Why does a business need effective governance?

Our Business Advisors are often asked to help clients understand the need for and the benefits of implementing governance. Once clients see and understand the value and wish to reap the benefits implementing governance can deliver, the next step is to help them establish governance within their business.

Pressures arising as the business increases in scale and complexity often drive the need to implement effective governance. Or, at times it can be triggered by a big event, for example,

  • retirement or exit of a business partner
  • a need for the business to re-invent itself
  • the sale of the business, where the incoming owner has identified the gap in the standard of governance practices and wants to address it
  • an owner planning to sell the business whose planning process has determined that quality governance will increase the sale price.


How to set up and operate an effective Advisory board

The best place to start when establishing governance within a business is to understand the value of an Advisory board and then take steps to set one up.

An Advisory board considers, creates and refines strategy for the business. Leaders and managers of key business areas report to the Advisory board, creating a performance monitoring and improvement process.


Who should be on an Advisory board?

The business owners and an external professional who works with businesses in the governance area as their business are usually the initial members of the Advisory board.

The owners have skills, experience and detailed knowledge of the business; when coupled with the external, independent view of a professional, this delivers a powerfully effective combination creating additional commercial value.


What does an Advisory board do?

  • Separates accountability from responsibility
  • It meets regularly (usually monthly)
  • More formal Board of Directors meetings are additional (usually held quarterly)
  • Succinct, meaningful minutes for both meetings are recorded as a reference point, for both review and also as one of the ways to assess business performance and achievement of goals against the business plan.


Taking action with gap analysis

You can generate a gap analysis between planned business performance and actual business performance from the minutes. This will enable teams to fine-tune their plans.

Gap analysis recognises excellent performance and identifies the root causes of it, so that improvements to maintain and enhance it can be actioned.

It also identifies shortfalls in business performance and determines the root causes of those shortfalls so you can make a remedial plan.


This gap analysis and resulting actions may seem like common sense. However, our experience shows that the businesses that either have or put in place effective governance are almost always among the top industry performers. Talk to us about implementing it today.



Advisory boards regularly (often annually) host a retreat for everyone in the business to communicate and discuss strategy in the context of the current risks and opportunities.

A refinement of this type of retreat is to break it into two groups, each meeting on a separate day.

The 1st group (meets on day 1) is the Advisory board and the leaders and managers within the business – this group discusses strategy and tactics.

The 2nd group (meets on day 2) comprises eveyone in the 1st group, and everyone else within the business. It discusses operational plans and tasks to address and achieve.

While a retreat is an investment for the business, the resulting improvements in communication, morale and performance deliver significant returns on this investment. Humans like to know where they are going and why. The opportunity to contribute within their roles and have their achievements recognised, is a huge motivator for people.


Finding a realistic pace of change

In our experience, a newly created Advisory board takes between 3 and 6 months to hit its straps and deliver the full range of benefits described. However, we’ve seen them become effective after two months or sometimes take as long as 12 months.

The time range depends upon the skills and background of the business owners involved and how much of a stretch full effectiveness is.

Once an Advisory board becomes fully effective, the resulting mindset shift and momentum generated make maintaining effectiveness standards both possible and also realistic. It sets up the business to drive through measures the owners always wanted to achieve.


Get ready for attitudinal and emotional change

Experienced owners and leaders know the roles that attitude and emotion play in business.

Many business owners are competitive and have a burning desire to create a better future for their families, employees, and themselves. In many cases, this is why they decided to go into business in the first place.

Emotions such as confidence, the need for validation, recognition and self-respect are of particularly importance to business success.

An effective Advisory board’s role is to harness and manage the emotions of the people within the business and maintain and improve their attitude. These activities are at the heart of any high-quality business culture. They maintain positive momentum, resilience, and underlying confidence in the business to overcome difficulties and achieve its goals.

The difference between an effective Advisory board and an exceptional one is the way in which people are managed.

An exceptional one,

  • acknowledges that addressing, engaging, and working with the attitudinal, emotional and characters of everyone in the business is critical
  • allows people to achieve their potential by acting professionally and finding ways to express their personality and use their skills. It then recognises good performance and rewards it. Businesses find their next generation of business leaders this way.
  • harnesses the right combination of drive, humility, honesty, humour, and integrity within its people.


No two businesses are the same, but in our experience, exceptional ones demonstrate the traits of effective governance and without ever quite being satisfied. Talk with us about how your business could do the same.


A powerful engine driving change

Positive attitudinal and emotional effects kick in once the pace of change is agreed and the path to effectiveness defined. They generate progress and momentum that create confidence.

It is hard to describe how exciting it is to be part of a functioning Advisory board operating effectively with momentum and confidence. The result is often life-changing, both for the business owners and for the people within the business. The changes, improvements and refinements create waves of progress that last years, sometimes decades.


Next steps

If you want to implement governance within your business, or have stalled and need to pick up the pace to achieve your goals, then reach out to one of our Advisors.


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About the author

Murray Fulton has been a business Advisor since 2005, working with businesses in New Zealand (and offshore) in an annual revenue range of $1 million to $100 million. His clients operate across many industries, and their brands span a range of market positions, posing differing levels of commercial challenge. Each leader he works with has their unique style, pace and requirements of his skillset.

Business leaders reach out to Murray when they have earned a powerful market position they wish to maintain and enhance or are looking to improve upon efficiently and in the minimum possible time. Sometimes, they need to re-establish lost market position.

Whatever your challenge, Murray is always ready to explore how he and his network can assist. Contact Murray.