Public sector has a few things to learn about governance

The private sector has taken a leading role in implementing corporate governance initiatives. The public sector – particularly in developing countries – is struggling to catch up. Two key factors in public administration have highlighted the need for the implementation of governance in the public sector. First, the swell of government organisations and institutions to […]

The private sector has taken a leading role in implementing corporate governance initiatives. The public sector – particularly in developing countries – is struggling to catch up.

Two key factors in public administration have highlighted the need for the implementation of governance in the public sector.

First, the swell of government organisations and institutions to meet the population’s needs.

This obliges governments to provide a number of public services in diverse areas extending to utilities, transport, health, education and communications, among others.

The second is the tendency of the public sector to increasingly adopt private-sector policies of excellence and accountability such as proper contracting practices, bidding, fair competition and total quality management practices.

That said, not all government organisations have been able to implement good governance in their institutions, and many countries are still struggling to come to terms with the governance of public organisations.

This is largely because many organisations have attempted to adopt good governance policies without fully understanding their implication on the organisation and its stakeholders, in addition to a lack of institutional support for governance practices.

To avoid such pitfalls, public organisations are strongly encouraged to carefully consider the list of speed bumps below that may slow or obstruct the effective implementation of good governance in the public sector.

Public-sector officials have to avoid the direct translation of governance from the private sector into the public sector. It does not work because there are key differences between the sectors – chief among them is that the private sector is profit-orientated, while the public sector serves a wider purpose that combines profit-seeking and providing a public service that no one else can or is willing to provide.

Good governance should be viewed in the public sector as a system that supports and monitors how the organisation’s goals are achieved. This definition starts at the board and the executive management of the organisation as they develop and set its objective, passing through all the different departments until the objectives are delivered to the end customer.

In the process of implementing its objectives, the organisation passes through an array of obstacles and challenges.

Good governance puts in place a solid system that prevents any deviation from the implementation of the objectives.

Such a set of governance tools includes robust audit and risk management functions, quality management and a human resource function that trains, evaluates and prepares the next regiment of future leaders.

It also includes a proper reporting system and authority matrices, and developing the organisation’s policies and manuals.

To institute good governance, organisations must have a good grasp of their own governance appetite. An implementation of governance practices within an organisation poses a number of grave challenges that require special attention by the board and management.

Take, for example, the concept of transparency. It means different things to different people.

Therefore, the board should articulate what the concept means and how to define its scope, taking into account the sensitive nature of public entities with regards to national security and foreign relations.

It is imperative that public officials deliberate what sort of governance the organisation is willing to adopt. It is better to implement an acceptable governance that may fall short of best practices over another that seems more robust but that would not see the light of day because the organisation’s culture does not support it.

Additionally, public organisations need to carry out a thorough audit of their governance tools and processes, with the participation of all key stakeholders in the organisation. This is necessary to uncover potential governance gaps.

They also need to map out all major external and internal stakeholders to establish reporting lines and communication channels.

Once those considerations are addressed, the organisation is ready for the next stage of governance.

This involves developing a code of governance that takes into account local laws and the organisation’s bylaws and internal policies.

Only then can they actually implement governance polices.

They must put emphasis on ethical practices and ensuring that proper communication channels are established with key stakeholders of the company.

Fause Ersheid is a senior corporate governance analyst and researcher at the Abu Dhabi Center for Corporate Governance.

business@thenational.ae

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Source: Business

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