Corporate Governance has been described as “the system by which companies are directed and controlled”. Clearly this applies to all businesses. However Corporate Governance as a subject tends to be the ambit of public companies, charities and other public interest organisations. On line conversations in the Corporate Governance community seem to mostly relate to larger businesses.
In small to medium sized organisations it is not uncommon for systems and information to lag behind the growth of a business. Directors often focus on business development, but don’t always mind the back office or the long term perspective. In recent years I have been called into situations where small/medium sized companies did not understand the cost of the goods or services they supplied or, when supplying services, they weren’t monitoring staff time/effectiveness. In the first situation the businesses couldn’t make informed decisions and in the second they risked incurring avoidable costs.
Oversight by non executives is a key feature of Corporate Governance – while the idea may be alien to many SMEs, they bring experience, an alternative perspective and the need for accountability and as such can help small businesses* as well as larger ones!! Similarly, most large public companies have internal audit to help the non executives monitor the effectiveness of the organisation’s controls. I prefer to regard internal audit as “entrepreneurial audit” as it is something that helps ensure that systems and information support the business going forward and it could have helped the SMEs that I mentioned make improvements at an earlier stage.
These are a couple of examples of how SMEs can learn from the Corporate Governance world. Over time the wider community would benefit through there being more profitable and robust smaller businesses!! Having said that I also I sense that many people in the SME community regard the word “Corporate” as almost a dirty word. It’s a shame because the word “Governance” is usually accompanied by the word “Corporate” and perceptions are really important! ….
… So perhaps now is time to take the “Corporate” out of “Governance”? Do you agree that small businesses can learn something from bigger ones and if so how else can they brought together? Your thoughts would be appreciated!!*please see my White Paper: 5 Questions Successful Directors Ask Themselves About Their Business Strategy