Does a Board of Management create value?

The creation of a Board of Management which has several members independent from the executive and staff of a business can bring in a significant and objective perspective to the decision-making process in businesses both large and small.

Many issues of corporate governance are overlooked when the operators of a business are shareholders and  directors and also executives and / or staff.  In simple terms it is relatively easy for an individual who wears on all three hats to justify any outcome after the fact as there is no independent party to question if the outcome of any business strategy or expenditure program met the predicted or forecast outcome, or indeed whether the responsible parties performed reasonably in executing the task.

A second factor, which a board of management can help overcome, is that few business people are so multitalented that they have expertise in all facets of the business as it continues to grow.  The ”founder effect” is the phenomena, where the limitations of the management skill sets of the founder eventually bring growth to a halt, or worse, continued to propagate strategies that were successful in the past, while the marketplace changes around him or her.

This can also be described as the “Peter Principle”, where a successful management team develops a business to a level that is beyond its ability to manage.

In contemplating any international development it is critical to bring to the Board of Management individuals who have had previous experience in the planning and development of international businesses.

The formation of a formal Board of Management, with at least one member, who is neither a shareholder or executive, a defined agenda and a regular meeting schedule can add enormous value to the corporate governance of a business and the performance of the enterprise across many facets of its operation.

A strong, multitalented Board of Management can provide lateral thinking to help make the correct choices, where multiple options present themselves in strategic decisions regarding the growth and/or profitability of the company.  A further benefit of an independent board member can extend to providing a mentoring role to senior executives and an internal mediation and arbitration capability if a heated disputes or deadlocks occur at the management level of an enterprise.

Finally, the agenda of a good Board of Management with capable independent members, can focus the management team on the big picture during regular monthly or quarterly meetings allowing the group to  achieve the goals and objectives of the business without the distraction of the urgent, but often less important day-to-day matters of the business.

 

Rod Young

Rod Young is the Executive Director at DC Strategy.

DC Strategy is the region’s leading specialist consulting and legal firm. Our specialist teams in Strategy, Franchising, International and Legal have developed the networks and brands of many of the region’s most successful businesses. Contact Rod Young at rod.young@dcstrategy.com