What is Governance - For Private and Family Owned Businesses

 

I often get asked these questions. What is Governance? How can I apply sound governance practices in my company.

First and foremost, Governance is not about slowing down processes or 'Red Tape' (which many private and family owned business owners think).  Governance starts from within. I prefer the definition that Governance is translating the wishes and desires of owners into results (Dr. John Carver). It is extremely important to understand that the following points are fully grasped and understood.

Owners Expectation: Having complete clarity in what owner's expect is the first and foremost. I have noticed companies going straight into strategy without taking time to truly understand owner's expectations. In some cases, owners themselves are engrossed, working fully on strategy and operations of their company, without fully connecting to what they really want. All decisions must be clearly linked to the owner's expectations. The starting point for Governance is to fully grasp owner expectations.

Accountability: In order to have sound Governance, accountability is very important. Simply put, accountability is owning up to the results, whether favourable or unfavourable. Leaders must ensure there is clear accountability, responsibilities and authority. Ensuring what the reporting entities need to do and perform as well as having clarity in Director's roles and responsibilities. 

Outcome driven: Decisions must be made based on linking choices to the outcome. This factors in sustainability and correlates to the values of the organisation. Sadly, I note small boards in private and family owned businesses deeply immersed in historical results which are important but not enough.

Policies - Linking 50,000 Feet - Policies are the backbone, in my opinion. Yet, I see organisations don't take much note of these. Policies don't need to be pages and pages long. Simple yet powerful enough to cover the 5 core pillars which include; Outcomes with clarity, Financial health, Strategy, Risk and Best Practice. These are clearly articulated and are current and live. In other words, the criteria is set from the start on expectations and parameters. This is in accordance to the Policy Governance® model which I believe offers a systematised approach for boards.

Monitoring - Policies alone are not enough. The policies need to be translated by the CEO or Managing Director in a clear format and interpreted, referring to the expectations set in the first place. This is done in the form of monitoring reports as set out in the policies initially.

Leadership Pipeline - Governance is all about having the right fit in place. The leadership pipeline must be diverse, reasoning their point of view with as many facts as possible. If you have a sound and progressive leadership pipeline, you will have a positive impact to the growth of your organisation.

Besides the above, Directors can contribute to the strategy of the company, though strategy is owned by the management. Directors can also bring in value through key introductions and their influence in the market place.

In summary, companies must step back and focus on the leverage points ensuring that the board (which can be made up of executives for smaller companies) is on the same page. Having a structured format which is systematised will enable directors to optimise their time.

www.rentadirector.com 

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