What is corporate governance? Functions and principles of application

Nowadays, building a business management system is an extremely necessary and important process. So what exactly is the concept of corporate governance ? What are the functions and principles of applying this form of governance? In the article below, 1C Vietnam will provide detailed information to answer the above questions.

1. What is the concept of corporate governance?

Corporate governance is a continuous process, including four main functions: planning, organizing, operating and controlling. These functions are performed to create value and achieve the company's overall business goals.

Corporate governance is a complex process, including many important aspects, including:

• Planning: Identifying goals, strategies and methods to achieve those goals.
• Organizing: Restructuring the business, defining the organizational structure and assigning resources to specific tasks.
• Executive: Provides encouragement and guidance for employees to complete tasks.
• Check and evaluate: Measure and monitor business performance, compare with set standards and plans, thereby making necessary adjustments.

2. The role of the corporate management system

Corporate governance plays a key role in the successful direction and development of a company. Effective management activities help business units improve resilience and sustainable development, specifically as follows:

• Create a business environment of transparency, integrity and responsibility: Corporate governance helps build strict rules, processes and internal control systems, ensuring all business activities are carried out in accordance with comply with regulations, avoid fraud and corruption. This contributes to enhancing the trust of stakeholders, including shareholders, investors, customers, partners and the community.
• Promote operational efficiency and increase long-term profits: The business management system allows the company to plan strategies, allocate resources appropriately, optimize production and business processes, thereby improving productivity. Improve operational efficiency and increase profits.
• Minimize risks and costs: Effective management helps businesses identify and assess risks comprehensively, thereby providing measures to prevent and minimize risks, limiting their financial losses. enterprise.
• Human resource development: Thanks to a professional management system, businesses can build and implement training programs, develop human resources, motivate employees, thereby improving capacity. compete.

3. Main administrative functions in an enterprise

Corporate governance is a complex process, including many different activities. For the management system to be effective, the company needs to fully perform the following basic functions:

3.1. Planning

The planning function is one of the four basic functions of corporate governance, responsible for determining goals and planning strategies to achieve those goals. To perform this function, administrators need to perform the following activities:

• Research the context and business activities of the market: Administrators need to collect information about the economic, political, social, cultural, technological situation,... of the target market, as well as operating situation of competitors.
• Understand the business's operating situation: Managers need to assess the current situation of the business, including factors such as finance, human resources, facilities,...
• Set goals: This is the destination that the business wants to achieve within a certain period of time. Goals need to be clearly defined, specific, feasible and appropriate to the business's resources.
• Determine required resources: To achieve the set goals, businesses need to determine the required resources, including human resources, finance, facilities,...
• Clearly define the work that needs to be done: Task items need to be arranged and assigned in order of priority, implementation time, implementer,...

3.2. Organize and arrange personnel

Business administration also includes the function of organizing and staffing, to ensure smooth operations, easy implementation and completion of business plans. The optimal staffing function typically includes the following activities:

• Organizing the apparatus: Identifying levels and positions in the enterprise, specifically describing the powers, responsibilities and benefits of each position.
• Resource allocation: Allocate resources (human, financial, material,...) appropriately to departments in the company, from large to small.
• Develop and promulgate rules and policies: Develop and promulgate rules and policies within the enterprise to ensure operations are carried out smoothly and most effectively.

3.3. Leadership, management

After developing plans and implementing directives, business administrators need to monitor so that human resources operate effectively. This function requires administrators to be able to communicate, convey information clearly and honestly, motivate and encourage the efforts of employees. Employee work results will be a measure of the effectiveness of leadership and management functions.

3.4. Check

The measurement and adjustment function is the process of regularly monitoring and evaluating the company's operations to ensure the plan is on track and achieving the set goals. This function includes the following steps:

• Determine measurement targets (KPIs) based on company goals. Collect data and prepare reports on actual activities from many different sources, including department reports, management data systems, customer surveys, etc.
• Compare actual reported results with planned targets, helping to identify deviations between actual and planned.
• Make adjustments if there are deviations, ensuring the plan achieves its goals.

>>> SEE MORE: 4 administrative functions

4. Important principles in the corporate governance system

In addition to learning in detail and exactly what business management is, companies also need to focus on properly implementing the following principles that cannot be ignored when building a management system:

4.1. Work specialization

This principle aims to promote concentration at work, helping workers and businesses achieve greater efficiency. When each person only focuses on a certain job, employees will be able to develop their skills and expertise, thereby improving productivity and work quality.

4.2. Authority and responsibility

Authority is the power assigned to an individual or group to carry out certain tasks. Responsibility is the obligation to perform assigned tasks. The principle of "authority comes with corresponding responsibility" requires managers to be responsible for their decisions and actions. This principle helps ensure efficiency and transparency in corporate governance.

4.3. Discipline

This is an important factor that helps ensure the stability and development of the business. Discipline includes standards, consistency of action, compliance with rules and core values of the business. When discipline is well implemented, businesses will have a professional, effective and sustainable working environment.

4.4. Agree on orders

In an organization, each employee should only receive orders from a single leader. This is to avoid the situation where employees are given conflicting demands by their superiors, causing them to not know who to listen to, leading to confusion and indecisiveness at work.

4.5. Agree on direction

Working groups with the same goal should be supervised by a leader and have a unified plan. This ensures smooth coordination and cohesion in all group activities, contributing to improving work efficiency.

4.6. Put common interests first

In a business, the common good needs to be placed above the personal interests of an employee or group. This principle is introduced to ensure the stability and sustainable development of the unit. When the personal interests of an employee or group conflict with the interests of the organization, management needs to be responsible for reasonable mediation to ensure that the common interest is given priority.

