At Grant Thornton New Zealand, we see how many of our clients benefit from having a strong governance structure. For this reason we are supporting an online initiative, launched this month, appointbetterboards.co.nz, which aims to makes it easier for New Zealand’s privately held businesses (PHBs) and Not for Profit organisations (NFPs) to connect with advisers and build stronger advisory boards and boards of directors. The website will also provide an opportunity for individuals like you to share your governance experience.
The vast majority of domestic businesses are either owner operated or family owned and independent directors and advisers are a rarity. This can be a serious deficiency for many companies. In our experience, once owners understand the service that good independent directors can provide, and the resulting improved business performance, they’re enormously relieved to bring someone on board. Developing an appropriate governance structure and appointing the right people reduces a business owner’s stress and provides them with the freedom to get back to thinking strategically about their business.
Competent advisers and directors have a very focussed and strategic approach and work to develop a clear plan of action. They work to ensure that their organisation continuously improves and increases its competitiveness. Being a director is more than just sitting around a board table. Directors must be out and about, walking around, seeing, questioning, talking and forming a view as to the culture, risks and performance of the business. It’s hard work but if it’s done well, it’s extremely satisfying – and makes a real difference!
Appoint founder, Simon Telfer is passionate about the betterment of New Zealand’s NFPs and PHBs. He believes these businesses are New Zealand’s unsung heroes - but that they need to be more robust and ambitious. “Often this requires an injection of confidence and experience through the appointment of an advisory board or independent directors,” he says. “I’ve seen a many businesses flourish and grow after implementing independent governance. One of the most important things an external advisor can do is give a business owner confidence – to grow, expand and do things differently.”
PHB owners need to take risks if they want their business to grow. A board of directors or advisers are there to bring wisdom and balance when an organisation finds itself at a crossroads. “It can be difficult for the owner to make these decisions alone,” says Telfer. “An owner cares deeply about the wellbeing of their business and wants to see its current values kept safe. But on the other hand, the owner sees the potential and the benefits of growth. It can be very useful to have an objective perspective to help decide which strategy best balances the opportunities and the risks.”
There are a number of aspects to consider once a business decides it needs some sort of governance:
What type of governance structure would best suit the business – an adviser, advisory board or a board of directors?
These options have differing formalities which typically should match the age and stage of the organisation. A business owner may well ask themself, are we big enough to take this step? In the majority of cases it is rarely too early to take the first step in this direction – appointing an independent adviser.
What skills and values are needed by those looking to be appointed?
This depends on the business’ strategy. Where does the business want to be in five years? What extra skills are needed to get there? If moving into the international market, the business will need a board member who’s had experience taking companies offshore. Or if numbers are not the owner’s strength, find a board member that has financial expertise. The owner also needs to consider the personal values of the potential adviser or director. If they want someone to coach them, get someone with mentoring experience. If the owner is strong minded, they need to find someone who’s firm, will challenge them and not be walked all over!
How much time is a director or adviser to spend on this role and how much they should be paid for their time?
A payment of some form is recommended as it formalises the relationship and creates an expectation from both parties. It takes away the possibility of the appointment being seen as a favour or meetings and involvement ranking at the bottom of a very busy to-do list. Advice should be sought regarding these decisions.
Telfer has been helping businesses answer these questions for a number of years. He created Appoint after realising there had to be an easier and more effective way to connect directors with companies. The website will allow business owners to cast a wider net than would usually be possible by simply relying on suggestions from their circle of friends.
When setting up a board, it’s important to ensure it is made up of a group of people with many different skills and different ways of approaching problems. Telfer is committed to ensuring that the pool of available directors on Appoint will reflect the makeup of the community at large. “The key reason for this is that varied backgrounds and experiences of individuals have been shown to lead to better collective decision making,” he says.
At Grant Thornton we have a proud history working with and advising New Zealand privately held business owners on how to grow their business. Our involvement with clients allows us to see when a business reaches a point where it may benefit from this level of advisory. An owner’s skillset is always limited in one way or another and often a company can then be limited in how it grows past the owners capability. If the owner isn’t specialised in strategy, this can severely limit the business. A valuable option is to bring on an adviser or director who has specialist experience in strategy to assist the business in getting to where it wants to be.