Good Governance

Whether you are an employee, contractor or running your own business, how disciplined are you to sticking to your own values based rules? Have you and / or your business got well defined good governance and how well do you adhere to it?

Background to good governance

I have seen governance defined as being the way (business) rules are set and implemented and their adherence monitored, either in a separate process or part of decision-making or leadership processes. In the case of a business or of a non-profit organization, governance relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility.

Context

In my coaching and mentoring work we often come across the topic of governance, albeit from different perspectives, depending on whether I’m working with executives, professionals or business owners.

In the leadership context, needing to clarify accountability, responsibility and authority often features where there are task or “territory ownership” disputes, largely based on a lack of clear definition or assignment or understanding (and of course interpretation) of authorities. This too forms part of governance, where the “rules of engagement” need to have been defined so that everybody knows what is expected of them, that behaviour will be monitored against those “rules” and that all outcomes will be measured against them also.

Most small businesses don’t have these defined, let alone use them as an ongoing measure of performance and adherence to expected standards of behaviour and delivery or execution of the business’ purpose.

Example for Good Governance

For instance larger companies will have a “financial controller” one of whose main responsibilities is to be sure that there are rules and standards and policies in place by which the company will measure itself and its progress across all its operations and support functions. A budget is one such measure that is used on a monthly, quarterly and annual basis to be sure the organization is going to meet its targets and hence its objectives. The controller’s job is to then orchestrate measuring performance against those targets and report where they have fallen short, met or exceeded the stipulated expectations, and more importantly to be sure that measures are in place to rectify and disparities or shortfalls.

Protection

Managing risks and issues is an important topic for the protection of the company’s assets, its continuity and of its value to its shareholders. Good governance will have the necessary rules and policy protected processes in place so that risks and issues are identified and dealt with before they become threats to the “bottom line” or to the image of the organization. Good governance will enable these to be recognized early and safely so that they aren’t dependent on hero’s to prevent them or on heroic deeds to rescue the organization after they have, remembering that people’s need for significance can sometimes drive the “overlooking” of the warning signs so as to create some drama that necessitates their skill and visibility to “fix them”.

Age and gender mix

I recently worked with a client where we found that there isn’t anyone over age 35. It was not surprising, that whilst there is absolutely superb innovation and creativity, there wasn’t really any governance. That will keep on working well as long as there is continuous demand for their (innovative) services and the going is good. However, the going can also get to be “too good” and Complacency sets in or conversely, when the going gets tough, and things get a bit more “tight”, then they often find themselves out of their depth to keep things sustainably profitable. For often the first time, they might have to let people go, and respond to market situations with sometime short term “knee jerk” reactions.

This is where a good business mentor will also look at the age (and gender) mix of a business’ resources to be sure there is a balance that will offset certain risks or threats, both from within as well as towards the outside of the business. I suggested in the above case that they were in need of some more mature experience and that it is the experience indicated by “the scars on their back” that enabled those “with some grey hair” so often to be able to provide good insights into risk prevention, in itself a good form of governance.

Is it Generational?

The normal response in such situations is the younger generation’s fear of their exciting business environment being stifled by “old school” policies and rules that “just get in the way”. Of course this is where the right balance will be critical, such which an unbiased and detached third party mentor will be able to provide very professionally.

And so it struck me that this may in fact be “a generational thing”. We certainly established that having the tools and the processes in place that enable even the most creative of businesses to maintain the appropriate levels of controls and early warnings was a necessity for maintaining sustainable business profitability and continuity and avoiding unnecessary risks. We also established that it wasn’t necessary to have all the “stuffy institutions” symbolized by “the Boardroom” in the company, but definitely the principles and the processes. Using recent examples of specific business failures “close to their home” quickly and easily drove the point home, and allowed the client to recognize that they had in fact been “lucky” not to have been dragged to go under and that if and when that occurred again, that they may not be that “lucky” again.

Business Thresholds

In my blog Thresholds and again more recently in New Business Start-up Thresholds I speak about the normal stages every small business needs to go through if and when it wants to grow into a larger or indeed large business.

Typical such thresholds are that the business may have started being a hobby and then crossed the threshold of becoming registered and run as a real business whether in an informal or formal structure. The next threshold is the engagement or employment of resources required to meet capacity demand. After a while that needs an organization structure designed with the necessary roles and responsibilities, accountabilities and authorities defined and implemented.

Without the implementation and the discipline of good governance around that structure nothing will change and individuals in the business will keep doing things the way they always did or the way they prefer. Apart from the owner(s) or leader(s) of the business leading from the front by living and playing within that set of rules themselves, the governance needs to have processes in place that assure these values, behaviours and activities are played out to meet the (new) expectations. Without that it will just have created more cost, more confusion and ultimately perhaps the business.

So what next?

Well, unfortunately many new business start-ups don’t recognize these thresholds and the different responses that each one requires. Most small business will keep going at their business and in many cases the owners will just keep working harder and harder in order to stay on top of it. There comes a time where they simply can’t anymore and have to admit to the overwhelm they are under (if that hasn’t dragged them under by then).

Most are well networked and some will ask for and listen to advice from supportive peers or friends. Many mistakes are made, which are put down to experience. That’s a necessary learning cycle, provided the “experiences” aren’t the undoing of what is or was ostensibly a really good business, built around a great idea for a defined market niche.

This is where the services of a business mentor could help make all the difference. Leveraging the experience of such a mentor can help avoid the pitfalls and the expensive mistakes, while still enabling sufficient learning and growing. Such experience can help recognize opportunities or perspectives not seen because the owner(s) were personally too embroiled in working “in” the business, that they had or allowed insufficient capacity to step back and ‘see” what the business needed at that point – that is to allow working “on” the business.

The mentor, even if it is just on one or two days a month can assure that these businesses avoid the pitfalls and capitalize on the opportunities as well as to recognize impending thresholds and plan and prepare for their realization and implementation.

Why wouldn’t you avail yourself of such support and guidance? Is it a cost you think you can’t afford to make, or perhaps an investment you can’t afford not to make? And if you picked a business mentor that is networked into a range of fellow professionals, he wouldn’t try to be all things to all people (and to you) but “park his ego” and acknowledge where you need skills he can’t provide and leverage the skills of someone who can so that you will always get the outcome that you need at that point in your business’ cycle and thresholds.

Why wouldn’t you?