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Business Process Consulting - Good Governance in Small Business
by Peter McLean

Having good governance principles in place ensures success and builds trust in the marketplace over the long term. Customers and investors alike gravitate toward companies and businesses that are seen to be well-managed, well-governed and operate under a clearly defined set of standards.

Effective small business owners and managers are well aware of the need to secure their business and protect it against legal exposure and any potentially damaging publicity. Making effective strategic and operational decisions is critical in achieving this objective.

Being aware of the issues at stake and being well-informed in regard to the standards that need to be attained and maintained are givens. Objective decision making in regard to these risk factors is a sign that the qualities of good leadership are being exercised within a business.

Further, there are three key factors that need to be observed and considered in building good governance principles into your small business.

Ownership and Trust
Most small business environments are created by an individual or a family. In the case of a small family business, relationships can be close and intense. This means that such businesses can often be emotionally laden environments. When families have interpersonal difficulties, emotional intelligence in business can be difficult to maintain.

As such, this particular form of ownership can create potential risks. These risks can often be exacerbated when there is a high degree of power concentrated in one person, usually the founder of the business, or in one or two other family members. Such concentration can lead to poor decision-making, a myopic mindset and/or an unclear focus.

Therefore, it is incumbent upon successful and effective small business owners to establish a business policy development framework that ensures that these risk factors are managed and, where possible, eliminated from their companies.

Effective business owners welcome the idea of adopting a governance model that ensures that the best interests of the business are served, as opposed simply to serving the interests of one or two individual family members.

They also set time aside to invest in leadership skills development, at this governance level, as they know such development is essential for the success of their business.

Having the Right People in Governance Roles
As in the recruitment of employees, the recruitment of company directors must be closely attended to in small business. For example, just because John or Mary is the son or daughter of the business owner, it does not necessarily follow that the company will be best served by their sitting in a governance role.

This role is best served by bringing the right mix of skills to bear, together with the proper mindset and the ability to separate family matters from business concerns. This is best practice in business development and risk management.

Having clear specifications, roles and functions spelled out through policy and position descriptions enables people to be bound to a code of conduct and underpins effective decision making at this important strategic level. Again, adequate time must be deliberately and consciously devoted to this function for it to be performed effectively.

Objectivity in Decision Making
One of the real dangers for small to medium-sized businesses is having the proper separation of roles between strategic, longer term thinking and the more immediate operational concerns. These two streams are separate, though highly interrelated. In a family business, there are the potential traps of meddling and getting bogged down in operations, on the one hand, or being too distant and passive on the other. This can be even more complicated when a family members who sits on the board of directors of the business is at the same time managing a business unit operationally.

The critical role of governance is to stay focused on the strategic level and to pay attention, for instance, to the positioning of the business in the market place, succession planning and leadership development. The proper delegation of authorities and responsibilities is critical in allowing operational people to get on with what needs to be done in the business on a day-to-day basis, without interference.

Peter McLean may be contacted at
Peter McLean is a highly experienced Coach, Senior Manager, Consultant, Business Owner and Company Director. He successfully coaches top Executives in some of Australia’s leading multi-national companies. One such Senior Executive recently won an International Award for Excellence within his particular field. In addition, Peter works extensively in the Public, Private, Commercial and Not-for-Profit sectors, delivering outstanding results for his clients. To learn more of how you can benefit from Peter’s experience, visit the Essential Business Coach web site!



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