Strengthening governance in entrepreneural firms

As entrepreneur organisations grow in size, it is often very difficult for the founders (who are often owners) of the business to ensure every part of the firm is giving them the right level of returns and aligned with the right set of objectives.

Increasingly more so, there is a need to rely on professional managers specifically and employees in general to carry out their tasks in line with the founders’ expectations.

Thus there is no choice but to institute the appropriate level of governance with the simple purpose of ensuring the firm and its management are aligned with the founder and owners’ strategic objectives; that the firm has the right people; and that the firm is giving the right level of returns for the investments made.

However, there is also a need to ensure that governance does not handicap the firm’s dynamic entrepreneur spirit; or worse still result in paralysis.

To address this, there are three vital elements: (1) clarity and maturity of roles of the parties in the governance process; (2) transparency of decisions and information flows to enable self-management and fewer suffocating processes; and (3) human capital emphasis and alignment of purpose, values and goals – which is rigorously implemented from point of people attraction & recruitment, right up to development & leadership successions.

Let me expand a bit on each.

Roles and responsibilities in governance

It is primarily important to clarify the roles of the governors of the business (directors) who need only focus on strategy & capital use, human capital, and performance & outcomes.

This should be distinct from the managers of the business who have the freedom to do whatever that is needed within the boundaries set by the governors. Ultimately the managers are accountable for fulfilling the organisational purpose, values, strategy as well as the business performance, outcomes and returns.

For this to work effectively, the governors need to divorce themselves from operational decisions, sentiments and apply objective judgment on key strategic matters. The management should be given the freedom to execute operational decisions, and ultimately be held accountable to achieve the objectives set by the governors.

Keeping the roles of governors separate from the managements ensures that there are checks and balances, and thus enhances the governors’ ability to hold management accountable for the results of the business.

Transparency of decisions & information for self management

In order to avoid layers and extensive need for processes, the most effective form of governance is transparency of information and decision. With a high level of transparency, decisions can be open to review by a wider group of people and thus ensure sufficient rigour in the decision making process. The level of transparency ensures that softer issues such as integrity and moral issues are considered and thus creates a more ethical enterprise. This avoids the need to establish committees upon committees and several decision making layers.

To further assist in the self management (and thus reduced bureaucratic infrastructure): information transparency particularly with regards to performance, data for analysis ensures that the firm’s employees are provided with all the relevant information to form their own analysis and thus carry out decisions. Once those decisions are made, the transparency of the outcomes ensure that there will be checks and balances which will keep the persons accountable for those decisions “honest” in driving the right results. Thus, this avoids the need to have several performance review committees and meetings used to hold management and decision makers accountable for results.

Transparency of decisions and information ensures a more efficient way of driving the right decisions and accountability for performance.

Alignment of employees to purpose and values

Last but not least, an uncompromising emphasis on organisational purpose and values is vital to ensure that the two forgoing aspects of governance are doubly effective.

Be very clear that these are not complex rules that limits freedom and is difficult to understand and cascade through the organisation. Organisational purpose and values are a set of concepts that provide employees with “true north” and guidance for their daily actions. It is important that the firm constantly emphasises purpose and values throughout and at the same time involve employees in dialogues on these matters to develop greater buy-in and clarity without creating too many rules.

By having clear and uncompromising set of purpose and values, the organisation can there for ensure stakeholders act in the right manner in relation to their roles in governance, and how they use information and decision making transparency.

To implement this, it is necessary to have the methods to assess and communicate these values and purpose at the point of recruitment and throughout the employees’ life cycle within the firm. It is important to internalise these concepts and ideas within the firm through staff reviews – but be careful not to use it for the purpose of rewards, but use it as a recruitment, development and a tool for career progression.

Can BMW and Mercedes-Benz Put Rivalry Aside to Take on the VW Group?

source site – Can BMW and Mercedes-Benz Put Rivalry Aside to Take on the VW Group? | Automotive News Blog – Wide Open Throttle

Despite some disagreements over CO2 rules, European companies haven’t abandoned plans to work together. How far those plans will get, though, appears to hinge more on setting aside traditional rivalries than justifying the economic benefits. At the center of the talks is BMW, which is talking to Mercedes-Benz as well as Fiat and already has an R&D partnership with PSA/Peugeot-Citroen. The question is just how far the talks will go.

although not news, this is an incredibly interesting sign of the times today. 10 years ago, you would be laughed at if you suggested that BMW and Merc should collaborate. but the top guys at these two (still) very bitter rivals are accepting that possibility. however, the challenge is whether the culture and history between these two could be overcome to achieve economic sense. time will tell.

i for one would prefer a bmw-psa/peugeot-citroen-fiat partnership / alliance rather than sleeping with the merc enemy. this is more than an emotional rhetoric… but for 2 reasons:

1/ the psa and fiat groups do not provide direct rivalry (yet) to the likes of bmw
2/ the ethos and essense of the psa and fiat brands fit well with the bmw brand essense of driving performance experience

an alliance with merc could result in potential cannibalisation of either the bmw or the merc brand.

Creative thinking and problem solving

One of the challenges at the office is getting the workforce to generate creativity. Our company is in the internet business, and it is therefore necessary for all of us to be dynamic in our thinking so as to be ahead of the game – or at least at the leading bunch.

However, years of rigid education system, a culture of not challenging status quo & seniority, and an evironment of feeding information (as opposed to seeking information) makes creative thinking something of a curiousity than the norm.

The pity is that all this puts all of us at a severe disadvantage compared to other nations.

Yet, all is not lost. The first challenge is to foster this creative thinking environment at the workplace. There are many tools and techniques available.

The key to the adoption of creative thinking at the workplace is top management buy-in and sponsorship. Transforming an organisation from a passive to a creative one will not happen overnight. The changes will be painful. Some may be counter intuitive.

It is therefore also vital that everybody believes in the process. Not difficult given the existing cultural norms. Sponsorship is also vital given that the cost of change may be significant in monetary as well as human capital terms.

But these are the mere first steps. As usual, I have been doing a bit of my own research on the net – – almost randomly, I came across some material that could be useful. So check out – a site dedicated to improving Creativity and Innovation for solving problems woldwide, with that in mind, we provide a central repository for Creativity and Innovation on the Internet as a summary of tools, techniques, mind exercises, puzzles, book reviews etc, that is open to all – and can be written by all.

Feel free to share your thoughts here.