A key part of leadership is realising that you and your staff combined don’t have all the answers. You will, of course, be continually seeking ideas and advice from multiple external sources, but it is undisputed in business that one of the greatest sources of that advice comes from implementing an advisory or formal board structure. These are, after all, the people most likely to save you from yourself.
The first key thing to understand about governance is the role that it should provide. Being the advisory group responsible for the way the business is run and controlled, the governance team will focus most of their efforts on these six high-value areas:
- Key staff appointments.
- Strategy development, review and sign-off.
- Crisis and risk management.
- Financial performance and position (from monthly management reports).
- Capital raising (if needed).
- Exit sale (if/when applicable).
The second thing to understand about governance is that it’s all about fit. There is no point hanging onto your first mentor if you have outgrown them, and likewise, too many businesses race ahead to create an expensive and elaborate board before they are at that level. The key is getting the right governance structure for the current size and future ambition of the business. The natural evolution moves from informal mentor(s), to formal advisor(s), to advisory board, to formal board.
Here are some other key tips to get you started:
- Advisory and formal boards are not just for the big boys. Done well they deliver value many multiples greater than their cost.
- If you use a lot of different advisors, it may be time for a cull. Building deeper relationships with one or more of the best advisors will allow them to build an even greater understanding of your business and therefore give you even stronger recommendations. Having too many advisors can lead to escalating costs, conflicting views, and a lack of action and accountability.
- Start with someone who has compatible industry experience to get some of your operational
issues sorted, but don’t underestimate the fresh perspectives that come from those outside of your industry too.
- Work with people who will challenge your thinking and speak their mind. Someone who is too passive, or agrees with everything you say, is not going to give you the results you want.
- Professional services experts like lawyers and bankers don’t generally make the best general business advisors. You need people who understand the breadth of business realities such as accountants who get to see many businesses from the inside-out, or those who have owned successful businesses themselves.
- Don’t forget that your peer network is also a form of governance. Peer networks are crucial for advice, inspiration, motivation, support, and discovering new tools, suppliers, and customers. All of your organisation’s leaders should be building such a network to help them grow.
A final key question to ask yourself as a leader is whether you can grow as fast as the business? If not, then you might also need to reconsider your role in the business moving forward.