Good governance and oversight are essential cornerstones of a successful business. The discipline it provides is a foundation for longer term, sustainable business success.
The discipline of governance builds market presence more efficiently. It does this by giving support to owners and the senior management team to remain focussed on strategically important objectives. This in turn leads to business advantage, and improved responses to external or competitive threats.
Effective governance and oversight should lead organisational culture, ensure accountability for responsibilities and provide a suitable framework for the allocation of resources.
Public companies are legislated to have a formal Board structure to protect shareholder interests. This not only holds management to account, but also provides a forum for mentoring and critical advice to the CEO and Leadership Team. An important element of these Boards is the use of independent Non-Executive Directors.
In private family or smaller businesses, the owners and leaders of SMEs often lack this structure. They do not have the same opportunity to utilise the wisdom of experienced Directors, and often lack accountability for performance and decision-making.
One reason for this is a reluctance to give control of the business to a formal Board of Directors. Another is lack of awareness about alternative structures.
For an increasing number of private enterprises, the answer is to set up an Advisory Board. These have only recently become more widely available to small business owners, and are still seen as a relatively new concept.
The inclusion of an Advisory Board for governance and oversight provides additional expertise, objective advice and support. It holds no formal power or control over the organisation.
In 2014 The Business Development Bank of Canada found that on average, businesses enjoy increased sales of 66.8% in the first three years after setting up an Advisory Board.
Business Growth
Leading a business is a lonely occupation. The buck stops with you and it is inevitable that at some stage you will hit a ‘growth ceiling’ where your motivation, talent, and hard work just don’t seem to be enough. This is where growth slows or stops, and it all feels that much harder than it used to.
The larger your business grows, the more issues you have to deal with, and there are limits to what any one person can do on their own, no matter how skilled.
Successful entrepreneurs realise that additional expertise and objective insights are needed to navigate through these challenges.
Advisory Boards
An Advisory Board helps you make the right decisions at the right time. It develops skills and judgement, and ensures effective leadership to the broader management team:
- Providing a sounding board to explore challenging issues and opportunities with independent, experienced advisers
- Ensuring your business has a well thought through strategy and execution methodology that is appropriately resourced
- Creating accountability for performance and decision-making
- Providing access to qualified networks and resources
- Bringing new thinking to challenging issues and business growth
- Mentoring and personal development of the Leadership Team.
Unlike a corporate Board of Directors, an Advisory Board is informal and unofficial, and can be structured in any way that suits your company. They do not exert any formal authority of control over the business.
There are many reasons to establish an Advisory Board. Most commonly it is to help grapple with the challenges of achieving high rates of growth, or to respond to changing business circumstances.
Advisory Boards are also established to help emerging enterprises become established or pursue commercialisation. In other instances, they are formed to aid with succession planning or preparation for business sale.
An Advisory Board’s membership can be altered to suit different circumstances at different times, or even be disbanded once the particular issue has passed (e.g. succession or exit).
Are You Ready?
Do any of these ring true for you?
- You have ambitions beyond where your business is now
- Your business is running smoothly, but you’re not sure where to go from here
- You know where to go, but you don’t know how to get there
- You feel like you’re missing opportunities
- Your business has stopped growing, it feels like it’s hit a growth ceiling
- You’ve made costly mistakes
- You feel like you’re operating in a bubble, that you’re all alone
- You’re thinking inside the box and feel the need for new, different ideas
- You have great ideas, but you have trouble sticking with them
- You are accountable to others – investors, family members or the like
Transition Capital is aligned with the Australian Advisory Board Institute and can assist with setting up your Advisory Board to provide good governance and oversight in your organisation.
David Shelton is an approved Chair and conducts initial no-fee and no-obligation briefings for business owners and CEO’s to further explore the suitability of establishing an Advisory Board.