Why Governance Models Matter - NBR
The news out of one of New Zealand’s largest companies, Fletchers, points to problems with corporate governance and board oversight, but it’s not just corporations that suffer from poor governance models. Small businesses also need to carefully consider how they’re going to manage governance practices if they’re to grow and prosper.
New Zealand is a nation of small businesses
The small to medium enterprise (SME) market is a key segment of the New Zealand economy with a whopping 97% of us working for a company with fewer than 20 employees.
This makes us nimble and agile, able to react to change swiftly and to deliver turnaround in a timely fashion. But it also exposes us to a world where most CEOs are also the owner of the company and that can have its downside, particularly at key turning points in a company’s history.
Governance sweet spots and stress points
There are three moments in the life cycle of a company where strong governance governance models add real value - Growth, developing capability and succession planning.
Growth is easy
If you want outside capital to grow your business you need to have a strong governance model. Many New Zealand start-ups in the tech sector are discovering that in order to secure investment they need to have a board of directors and to demonstrate they understand the governance model.
Developing in-house capability
A board can guide you in areas you’re short on experience or expertise. BoardPro itself is a good example. Our founders are solid self-taught marketers and salesmen and we’ve recruited an experienced marketing executive. But more expertise will be needed given the growth pathway required for a funded, Software as a Service (SaaS) business with international growth plans. We’re mentored by a senior sales and marketing executive from one of New Zealand’s largest SaaS businesses and will bring like talent onto our board as we expand beyond our New Zealand pilot market. That level of input both reduces the learning curve significantly and de-risks the business.
The question of succession planning
Most SME owners don’t think about what happens when they retire – they’re too busy in the day-to-day space making sure the company remains liquid.
But succession planning will be an issue at some point and if you’ve built your own empire in your own way you may not want to simply sell it off or worse, cease trading. Your company should be able to continue after you’ve stepped back to enjoy the quiet life and having a strong board can help with that.
Not all SMEs will need a board governance framework, of course. A board structure for the local dairy or neighbourhood café would be overkill, but for those companies that are serious about expanding, a CEO and key board members are essential.
How do you put a board together and how do you make sure it doesn’t get in the way of you doing your day job?
Simon Telfer set up Appoint Better Boards to help commercial and for-purpose organisations find the right director mix. Simon has a wealth of experience with boards and with the governance process and is helping SMEs in this area. If you’re setting up a board for the first time, or simply considering getting governance advice and best practice, Appoint can help you out.
This article was first published in the National Business Review, September 2017.
Thanks for reading.
CEO & Co-founder