Does governance sound like something for large corporations and bureaucrats? What could good governance do for your firm?
I recently gave a presentation on 5 ideas to help every small firm grow. Afterwards a discussion on corporate governance followed. Some slunk away at the subject, others became very animated, some listened carefully and said “but we do that and it helps us”. Which would you be?
- What is corporate governance
- Why is it critical to your small firm
- Practical steps that work in small firms
What is good governance
I was a little worried by Wikipedia’s statement “Good governance is an indeterminate term”, but a little happier with the “Governance describes “the process of decision-making and the process by which decisions are implemented (or not implemented)”. Here’s my good governance list:
- Clear objectives.
- Management structure and process that’s understood
- Understanding and pro-actively managing risks to the firm.
- Knowing what the main areas that you have to be compliant are, and monitoring that compliance (e.g. Government, shareholders, industry regulators)
- Establishing regular financial audits and disclosure of audit findings.
Does this all sound like common sense to you? I could simplify it and say its spending time to ensure that your firm is going where you want and is going to be able to get there. That’s something that every business owner should want, but few think about.
I guess you’re thinking I agree with the logic of this, but I don’t have the time. Starting is easier than you think, try my 5 simple steps below .
Why good governance it critical to your small firm
If you don’t want any third party funding (after all a bank wants assurance that it’s investment is secure), don’t have any professional bodies to worry about and just want to do a good job – is this important?
If you want to grow or even maintain your firm in a stable condition over the long term, then it’s critical.
If you think of some of the firms you’ve seen (including accountants who at the last minute had to adjust plans do to “unforeseen” cash flow issues) that work well and suddenly have big problems that could have been prevented – then it’s critical.
Do you have staff whose loyalty is important to you? They’re stakeholders who would rather feel comfortable that their investment in your company (their time, energy, and money) is sound.
Practical steps that work in small firms
- Have a clear idea about where the firm is going – that’s a vision and a plan (did you read how-to-create-a-vision-for-your-business?).
- Take time out periodically to ensure that you’re on track to achieve it. Spending time with somebody from outside your firm might challenge you, but will help here.
- Set aside a couple of hours and complete a risk audit (read 5-ideas-to-use-risks-to-improve-your-business). Then periodically look at it to ensure that you are doing what you said you would. Again an external view can help.
- Be aware of compliance issues. Spend some time, say an hour a month, to look at one area and what you need to learn.
- Look at the way money is handled, especially if you’re not the only one that handles your finances. What could go wrong? Did you read cash-flow-planning-what-might-keep-your-firm-alive
What do you think? Have I missed anything? Which will you implement first?