at least one person from each department that will be directly affected by the governance structure.

4. Implement your governance structure after it’s approved by both your team and executive leadership, but before it is implemented across the company. According to best practices, this should take place over six months or more so that all employees have adequate time to read and review the documents relevant to their roles within the company.

Who Can Help Me Implement a Governance Structure?

Governance structures should be tailored to the specific needs of an organization, so it is recommended that you hire an outside consultant to help with implementation if your organization does not have the bandwidth for self-management. This person should be familiar with governance best practices and may also have helped other companies successfully implement governance structures in the past.

What is included in a governance model?

A governance model might include mission and vision statements, as well as short and long-term objectives for the organization. A list of best practices that will be followed throughout the organization. Procedures and standards that must be followed by departments to ensure good performance. It may also include strategies to follow in times of crisis.

What is IT governance?

IT governance is the function of directing and controlling an organization’s investment in, and use of, information technology (IT). It can include any number of formal policies or informal processes for managing IT. The goal of IT governance is to ensure that the business endures by providing alignment between IT activities and business objectives.

What are the 4 Models of IT Governance?

1. Corporate Model

    • Mission and vision statements, short and long-term goals for the organization

    • Short-term objectives that align with business goals

    • Strategies to follow in times of crisis

2. Divisional Model

    • Different department standards to maintain efficiency while following core values

    • Strategies to follow in times of crisis

3. Project Model

    • Mission and vision statements, short and long-term goals for the project

    • Standards that ensure good performance during the life of the project

4. Matrix Model

    • Mission and vision statements, short and long-term goals for the company

    • Mission and vision statements, short and long-term goals for the project

    • Standards that ensure good performance during the life of the project.

How do you write a governance framework?

Governance frameworks can be written in a variety of ways. It is common to write one that includes the organizational purpose and core values, as well as external factors (industry specifics) that guide the structure of governance. Begin with your organization’s purpose and vision, then write short-term objectives that align with your business goals. Write strategies to follow in times of crisis, and procedures/standards that must be followed by departments to ensure good performance. A list of best practices should also be included for easier reference. Finally, determine who is responsible for each document you are creating, and who will be responsible for enforcement across the company.

How long does it take to write a governance framework?

A governance model can be written in as little as an hour, but taking the time to ensure that all employees have adequate time to read and review the documents relevant to their roles within the company is important.

Ask yourself these questions to begin building your governance structure...

How do you structure a committee?

Establishing a committee can be done in several different ways. You may choose to create a project-based committee for one specific objective or choose to establish committees that will oversee the company as a whole. Ask yourself these questions to begin building your governance structure:

    • What objectives do you want to achieve?

    • Who is responsible for achieving these objectives?

    • What department will play a role in achieving these objectives?

Once you have determined your committee’s purpose, determine which stakeholders must be included. Determine the length of time you will need to achieve your objective and structure accordingly. Write an outline for each member of the committee outlining their responsibilities and how they should engage with other members

What is the committee organization structure?

A committee organization structure is the flow of authority and responsibility within a committee. It can be as simple as one leader with several members who report to them, or it can include parallel leadership structures. In either case, your goal should be twofold:

    1. Identify what information will need to be passed from member to member
    2. Ensure that any necessary information is accessible to all committee members.

How do you structure a committee?

To ensure that the committee has clear responsibility and authority, begin by creating an org chart for your project or company that includes both current staff, as well as people who are not yet on staff but may be brought in for specific phases of the project/committee. Underneath each position, write job-specific responsibilities and authority. Only assign one person to a position unless you have a specific reason not to do so (i.e., the HR Manager is also the Office Manager). If there are multiple people within your committee who can hold responsibility for certain tasks, organize them into parallel leadership structures under that position.

What are the components of a committee charter?

A committee charter is a document that states the purpose and objectives of your committee, as well as clearly defined roles and responsibilities for all members. This document should be accessible by all committee members, and a digital copy should also be kept on file with the company’s records in case physical copies are lost or inaccessible. A typical charter includes:

Purpose and Mission Statement:

  • What is the committee’s objective?
  • How will they accomplish their mission?

Scope of Authority:

  • What resources are available to the committee?
  • Are there any restrictions on their authority?

Committee Members:

  • Who will serve on your committee and in what capacity (roles/responsibilities)?

Time Frame:

  • How long will the committee exist?
  • What is the scope of their authority for this time frame?

Caveats and Disclaimers

We have covered many topics in this article and want to be clear that any reference to, or mention of governance structure template, governance model, risk management, document, contact, objectives, oversight, resources, committees, rules, managing, responsibilities, implement, structure, govern, establishing, identify, review, projects link or models in the context of this article is purely for informational purposes and not to be misconstrued with investment advice or personal opinion. Thank you for reading.

You may also be interested in reading How to Write a Sustainability Report



Research & Curation

Dean Emerick is a curator on sustainability issues with ESG The Report, an online resource for SMEs and Investment professionals focusing on ESG principles. Their primary goal is to help middle-market companies automate Impact Reporting with ESG Software. Leveraging the power of AI, machine learning, and AWS to transition to a sustainable business model. Serving clients in the United States, Canada, UK, Europe, and the global community. If you want to get started, don’t forget to Get the Checklist! ✅

Scroll to Top