What is governance is and why it’s important
Governance is about the time you dedicate to working ‘on’ your business, rather than ‘in’ it. This includes all the checks and balances you put in place to ensure your business runs smoothly, meet its objectives, and stays out of trouble. Governance also means getting expert advice on matters you don't yet know enough about, plus support when making big decisions.
Governance is about the big picture
Governance includes all the practices, processes and policies that help you guide your business in the right direction. Any task that focuses on the ‘big picture’ is part of governance. Tasks like checking your finances are stable, creating long-term strategies, planning your risk management and keeping an eye on your wider industry.
If you struggle to find time to focus on governance, you’re not alone. Many business owners have multiple demands on their time and find it tricky to balance all their roles. When you’re busy, it can be hard to think about anything non-operational, but you shouldn’t underestimate the importance of overseeing your business well. Your decisions can affect future performance.
Don’t think of governance as more paperwork and hassle, it’s simply about running your business in the best way possible and helping it succeed. It’s an extension of what you’re already doing.
Good governance has many benefits
Governance helps you to always act in the best interests of the business. More specifically, it can improve the performance of your business, help it become more stable and productive, and unlock new opportunities. It can reduce risks, and enable faster and safer growth. It can also improve reputation and foster trust. All these benefits mean your business is more likely to last in the long term.
People on your governance team can provide a sounding board and sharing the burden of responsibility can also help you sleep easier at night.
Good governance can help your business thrive in the following ways:
- Grow your business
- Stay ahead of risks
- Improve compliance
- Improve trust and reputation
What type of governance is right for you?
Governance should be a part of any business, no matter how small. You can start with the basics and make it more structured when you like. You can do it yourself or you can create an advisory board.
When making big changes, it’s essential to have all the checks and balances in place, plus expert advice and support. If your business is small, you may choose to keep your governance approach low-key. If your business is bigger, you may need a board of directors to manage the complexity, share the load, and benefit from others’ skills and experience.
Your business is unique, and your approach to governance will be too. It’s really up to you and what’s best for your business.
Comparing two approaches to governance
| Do-it-yourself approach | More structured approach |
| Governance is down to you, with other business owners, or advisors for support | Governance is the responsibility of the board |
| You do regular ‘DIY reviews’ of your business performance and direction | The board meets regularly |
| You make all the decisions that drive the business | The board makes all the big decisions |
| You retain complete control of everything | You share control with the board |
| You shoulder most (or all) of the responsibility | You share the burden of responsibility with the board |
| You rely on other business owners, peers or advisors for expert advice | You have expert advice in your governance team |
Governance is important at every stage of your business
It’s never too early or too late to start thinking about governance or how to improve it.
- When you’re starting up, good governance can attract investors.
- During intense growth or a crisis, good governance can keep you on track.
- Once you’ve matured, good governance helps to create strategies for growth or resilience.
The sooner you put good governance measures in place, the sooner you’ll see the benefits. You can add governance tasks as your business grows or changes and you need to start thinking more strategically.
