The best practices for corporate governance are not the same for small and medium-sized businesses. Small and medium-sized businesses (SMBs) are the lifeblood of the economy. They exist to serve our communities and provide us with the materials we need to enjoy a comfortable life. Unfortunately, as with any other influential group, some SMBs can be lax in their approach to corporate governance. This, in turn, has a serious impact on their ability to flourish as businesses and contribute to society. This article details a set of best practices for SMBs to follow to ensure effective corporate governance.
What are the best practices for SMBs to follow for Corporate Governance?
Corporate governance for SMBs is not a one size fits all approach. This is because the needs of an SMB are
different from that of a large corporation. Instead, there are certain best practices that an SMB should
follow to ensure they receive the benefits of corporate governance. These include:
Ensure A Representative Board
The best way to ensure that your business is managed responsibly is to ensure that you have a board of directors that is actually representative of the business. One of the first things that any investor will demand is a board that is sufficiently independent and composed of individuals that will protect the interests of minority shareholders. The more independent the board, the better. SMBs that want to be taken seriously as potential business partners will ensure that they have an independent board of directors.
Regular Board Meetings
Setting aside a time each month for a formal meeting ensures that everyone on the board is on the same page and that important business decisions can be made by consensus. Regular meetings allow the board to stay informed about the business and monitor its strategic and operational planning. They also provide an opportunity to bring in subject matter experts to educate the board about emerging trends and issues.
Extend The Board’s Insight Into All Aspects Of The Business
In addition to ensuring a representative board, SMBs can also extend the insight of the board into all aspects of the business. This is easier said than done, as too often boards are content to simply approve the decisions that are already made by management. To avoid this, many boards will insist on having a seat at the table when important strategic decisions are made. Regular attendance at the director and board meetings enables SMBs to become more knowledgeable about the inner workings of their businesses and gives the board the confidence that they are always up to date on the most recent developments.
Maintain Professionalism
While many businesses will be happy to see a boost in productivity with more efficient and motivated employees, this need not be at the expense of the corporate culture. Maintaining a professional corporate culture will help to engender trust among customers and suppliers, creating a positive feedback loop that encourages further business.
Get The Most Out Of Your Employees
One of the best things that an SMB can do for itself is to invest in its employees. They can be the key to growth and prosperity, and it is often the case that the more that an organization invests in its people, the more that they will benefit. SMBs will do well to look for ways to invest in their employees’ skills, experiences, and confidence, as all of these make a difference.
For instance, if your company is looking for a quality accountant, they can take care of their own finances independently and professionally, creating a better working environment for everyone. Similarly, sending employees to professional courses or even just giving them more training can have a positive impact on the whole company. If you can’t afford to give your employees paid time off, at least allow them to take a percentage of their working hours towards training and development.
Have A Strategy For Growth
As an SMB, your first port of call should always be to your customers. There is a range of products and services that you can offer to improve their experience, and the best approach is to develop a strategy that will help you to identify these opportunities and to act on them. Look for the intersection of your inputs (people, place, and things) and your desired outputs (profit, satisfied customers, and growth). By finding this intersection, you can be confident that you are headed in the right direction and will be able to effect change. In addition, an SMB can work with its employees to develop training programs and development plans that will further enhance their skills as professionals and create a better working environment for everyone.
An effective corporate governance structure and an engaged board of directors can make a significant difference to the way that an SMB operates. As the above points suggest, this can involve a significant time investment, so it is important for SMBs to ensure that they invest the time and effort necessary to secure the benefits that this can provide. As with any other important aspect of their business, boards, and staff need to work collaboratively in order to secure the best possible results. Establishing and maintaining a strong working relationship with key stakeholders, such as investors, lenders, and the public, is an essential part of this process and can have a significant bearing on the success of an SMB.
