Just to refresh ourselves, the difference between governance and management is that governance is about strategic direction, overall policies, establishing a vision and mission, whereas management is about caring for the operations of the business, the “how’s” of running the business to meet strategic direction and policy.
The decisions correctly made in governance are about the really big things in the business that will affect the long term future of the business.
Appropriately these governance decisions are made by a Board of Directors while the CEO and other managers look after operational management.
In a small business, whether a single owner-manager business, or one with a number of family or unrelated partners, both governance and management decisions are often made by the same people wearing different hats, and more often than not, the decisions are made smoothly and efficiently.
So, why would you need to put a Board in place?
I believe a number of issues make the establishment of a good Board beneficial to your business, at the right time. Read More
I’m going to talk about “governance” in this and next week’s posts.
What is “governance”?
Governance and Management are two different things. Managing is what you think it is, where you manage the operations of your business, manage the finances, manage the staff ensuring they are given responsibilities and rewards, manage purchases and sales and quality of product and service. Managing is what gets things done in the business, in the most efficient and productive way, providing the results you want.
Governance on the other hand is about the oversight of the business, not the operations. Governance is about strategically setting the business’ direction, goals, limitation and borders. The best example of the difference I can give you is a practical example of when the business’ founder “gives up the reins.
Imagine the family business where the founder, perhaps the Parent started the business years ago. Typically he or she started on their own, doing everything from sales to purchasing and inventory. In that simple start-up he or she managed the business and the staff of one as well as set direction and decided what the business should and should not do overall. The Parent decided what markets and products they got into and what they would not and why; they started hiring staff and worked out what type of people they would hire and how they should be treated; and, in time, they worked out what were the “right things to do” in the business.
Then, as they expanded the business they brought in family members, sons and daughters, to help in the business. These offspring worked in the business to learn the ropes (even if they might have gone to university or college to learn new and more professional techniques). Eventually, sons and daughters took up management positions, they managed the sales team; or looked after the finances and investments; they hired, fired and fired and trained and rewarded staff; they looked after inventory and production and service.
Then one day the Parent decided to take their hands off the day to day business, while still being involved. The eldest daughter was appointed in charge of the business – they might have given her the title of CEO or MD or General manager, or just “Boss”.
At this point the governance of the business and the management of the business diverged. The Parent represents “governance” while the children are “managers”.
And the difference?
Can you imagine what would happen if eldest daughter decided to hire cheap labour against the business values of quality staff and quality rewards? Or decided to buy cheaper materials from overseas when the business had always worked on supporting local quality suppliers? Or how about if she decided to branch out from selling hand-crafted toys to cheap plastic toys? Read More
The more I help clients grow their businesses, the more I see how “teamwork” is not a natural thang!
Sure people like to belong, and people like to help in a common endeavour, but people are different and they have different values, habits and personalities. Ask your team to define “a job well done” and you will get a variety of different answers.
This may not sound like a significant problem, but what if their different definitions of a job well done mean that they approach the joint task differently? To you, it might be okay to call out at team meetings discussing how to do something, and voice your ideas. To someone else, they might want to think through the problem and think that your calling out is just self-aggrandisement, and just plain rude. There may be a raft of other differences that can cause team members to be frustrated at each other and the way the team works.
In a more formal structure, I have helped clients create team “charters” which outline what the team was formed to do, its objectives and scope, and its authority in doing the task. Read More
In over 30 years’ experience in advising clients on planning I believe very strongly that there is a correct process to follow when you are preparing your strategic or business plan.
At the same time, I have also seen many attempts at different ways to prepare strategic or business plans by consultants who have never had to live through the implementation phase of planning, when client staff go “Huh? What exactly are we supposed to do here?”
I have just spent some time with a client who has prepared their plan exactly in that way. While I was advising them on the financial aspects of their business, their Chief Operating Officer was internally preparing their strategic plan, which I had a chance to look at since it would obviously have an impact on their financial strategy and budget. It was not my role since, as a gun-for-hire consultant I can only do what I am contracted to do. However, for the benefit of my client I felt I had to provide some warning about what I felt were the shortcomings of the planning process to the CEO.
As a consultant you have to approach these situations carefully. You do not want to seem critical so that you look like you are touting for more work; you do not want to insult internal staff and put them off side in case you have to work with them on other issues – yet, I always feel a responsibility to provide an independent view of what I see that may affect their business.
Here, for nothing, is a list of what I thought was wrong with the process and the resulting planning document.
As your business grows, you no longer have the only contact with your customers. More and more, that front-facing position is being filled by your frontline staff – your sales people, your front of house reception, your people who meet and greet and deal with customers day to day.
The customer service instincts that you displayed now have to be passed on to your frontline staff. So how do you breed that customer-service mentality into your team?
The principles are actually quite simple – ensure your team is vision-driven, build strong teamwork, create vision-centric KPI’s and provide rewards for doing the right things, as explained in this video.
Some key steps include:-
1. Ensure customer service starts with understanding your “brand”.
Your frontline staff need to understand what your “brand” is, as reinforced by your business vision statement. What does achieving your vision mean to your customer? What values will your staff need to uphold in front of the customer to ensure that the vision comes alive? What indications does your vision statement give them on how they should deal with a complaint? Are they empowered to make decisions about customer-service as long as their decisions align with the indicators in the vision?
2. Reinforce good teamwork
Remove any barriers to teamwork and create a structure that shares knowledge about clients and about service. Provide systems that give frontline staff all they know about customer preferences. Allow staff to hand over to someone else in the team more appropriate for the task or the customer.
3. Negotiate and implement KPI’s that measure attainment of the vision in customer-service
Remove Key Performance Indicators that measure output (how many customers served) and instead implement KPI’s that reinforce vision-centric outcomes (how many customers received what they asked for, how many customers received more than they asked for).
4. Reward vision-centric outcomes
Stop paying bonuses for income generated from customers. Instead create rewards that that actually reward behaviours that produce outcomes described by the vision and brand. Instead of awarding an award for the highest sales every month, how about awarding the person who satisfied customers? High sales may be one-off, satisfied customers come back again and again.
Get over to the Resources section of https://teikoh.com to see what other models, worksheets and templates can help you grow your business the right way.
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