When many people think of governance, they think of men and women sitting around a mahogany table for hours on end looking at numbers. While formal board meetings with six or eight directors are appropriate for some larger scale businesses, governance in your business doesn’t have to look like that. Defined simply, governance is the leadership function in your business. This should be appropriate for your business style and size. There are however some key attributes that must be present to have an effective governance function, regardless of how it looks. These are as follows:
Structured – Governance is the function that provides the leadership to your business and as such it needs to take place regardless of management or operational pressures. Fitting governance in around other business activities means that your business leadership becomes reactive rather than proactive. Meetings should be planned in advance and occur regularly – we find quarterly or two-monthly works best.
Independence – You need to be able to retract yourself from the coal face and focus on the big picture view. This can be likened to getting out of the ute and jumping into the helicopter – you need to step back from the day to day activities. Having someone independent at your governance meetings can help significantly in achieving this, as well as adding an external view to the business. While those in governance should be aware of the current realities, they cannot be restrained by them.
Strategic Focus – The focus of governance should be on the future, not the past. You need to keep driving the business towards the vision that you have for it. This is best written down so that it can be clearly communicated, and kept in front of you at every meeting. Being able to demonstrate where you are going and providing evidence of how you are going to get there will increase the confidence of the key stakeholders in your business; i.e. the bank.
Accountability - The governance function in your business needs to have some “teeth” in order to hold management accountable to delivering on the vision of the business. Operating without this power is like trying to drive a car without a steering wheel – you end up going wherever the wheels take you. Clearly defining the role of governance and giving it influence over management is a vital step in enabling you to steer your business towards its vision.
Remember the purpose of governance is all about improving the current and future performance of your business. It is not some airy fairy set of meetings from which no tangible benefits are derived. Experience has shown us that those who invest in a structured governance function are well and truly rewarded for this investment.
Brendon Harrex.