The principles of applied governance can provide the basis for effective management and growth for any size company. 

Many of my clients struggle when they transition from doing everything themselves to a more distributed management structure. This change can be challenging for them; they find it difficult to delegate tasks and trust others to handle them, and it can take them time to adjust to this new way of managing things. 

This creates resistance to making changes that would allow the business to grow, and often, that is where the business stays. The owner is held back by not being able to effectively delegate responsibility and accountability to staff. 

Generally, it is recognised that the most direct reports a manager can deal with effectively is about seven. Any more than that and the effectiveness and efficiency levels are degraded.

Having said that, I did meet a business owner who said he had fifteen direct reports. He was definitely an “energiser bunny” sort of character. I asked him how he coped? He said he had what he called the “Berdeck Triangle.”

It worked by giving his staff the ability to make decisions themselves. If they struck something they were unsure of, they had to discuss it with their co-workers. If they agreed on the approach, they could move forward. If they were unable to reach an agreement, they had to talk to him. In effect, it goes back to seven reports.

Back to Principles

These are the areas of applied governance that need to be considered according to the Financial Markets Authority Principles and guidelines: 

  1. Ethics – What code of ethics govern how the business is to operate. A written code is a good idea so that all directors and staff know what is expected. 
  2. Board Composition – What skillsets are required, technical, operational, financial, human resources and legal.
  3. Board committees – composition and areas of responsibility.
  4. Reporting – Financial statements, including annual reports and information that can be used to make good decisions. 
  5. Remuneration – transparent and appropriate.
  6. Risk Management  – Involves a good understanding of the risks faced by the company and strategies for mitigating them.
  7. Auditors – Independence and quality over and above legal compliance. 
  8. Shareholder relations and Stakeholder interests – Board respect for shareholders and stakeholders.

While many of these positions are separately held in larger companies the reality is that most small companies have multiple roles that are conducted by the same person, i.e., the owner wears many hats. 

Having awareness of these fundamentals, regardless of the size of the business, helps provide a framework for growth. 

It also provides confidence to the owner that they are travelling the right path. We at Advantage Business have a broad cross-section of experience and skill in this space to help you achieve better management and governance of your company while also helping you achieve your own personal goals.

In small businesses, these are almost always intrinsically linked. Independent advice, mentorship and guidance are crucial first steps for any business looking to grow and or change.