1. Risk management
Facing a variety of risks is a daily occurrence for business owners, and having a board to assist with managing them when they arise is an extremely valuable asset to have.
The Institute of Directors notes that a board plays a vital role in ensuring a company takes the necessary precautions when dealing with risk, while also maintaining the pursuit for adding value to the company.
Each company’s risk profile differs depending on its life cycle stage and what industry it operates in. For this reason it is not uncommon for companies to invite external independent directors to sit on their board. Independent directors are valuable because they offer:
- Insight into different approaches to risk mitigation
- Extensive networks that can be tapped into for specific expertise
- General know-how when it comes to fully evaluating a particular risk
For many business owners, it can sometimes be difficult to focus on strategy when they are immersed in the day-to-day operations. Having a governing board in place – one that regularly monitors progress against agreed actions – will ensure the business stays on the right path to achieve both short and long term goals.
3. Focuses on big picture
Closely linked to the point above, a good governance framework will push a business to think about the big picture and seek answers to tough questions that test the future of the company.
Board meetings are specifically about providing leadership thoughts on how to develop, grow, improve and increase the overall success of a business through implementing high-level strategy.
By having governance in place to help oversee those critical factors, it enables business owners to ensure they focus on these things as well on a very regular basis.
4. Expansion of leadership skillset
Depending on the experience of the business owner, there could be some core skills missing from their leadership capabilities – so a carefully selected governing board has the potential to bring different abilities to the table. The result is more qualified advice and direction.
In this NZ Herald article, Liz Wotherspoon Director of Growth at Auckland’s prestigious Icehouse describes governance as advice on matters a business owner knows little about, but which has the potential for significant consequences on the business.
“It is about having an individual or a group of people who have specific and complementary skills and independence of thought.”
5. Challenge the status quo
Also known as ‘playing devil’s advocate’, having a good governing framework in place allows for people, independent of a business, to provide challenging thoughts, ideas and advice to owners about their strategy and future growth plans.
When you live and breathe a company on a daily basis, it is easy to hold on to set of assumptions and not veer from the ‘tried and tested’ path. A good board will push you to challenge the status quo – whether it is still working or open you to possibility of a better alternative – and provide valuable insight into changes the business might make.