From The Kitchen Table to the Board Table: A Small Business Guide to Corporate Governance
Most small business owners recognize that governance structures are vital elements of their business, but only a few manage to embed corporate governance structure into their business. The restructuring of a business from the kitchen table to the board table to suit a corporate governance framework, is an important task to be done by the management, and in the case of small businesses, the business owners themselves.
Below is a general guide for small businesses who are thinking of creating an internal framework along the lines of a corporate model.
- Define roles and responsibilities. Well-defined responsibility, accountability and reporting lines between the management and employees are vital features in any corporate framework. These should be communicated well to ensure that expectations, priorities and business challenges are addressed accordingly.
- Create clear and efficient policies and procedures. A clear statement on management policies that covers every aspect of the business is a necessary requirement to ensure the smooth operation of your business. This may include procedures for monitoring company transactions, transparency and disclosure procedures and a code of conduct for all levels of management and employees.
- Conduct and disclose regular financial audits. External auditors benefit small businesses just as much as they do larger corporations. Auditors are able to provide an impartial account of ways in which a small business can improve its financial standing and its marketability to investors.
- Establish a formal recruitment and remuneration criteria. Do you need to hire a CEO/CFO and if so how much should you pay them? These and other decisions regarding recruitment and remuneration could be addressed if a corporate framework is in place.
- Work in a transparent manner. In order to implement corporate governance in a small business, it is essential to disclose relevant information, not just internally but also to external parties. Systems should be in place to guarantee that important information is made public in a timely manner.
- Develop an employee training and motivation program. Small business owners should not only supervise and monitor job performance, but also encourage employees to undergo continuing education. This will ensure that all staff remain up-to-date with relevant regulations and business developments and maintain their motivation to improve their skills and career prospects.
Every business is different and the formalizing practices for organizations of any size should be tailored accordingly to fit its own structure, culture and business strategy. Kitchen table meetings may work well but by adapting corporate governance, small business increases the likelihood of sustainability as well as growth.