Author: Erika Eliasson-Norris, CEO of Beyond Governance
Regardless of the size of your business, it needs good governance if it is going to operate successfully in the long term as governance enables businesses to survive by staying agile and competitive.
From start-ups to giant corporations, it is vital for durability to place good governance at the heart of the business, especially amid the recession, the cost of living crisis and economic turmoil.
What Exactly Is Governance?
Essentially, governance is your business’s manual. It encompasses all that the business is, where it wants to be in the future, and the route it needs to travel to achieve its destination.
Governance is everything to do with the business, from its frameworks to its decision-makers, from its policies to risk management strategies. It details the structure of the firm, how these interconnect and ways to ensure they work at the most efficient level. It highlights the key decisions that will need to be made and identifies who will make them. It assesses any potential risks and challenges that might arise in the future and puts measures in place to offset these. It outlines what role every member of staff plays in the overall running of the business and how they will be protected from the threat of litigation.
Businesses that invest in governance from the start, have a good manual that can be relied upon for every aspect of operations. Provided the CEO and board members, if the business is big enough to have a board, are fully committed to the company and the values and goals detailed in its governance manual, every employee will incorporate the desired attitude and working values, influencing the environment of the business and ensuring staff work well.
This is true for small businesses just as much as it is for larger companies.
Why Is Good Governance Important?
As governance influences from the top down, regardless of the size of the business or staff numbers, it is vital that this influence is a positive one if it is going to impact well on the company. With good governance comes good culture, and culture is key to business success.
With a thorough plan, everyone involved with the business understands what their role is and how exactly it is supported. This ensures people engage with their work, feeling appreciated and like they’re making a difference to the core company goals. This in turn creates a happy and healthy work culture, meaning work is a place people want to come to and are always willing to dedicate extra hours to certain projects when needed, which all contribute to the overall success of the firm.
Good company culture has the added benefit of attracting new staff – employee turnover is likely low but when new people are needed it should be easy to secure talented individuals who will like the feel of the place. As people feel supported and protected in their roles, they will be willing to make key decisions and be accountable for their actions. This leads to good decisions being made, which boosts the business’s bottom line and also its reputation – which in turn makes the company more attractive to investors and external clients.
As every business, large and small, faces similar challenges and aspirations, governance is vital for all companies. As well as ensuring the company culture is a positive one, having good governance means having good plans in place for your business and knowing exactly what the long-term goals and strategies are. It means you start as you want to continue, from day one, and are in the best possible shape for scaling up when the opportunity presents itself.
What Happens When There Is Bad Governance?
Companies of every size struggle if there is bad governance. There is no clear path for people to follow in their roles and no obvious route for the company to travel down. This lack of direction leads to disengagement by staff and ultimately, poor decisions being made.
Poor decisions impact immediately a business but also in the longer term as they influence how the company is seen by outsiders – how investors view the company. A lack of governance often causes investors to become restless, losing confidence in the business their money is in and asking lots of questions. Likewise, staff become restless as the culture can be negative and no one knows what’s expected of them. Often there are many leavers and worse – as staff are not loyal to the business, scandals happen and cases of fraud too. Both of these damages the business’s reputation further and are expensive to clean up.
How Can Businesses Achieve Good Governance?
The same is true for every type of business – good governance is achievable by planning well and investing in employees.
Before launching a small business or at least while it is in its early stages, you should plan for every scenario and understand how the company will operate in every situation. By having a clear and usable roadmap, you will be able to start your business in the right way and have a definite path to go down for growth in the future. You will also know how the business runs, including ethics and the ideal approach from staff as well as the frameworks, policies and support measures that are in place.
Make sure you invest in your people too. Hire in the right way so that every individual brings the right attitude to the team and contributes to the healthy company culture – make it clear that every employee is supported and that there are measures in place to protect staff too so that they have the freedom to work to the best of their abilities without the fear of repercussions or litigation.
When people are happy, they work harder. Hardworking and happy employees lead to a successfully run business and one that is built to last, even through economic uncertainty. By making sure your company has good governance, you will ensure it has the best possible chance of surviving as well as thriving, long into the future.
Erika Eliasson-Norris, CEO of Beyond Governance, has always worked in the ‘eye of the storm’. Her career included navigating controversial board decisions, shareholder rebellions, a share price collapse to the brink of insolvency, high-profile anti-management stakeholder protests, survival-focused business division disposals, corporate manslaughter investigations, forced CEO and Chair removals, c-suite fraud investigations, FCA dawn raids, unexpected radio appearances, liquidation evading emergency finance and more. These challenging and extensive experiences afforded her the top governance and legal position in a London-based FTSE 250 organisation at the age of 32 – the youngest person in the industry to take on this c-suite-level role. Following frustrations over the lack of tailored, realistic, practical advice for c-suite Governance Professionals, Erika left her corporate career in 2019 and founded Beyond Governance.