By: Brent Longnecker, Founder & CEO of 1 Reputation
Small, private businesses are the backbone of the U.S. economy. Statistics vary, but it would seem that there are over 30 million private, for-profit businesses just in the U.S. alone. They account for more than 50% of our GDP and up to 65% of new jobs created... including after the pandemic.
Further, small businesses are created for a variety of reasons. Specifically, a Guidant survey shows:
- 61% wanted to be their own boss
- 48% were dissatisfied with Corporate America
- 31% wanted to pursue a passion
- 23% were newly unemployed
- 21% because a new opportunity presented itself
- 20% just said “they were not ready to retire”
Boomers and Gen X make up over 90%-- almost split in half—and Millennials come in at 7%.
But no matter, size, gender, ethnicity, or generation…. sound governance is a must. Governance is simply a set of rules, policies, and processes put in place to monitor and assist an organization. An effective governance system will assist in a business running smoothly and safely. As such and given the importance of private companies and our economy, good governance guided by an independent Board of Directors is essential.
At that recent NACD (National Association of Corporate Directors) Leader Retreat, I shared about last week; this was another key area that was discussed in detail. It has been my experience that many private companies don’t set up a Board because there is a concern of losing control. However, in my experience, those that do, actually perform better since boards are there to greatly aid the CEO and the leadership teams. The key though is leadership and are they willing to open themselves to new ideas and thoughts? The more secure the CEO, the more likely it is they will want and enjoy having an independent Board of Directors alongside them. Talented independent directors can bring a wide range of experience, talent, and perspectives to the companies and leaders they serve that may have tended to be too insular and resistant to new ideas. And let’s face it, some CEOs are just resistant to new ideas that may not only challenge the status quo but also that “this is how I/we have done it in the past” corporate mentality… which is never good.
Besides, what leader does not want:
- Better Risk management
- Better Ethics
- Better Administration
- Better Compliance
It is by governance that those in positions of authority and those who work in a company are held to account for their actions and decisions. It ensures transparency, trust, stewardship, and integrity as well as accountability. Publicly – traded companies already know this and attack corporate governance aggressively. If that is the case why would a private for-profit company and even a not-for-profit, not want to have sound governance in place?
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Bottom-line, it is not easy to start and run a business, so everything possible to make it a smooth and easier undertaking should be considered. Once you have a sound governance program in place, it will make a big difference in the lives, stress levels, and productivity of all those in leadership roles. You will become a more confident and capable leader and be able to facilitate all the necessary segments of your business so that they come together seamlessly. Governance need not be complicated. Organizations like NACD are there to help.
So why not?!
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Here is another great article on governance... Enjoy!
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