Our previous governance blog introduced the importance of adopting a governance mindset as early as possible in your business lifecycle, the overarching benefits of an advisory board, and surrounding yourself with experienced people to help your business grow.
The conclusion? Governance helps you to always act in the best interests of the business. Yet whether it’s setting up advisory boards in the first instance or following through on accountability and meeting measurable objectives and goals, “governance” remains a mythical beast for many owners worldwide. Only 39% of global businesses rate their company’s performance in meeting governance goals as very effective, according to Navex.
Good governance fosters clear decision-making, provides clarity around the strategic direction of the business, promotes accountability and transparency, helps SMEs identify and mitigate risks and enhances the confidence of potential investors and lenders.
In our experience, and working on feedback from our alumni, organisations built on good governance structures grow faster and perform better than businesses without. Many of The Icehouse’s coaches sit on advisory boards throughout New Zealand, and we often hear that those initial coaching assignments are often a good stepping-stone into governance thinking.
“Ken [Leeming] is a great sounding board, challenges my strategy and offers me different perspectives,” says Heidi Farren from Altitude Tours and a coaching alumni. “He has so much experience and knowledge of businesses across all sectors. I’m 26 and don’t have many peers in my situation, so having great people around me, like a fantastic business partner, great advisory board, and Ken, is really important,”
Carl Saywell, Managing Director of MS Civil Construction explains: “Derek [Young] is now on my advisory board and very involved in my business. I can also work one-on-one with Derek for a day or so each month, and he’s incredible. He knows what buttons need to be pressed, is really invested in my success and has great intuition. He’s been amazing.”
As Ken explains, good governance is a serious business and surrounding yourself with good people can help future-proof the organisation. “A number of times I’ve said to different people that boards are places for grownups, and grownups from the point of view of maturity, business acumen, breadth and depth of skill set, not panicking, and maintaining a stable presence of mind.
“This is where boards really become important, consisting of people who can bring those skills and those abilities to the table. There are always challenges ahead, and there are headwinds ahead as well. As a result, there are a lot of boards concentrating on numerous options at the moment.”
An effective advisory board will be clearly and keenly looking at the ‘what if’ present and future scenarios that may come back to affect them. To that end, organisations are becoming more innovative in their thinking around the board mix. New trends include looking outside of traditional business circles to select advisory board members, people welfare, and skills diversity.
“Rather than doing the same old, same old, organisations are challenging the status quo, casting their net wider and selecting board members from completely different spheres of life or different spheres of work and background,” says Ken.
Secondly, more businesses are becoming acutely and astutely aware of people's welfare. In light of the events of the past three years, there's been a steady and growing influence around wellness at board level.
“There’s a responsibility to the welfare of staff, both in the workplace and outside the workplace and boards are making wellness a mandatory discussion. How are our staff? How are they feeling? What's the mental state of mind that we're aware of? Are we watching for fatigue? Are we watching for burnout? Are we watching for stress and strains that may not be evident to the naked eye but manifest in other ways? If they do, how do we help those people and what can we do to support them?” says Ken.
While discussions on diversity in the boardroom tend to focus on gender, ethnicity and age, there’s a growing desire to add skills diversity to the conversation. “Having that diversification of skill around a board table, that complements other skills, brings real value and real grunt to a board,” says Ken.
“It’s about having the ability to identify where there are gaps in that skill set, and actually fixing those gaps by having the right people, so you don't fix it by default, you fix it by design, and you bring people in with those skill sets to make it happen.”
In summary, a governance structure is not just for large corporations; it is equally important for bigger SMEs, +$3m businesses and beyond.
Implementing a well-defined governance framework provides clarity, strategic direction, accountability, risk management, and investor confidence. It enables firms to operate in a more structured and efficient manner, contributing to their long-term success and sustainability in a competitive business environment. It can be the difference between success and failure, and its value cannot be underestimated.
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