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...
Many boards are vague on what board meetings discussions should focus on. I recall a family owned manufacturing company, where the directors met to discuss monthly management reports. A senior member of an accounting firm was chairing these meetings. There were reactive arguments throughout one such meeting (I had the opportunity to observe) which lasted an hour and a half. The chair was dominating the meeting and ultimately making decisions without much contribution from the other directors and executives. They considered these to be board meetings as they comprised of directors and the head of finance.
My point is, there are many such companies who have not evolved to the new reality. The global landscape rapidly changes and boards must prepare more than ever before. Board level discussions and management meetings must have clear distinctions. In this article, I reveal 7 signs of an effective board.
1) Focused on Priorities: The...
In turbulent times when clients are decreasing their budgets, banks aren’t lending, competition is becoming more hostile and threatening, and change is no longer variable but a fixed part of “business as usual” it often effects small companies much differently than large companies. A major reason for this is that larger companies (at least those that are solvent and long-standing) for better or worse depend on their infrastructure and internal systems to get them through tumultuous times. A major part of this system is the Corporate Governance Structure of the organization. This system provides structure in times of uncertainty, it provides a network of quality individuals who are familiar with the company and capable, as a group, of making logical decisions on matters that will determine the level of success or failure within that organization. Some may assume that small companies don’t require the same type of structure to succeed; in fact some may argue...
We see rapid changes taking place globally and technology disruptions forcing companies to tweak and make relevant changes to their business to adapt to these external realities. Though this article aims at help all sizes of companies, research indicates that 96% of small businesses fail in the first 10 years.
I have come across businesses who are doing well on paper, but face serious cash flow problems. The reason is, directors and executives don’t take enough time to evaluate the critical triggers which drain company value.
Before we go into the question, I often get asked as to why I refer to both directors and executives. After all, the duties of directors are different and segregated from what management does. Directors must not entangle themselves into micromanaging and not all executives are on the board.
The following are some of the reasons why directors and executives need to work together in certain circumstances:
The Financial Ingredient: Financial Management in the Corporate Strategy Equation
It seems like a principal that is easy to understand; to make corporate decisions you must understand the financial ramifications of the actions that are being taken. How else can you make strategic business decisions; right? You have to consider how the strategic position being taken will affect the company’s financial infrastructure.
While this ideology may be simple to understand it is often ignored (or at the very least undervalued) when company’s are developing their operating strategies. This is not to say that decision-makers don’t consider the financial costs of such decisions, because they might; this is to say that many times they don’t fully under- stand how their financial infrastructure will be affected in the long and short-term as it relates to other factors beyond costs.
When operating strategies are being created, it is incumbent on management to understand how...
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