Governance is about the big picture
Governance refers to the big picture strategic work of running a business, rather than the day-to-day management. All the regular checks and strategic planning you do to keep your business heading in the right direction are part of its governance.
Governance often involves a board. A board is a group of people (directors) who work together to lead a business. But if you’re a solo business owner, the big picture planning you do on your own is governance too.
Taking a step back to think about the direction of your business can be difficult when you’re busy running it. But it’s an important and worthwhile use of your time.
Making time for governance can help solve problems, manage risks and set you on a path for success.
Why governance matters
Governance isn’t just about ensuring financial success and longevity. It’s also about guiding and supporting the character of your business.
It’s never too early or too late to start thinking about governance. You’re probably already doing it, without even realising.
Good governance can attract investors while you’re starting up and keep you on track during intense growth or a crisis. Once your business is well-established, good governance helps to create strategies for growth or resilience.
Formal processes and measures will allow you to improve your governance — and that means improving the direction of your business.
What good governance can do for your business
Good governance:
- sets the tone of your business — it establishes values and priorities
- sets your business up for long-term success — it improves performance and stability, unlocks opportunities, reduces risks and supports growth
- attracts investors — it demonstrates to others that your business is well run and compliant
- let’s you share responsibilities — it allows you to make the most of other people’s experience and know-how.
A good starting point is to make sure that everyone involved in overseeing your business is of good character.
As a business owner, you probably already live by these ideas. Good governance practices help you demonstrate your way of working to your staff, customers and investors.
What type of governance is right for you?
Every business needs some level of governance. The right type depends on your current stage and goals. There are two options – “do-it-yourself" governance, or a more structured approach.
Do-it-yourself governance
If you do-it-yourself you’re in charge of reviews, decision-making and day-to-day direction. You retain full control, carry most of the responsibility and rely on informal networks for advice.
This approach works well for:
- small businesses
- businesses in early stages.
Structured governance
As your business grows or becomes more complex, structured governance can add real value.
A board is responsible for your governance. The board meets regularly to make major decisions and shares responsibility with you. It also brings built-in expertise to help guide your strategy and growth.
You might shift to this model gradually – starting with an advisor, then moving to an advisory board, and eventually forming a full board of directors.
What is a director?
A director is someone who’s responsible for leading and overseeing a company.
As a director you have legal and ethical duties, and a range of important tasks.
Every registered company must have at least one director. You may have become the first director when you registered with the Companies Office.
If your company is small, one director may be all you need.
If you have a board, you’ll need to choose other people to be directors.
When choosing directors, think about:
- their skills, attributes and experience
- the strategic objectives of your company
- what help the existing directors need to govern the company effectively.
How to handle governance on your own
If you opt for do-it-yourself governance, you’ll need to review the big picture direction of your business yourself.
You may still want to involve advisors or other business owners. Getting someone else’s perspective can be helpful.
Do-it-yourself governance may not be as formal as a board meeting, but it’s important that you still take it seriously.
That means:
- documenting your process, plans and performance
- booking a specific time in your calendar for governance reviews
- using an agenda to make sure you cover everything
- reviewing the key indicators of your performance, including your risks
- following up any actions you set for yourself after a review.
Lay the groundwork for good governance
To be the most effective at directing your business towards success, you need to lay down some foundations. That applies whether you’re on your own or part of a governance board.
Laying the groundwork can mean:
- establishing a vision for long-term success
- documenting key plans
- getting insurance
- setting up good processes for compliance
- creating ways to measure important business data.
The work you do to create a solid foundation for governance will help keep things under control.
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