Articles

Good management isn’t enough

July 13th, 2011

Good management these days isn’t enough to ensure the success of your business. We’ve seen a number of business collapses as a result of general economic conditions and poor trading over the last couple of years and a number of directors facing legal action as a result,  because of poor decisions they made or decisions they didn’t make.

Regardless of the size of your business good governance is a must.    But the question I often get asked is ‘what actually is governance and how do I apply it to my business’?

Governance is covered off in another article and you can click on this link to read it. The point I’d like to make however is that governance isn’t related to your business size. It should be managed by any business that has directors in place.

This article is more around the guidelines and policies that companies (boards) should have in place and there are 6 areas that should be considered.

6 areas of good governance

  1. The Board
  2. Strategy
  3. Managing Risk
  4. Operational Management
  5. Financial
  6. External Relationships

Remember the purpose of the board is to govern, to set the direction and manage risk, not to manage and run the business on a day to day basis.

So let’s look at the policy in the 6 areas in more detail

The Board

  • Who is on the board
  • What are their responsibilities
  • What skills are required
  • How are they appointed
  • How is conflict resolved
  • How is performance measured

Strategy

  • What is the long term direction of the company
  • How do they deal with acquisition opportunities
  • Exit strategy
  • Managing Risk
  • Legislative requirements
  • Personal safety
  • Key positions
  • Audit requirements
  • Customer relationships
  • Emergency response

Operational Management

  • CEO appointment and performance
  • CEO reporting
  • Succession planning
  • Electronic management
  • Assets

Financial

  • Budgets
  • Accounting
  • Reporting
  • Banking authorities
  • Debt
  • Capital investment

To have a robust business each of these policy statements need substance and implementation sitting behind them. Remember the responsibility of the board is to set the scope and ensure it is implemented at a board level, but allow management (quite often the same person in a small business) to implement at an operational level.

Another advantage to taking a more holistic approach to your business also allows you often see opportunity that you quite often wouldn’t see as you are so busy looking through the trees.

Remember, governance and strategy is about direction and implementation and management is about the doing. Have both of these in concert and that should lead to better profitability.

If you’d like to find out more about how good governance can assist your business don’t hesitate to contact John Hutchinson on:

+64 6 974 6236
+64 21 748 142
[email protected]
www.planaconsulting.co.nz

    Comments are closed.