Effective governance accelerates SME performance

The first step is to have strong advisors
Business Sherpa Group's Margo Crawford and Claude Haw
Business Sherpa Group's Margo Crawford and Claude Haw

Margo Crawford and Claude Haw frequently have to explain to a business owner that an external advisory board is about accelerating performance, not ceding control.

Assuming, of course, that you have assembled a good team of advisors.

Crawford is the Founder and CEO of Business Sherpa Group (BSG) and Haw is an Executive Leader. For the past decade, this business management solutions firm has specialized in providing embedded business teams and strategic services to small and mid-sized enterprises (SMEs).

Their sweet spot is for-profit and not-for-profit organizations with fewer than 100 staff. Owners and managers in this weight class often find themselves caught up in the daily minutiae of managing cashflow, employees and deliverables. They find it hard to step back, look up and think strategically.

“Once an organization reaches a certain size, it just makes sense to have some kind of external board, whether a formal governance Board or an advisory board, to bring the discipline and arm’s-length perspective that increases efficiency and provides better risk oversight and management,” said Haw.

“Investors, including banks, are a lot more comfortable knowing there is a board providing that outside governance,” Crawford added. “It provides assurance that there is external oversight to help the organization reach a higher level of performance and help mitigate risk in their investment.”

Finding the shoe that fits

The Organization for Economic Cooperation and Development has concluded that “better corporate governance of SMEs is positively linked to their growth and long-term sustainability.”

However, governance practices that work for an established multinational corporation don’t necessarily fit for an SME. Haw and Crawford advocate the idea of “light governance” for smaller organizations, beginning with an advisory board without the fiduciary responsibility of a full-blown governance board.

It’s about giving an owner/executive the support to tackle the organization’s challenges in bite-sized pieces. Identify three to five burning issues, then establish a game plan for what can be done this week, this month or this quarter.

"Investors, including banks, are a lot more comfortable knowing there is a board providing that outside governance"

But how do you assemble a great board?

Crawford and Haw run into some common challenges with SMEs that are trying to assemble an external board.

Go beyond friends and family: Owners and management teams often don’t reach beyond their immediate networks to create a board. The result can be a lack of the experience and diversity that is needed to effectively help the organization.

Understand your top issues: By identifying the organization’s top three to five issues, you have the criteria to screen for the knowledge and skills that are required on the board.

Money talks: Paid advisors have skin in the game. Even if it is a small amount, it puts a greater onus on both sides to make the most effective use of everyone’s time and capabilities.

Terms of reference: Formalizing the relationship with concrete terms of reference ensures everyone is on the same page about expected outcomes, time commitments and the grounds on which the relationship can be terminated.

These sherpas walk the talk

Crawford and Haw have both earned their ICD.D designations from the Institute of Corporate Directors (ICD).

ICD is a not-for-profit with some 12,000 members across Canada that serves as a go-to resource for directors and boards. Earning an ICD.D designation demonstrates “a lifelong commitment to excellence in the boardroom, a desire to stay current, and to be a more effective director.”

“For me, ICD provided confirmation of what best practices look like and gave me access to a network of amazing people, both the educators and the other program participants,” Haw said. “The education is top-notch,” Crawford said.

“I’ve since had to deal with situations that match the case studies they take you through and the ethical issues they challenge you with. ICD is really upping the quality of the board members available to organizations in Canada.”