The success of large companies can be attributed to having good corporate governance frameworks in place. Small business owners can also benefit from the application of governance principles to add value and drive growth for their business.

Emergination Managing Director Justin Davies recently delivered two workshops on behalf of the Australian Institute of Company Directors for Small to Medium sized business owners on governance.

The presentation provided participants with a greater understanding of corporate governance, and how owners of small businesses can benefit by adding the expertise and experience of a board to their organisation. The objective of these 90-minute sessions was to provide useful guidance and practical resources on why, when, and how an SME can move towards a board structure.

     

 

What is corporate governance and why is governance for SMEs important?

Governance is applicable to all companies. It is not just about complying with rules and regulations. Governance is also concerned with forming a framework from which the company can build its policies, relationships, systems and processes on in order to sustain growth and success into the future. This framework guides how a business is managed in terms of strategy, decision-making, accountability, and performance tracking. It also ensures the directors and management team act in the best interest of the company and its shareholders.

Governance is important for:

  1. Business performance and growth – expertise and advice add value to the company with better strategy, improved productivity, new contacts, and access to resources
  2. Risk management
  3. Compliance with legal and financial obligations

A board of directors oversees the governance and management (via the CEO) of an organisation. The board should consist of members with a diverse mix of expertise and experience to guide the organisation forward.

Should your business consider a board?

Moving towards a board structure can help your SME achieve greater success. The systems, process, and skills that helped to get your business to where it is now is unlikely to be enough to get your business to the next level of growth. Bringing in expertise and quality advice is essential to speed growth at a lower level of risk. A board can help a SME achieve a higher return in terms of capabilities, profits and risk reduction.

Benefits of having a board:

  • Access to new expertise and experience
  • Improve business governance systems and processes
  • Guidance to grow the business while reducing the reliance on business owners
  • Expand current business networks and open up new markets
  • Reduces risk in volatile, uncertain, changing and ambiguous (VUCA) environments
  • A greater focus on strategy and future, rather than immediate operational issues
  • Increased capability to raise capital to allow the business to expand
  • Builds trust and reputation

Owners and managing directors of SMEs can face some challenges when it comes to establishing a board. Management reporting changes to a more formalised structure. Owners and managing directors may feel restricted when making decisions for the company. There is also the challenge of identifying the right mix of people to be on the board so that the business can benefit from each member’s knowledge and experience.

With that said, good governance will provide a competitive advantage for any company, regardless of the size of the business. For many owners of SMEs, it is a first-time experience when it comes to establishing a board, and they often face many challenges along the way.

If you need guidance to grow your company from advisory through to directorship please contact Emergination.

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