Data is one of the most powerful tools modern businesses have at their disposal. Whether created by an organization, its customers, or a third party, data can lead to meaningful insights that positively inform and shift business decisions when leveraged correctly. The opposite also holds true: When data is leveraged incorrectly, it can expose an organization to significant liabilities.

That’s why all organizations need to have clear data governance policies and protocols in place. While all employees should understand those policies, it’s especially important for managers to know the rules and monitor their team’s activity for compliance.

Here’s an overview of what data governance is and why it’s crucial for modern organizations.

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What Is Data Governance?

Data governance is a term that refers to the frameworks, processes, and practices an organization uses to formally manage its data assets. The goal of data governance is to ensure an organization’s data is high quality, accurate, and secure so it can be effectively leveraged toward business goals.

While no two organizations follow the same data governance model or framework, components related to the following are common across businesses:

  • Data quality: How complete, accurate, and trustworthy is the organization’s data? What processes can be implemented to ensure it’s of the highest possible quality? What safeguards can be put in place to identify, clean up, or remove low-quality data?
  • Data security: What actions can the organization take to ensure data is only accessible by approved parties? What types of encryption, activity monitoring, multi-factor authentication, access control, and other security measures can be put in place to protect data from malicious actors?
  • Data privacy: If the data assets in question contain sensitive information (such as human resources documents, medical records, and financial information), what actions can the organization take to ensure individuals’ right to privacy is respected and protected? How does this impact the way data is collected, processed, handled, stored, and used? What laws or regulations must the organization be mindful of when establishing its frameworks and workflows?
  • Data stewardship: Who is responsible for overseeing the organization’s data processes to ensure that governance occurs?

Why Is Data Governance Important?

Data governance is important because it ensures an organization’s data has more potential to be an asset than a liability. How it does this varies from organization to organization and industry to industry. Below are some of the benefits organizations can reap from having strict data governance practices in place.

1. More Confidence to Make Data-Driven Decisions

Establishing clear data governance protocols allows an organization to have more confidence in its data’s accuracy. This confidence increases the likelihood that the organization will back its decision-making process with data instead of subjective reasoning. By some estimates, data-driven organizations are three times more likely to report improvements in their decision-making than other, less data-driven ones. This can prove pivotal in increasing profits and overall business success.

2. Easier Management of Regulatory Requirements

In virtually any industry that collects and stores consumer information and data, there are laws and regulations that guide how it must be protected. Health care, financial services, and e-commerce are just a few examples. Establishing data governance protocols within your organization can make it easier to comply with such laws and regulations.

3. Increased Value to Consumers

Being able to point to the various components of your data governance practices can help you build consumer confidence in your products and services. This is especially true in sensitive industries, such as health care and finance, where consumers have a personal stake in your ability to keep their data private and secure. As such, data governance becomes a value-add for consumers.

4. Increased Efficiencies Within the Organization

A common problem faced by organizations without data governance practices is duplicate data, where multiple versions of the same dataset or file exist. When employees aren’t confident that they’re using the most up-to-date data, confusion, inaccuracies, and inefficiencies can occur. The converse is also true: When employees are confident in their data sources, this can lead to more effective use of that data. Taking the time to establish rules about how data is handled and treated can remove and reduce sources of inefficiency and confusion.

5. Greater Internal Accountability

Having clearly defined data governance rules and practices also makes it easier for an organization to hold its employees accountable for their actions. For example, if an employee accesses data they shouldn’t be handling or breaks the organization’s data hygiene rules, there’s a clear means of identifying the issues and remedying them.

6. Increased Transparency

Once data governance practices are in place, it becomes much easier to be transparent with internal and external stakeholders. For example, access logs allow an organization to know exactly who has accessed specific files. This information can be used to answer questions asked by consumers or regulators.

7. Lower Costs for Other Areas of Data Management

All of the direct benefits listed above also lead to an indirect benefit: decreased costs in other areas of data management. When you establish data governance protocols within your organization, you take several actions that indirectly prevent future expenses down the line. For example, strict data security decreases the odds of a data breach, which then decreases the chances of remediation in the future. Alternatively, compliance with rules and regulations lowers the risk of fines.

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Creating a Data Governance Framework

No two organizations will ever have identical data governance frameworks. This is because frameworks should be unique to the type of data an organization leverages, the ways it’s used, and the industry in which it operates.

When deciding to establish a data governance framework, start by identifying your goals and implement a means of measuring progress toward them. This can inform the policies, processes, technology, and team structure you use to achieve your objectives. The final framework should be documented and distributed internally to all parties who may interact with data.

Because data is leveraged by professionals at most organizations, increasing your knowledge of data governance can prove beneficial to your career, even if you don’t intend to work on data projects or interact with your company’s data team. Understanding data governance is especially important for anyone interested in management or leadership positions.

Do you want to improve your data science and analytical skills? Learn more about Data Science for Business and our other online analytics courses, and discover how you can use data to generate insights and tackle business decisions.

Tim Stobierski

About the Author

Tim Stobierski is a marketing specialist and contributing writer for Harvard Business School Online.