4.7. Remuneration

Remuneration is one of the most important factors in human resource management, having a direct impact on employee motivation. Remuneration needs to be fair and consistent with the employee's abilities, experience, qualifications, responsibilities and work performance. At the same time, this factor also needs to meet the physical and mental needs of employees.

4.8. Centralization

This principle allows power to be concentrated in certain people within the organization. This is an essential element of every organization and is a consequence of the structural process. Centralization helps make decisions quickly and effectively, while creating a unified and orderly operating environment.

4.9. Chain leadership

This is the relationship between leaders and employees as well as orders from top to bottom. This relationship needs to ensure clear, reasonable principles that both parties understand.

• Clarity is shown in the fact that the powers and responsibilities of each level of leadership are clearly delineated.
• Reasonableness is shown in the fact that superiors have the right to give orders to subordinates and subordinates have the responsibility to carry out the superior's orders.
• Understanding is demonstrated in the fact that superiors and subordinates clearly understand authority, responsibility and orders.

4.10. Orderliness

Order is an organized arrangement that ensures all activities take place smoothly and effectively. In an enterprise, order is expressed in the clarity of the position, tasks, and responsibilities of each individual and department. Each person needs to have their own place and be assigned the right tasks and responsibilities appropriate to their abilities and strengths. This will help employees feel confident and safe in the working environment, thereby promoting their full potential.

4.11. Balance

Fairness is one of the most important factors in attracting and retaining employees. Each employee needs to be treated fairly and fairly, without discrimination in terms of gender, age, social status, etc. Through this, we can create trust, satisfaction and attachment among employees. employees for businesses.

4.12. Stabilization

This is an important factor that helps employees have time to adapt and perform their work most effectively. When employees know their tasks and goals clearly, they will be motivated and determined to complete their work well. At the same time, stability in tasks also helps businesses plan and estimate resources appropriately.

4.13. Initiative

Innovations are new, groundbreaking, highly feasible ideas that can be applied in practice to solve problems or improve operational efficiency. At every level in the organizational structure, people who have the opportunity to express personal initiative will always have a spirit of enthusiasm, enthusiasm and dedication. Because it is a way to demonstrate one's abilities and abilities, and an opportunity to be recognized and contribute to the team.

4.14. Mental stability

Harmony between working relationships is the foundation for the success of a business. When people in the organization have a spirit of solidarity, they will be willing to cooperate and help each other to achieve common goals. This will help businesses overcome difficulties and challenges and achieve great achievements.

5. Distinguish between business administration and corporate governance

The concept of corporate governance and the concept of business administration are often misunderstood as coincident and synonymous. However, if you have a clear understanding of what corporate governance is, you will see that there are basic differences between these two terms, specifically:

6. Outstanding trends in corporate governance today

In a rapidly changing world, companies need to adapt and innovate to survive and grow. Corporate governance is no exception, with new trends emerging to help organizations improve efficiency and productivity:

• Technology application, especially artificial intelligence: This factor is becoming an important trend in corporate management. Online software tools are applied to enhance workflow, optimize operations and provide reliable analytical information.
• Focus on employee experience: Business success depends on its human resources team. Therefore, companies are increasingly focusing on building a favorable and creative working environment to attract and retain talent.
• Optimize processes, simplify cumbersome machinery: Any business is always looking for ways to optimize workflow and simplify cumbersome machinery. This enhances efficiency, reduces waste and creates a flexible and productive working environment.
• Measuring and evaluating performance based on data: To make informed decisions, businesses need to have analytical performance data. Therefore, in the future, measuring and evaluating performance based on metrics is becoming increasingly important.

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7. 1C:Company Management software supports effective business management

1C:Company Management is an open business management solution with flexible features that can be customized according to the specific requirements of each organization and business. This solution has the ability to connect all Sales - Purchasing - Production - Warehouse - Finance - Human Resources and Payroll - CRM departments on a single software system, helping to save time and costs. and increase operating productivity. In addition, 1C:Company Management also supports management according to the model of corporations and groups with many subsidiaries, branches, etc., helping to synchronize data on a software basis.

1C:Company Management software is a business management solution developed with many outstanding advantages, bringing practical benefits to the company, including:

• Modern technology: The solution is built on the 1C:Enterprise platform, specialized in designing automation and business management software. Thanks to that, the software ensures to meet the company's management needs in the new era.
• Diverse scalability: 1C:Company Management is capable of supporting many operating methods, including cloud storage, server use, online - offline. Businesses can choose the method that best suits their needs.
• Flexible design: The software is designed to be flexible, allowing customization according to business needs. The solution's features and utilities can be arranged, hidden/shown depending on specific usage needs. Pre-installed forms, information fields and report templates, suitable for your needs and standard business processes.
• Unlimited scalability: 1C:Company Management software allows unlimited adjustment of multi-legal structure, File-server, Client-server options on the basis of a 3-tier architecture. Thanks to that, the solution ensures stability and security to effectively process and store data when the number of users increases as the business grows.
• Great integration capabilities: 1C:Company Management has the ability to integrate with existing solutions at the business. Thanks to that, businesses can make the most of available data sources, minimize data entry time and ensure consistent data sources.
• Absolute security: The solution allows program access management, requires user account login and password. The system also allows decentralization of rights according to user groups, according to business processing functions and keeps track of all user operation logs. Therefore, the company's data information is guaranteed to be absolutely safe.
• Optimize management costs: 1C:Company Management software helps businesses optimize management costs thanks to the ability to automate business processes, minimize errors, and save time and human resources.

Thus, the content of the above article has specifically explained what the definition of corporate governance is . This is a complex process and requires the understanding, skills and experience of the management team. Mastering management functions and principles is essential for managers to be able to perform their roles well, contributing to the sustainable development of the unit. For advice and support with effective business management solutions, please contact 1C Vietnam today!

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