Tarun Chitra provided an excellent description of when governance is needed within DAOs in his recent piece for a16z,

DAOs work best when the governance burden related to curation, security, and risk can be reduced faster than the natural increase in coordination costs that accompanies the need to have members involved in voting on every decision made.

Improving member participation in governance remains one of the hottest and most nuanced problems facing DAOs today. However, these are not new problems we are facing. Roy Lerner wrote ‘Blockchain Voter Apathy’ describing the barriers for effective governance and potential solutions for increasing voter participation over two years ago. Despite his... See more

Optimizing for the right people to participate in governance processes is an ever-evolving discussion in governance circles today. It may not be pragmatic to assume that all voters should participate in every governance decision. Participating in governance is a lot of work—reading and digesting a proposal, providing feedback for discussion and goi... See more

as DAOs scale (# of members), their voter participation (# of voters as a % of members) falls. On-chain voter participation starts out around 50% for the smallest DAOs and falls to around 5% for the largest DAOs.