June 22, 2021 Governing for Growth
Over the past eleven months, a study has shown that 49% of new company registrations were carried out by millennials, those aged between 25 and 40. With millennials, or Generation Y as they are also known, representing the largest proportion of a multi-generational workforce that statistic is perhaps not surprising. What is good to see though is that, despite the pandemic, the appetite for setting up new businesses has not diminished. Furthermore, the statistics also indicate that this first post-internet generation is looking to be as entrepreneurial as has been predicted by multiple studies in recent years.
Starting up in business is a challenging and exciting time. We’ve written before about the importance of ensuring that regulatory requirements aren’t sidelined in the rush to build a fledgling business. But what happens as the business grows? How do you keep the initial ethos and enthusiasm alive as the business expands and you take on more people?
That’s a question asked by The Investor Forum in a White Paper called Governing for Growth. The paper looks to provide guidance for smaller and mid-sized listed companies as they move towards the next step in their development. As the authors comment: “Too often, management is distracted from driving business success by problems that might have been avoided, had structures and governance been improved earlier.” This can lead to a loss of investor value and set company development back for a period of time.
The paper outlines a number of scenarios which may indicate that a review of governance regimes may be appropriate. These include a change in management style from that based on personal relationships to a more process-driven management approach, a change in the nature of investors in the company, or reaching a threshold in terms of company employee numbers or turnover.
Having identified potential action points the paper’s authors then go on to suggest some steps which may be required in order to grow governance in tandem with the growth of the company. For example, the board may decide to carry out a self-audit with a view to ether ensuring that board members have the skills and abilities required by a growing company or to identify areas which would benefit from appointing new board members with the required skills. Alternatively, it may be considered appropriate to review the internal and external audit functions with a view to strengthening accountability.
Whilst these are challenges which a number of the businesses set up over the past year may not have to face for some time, nevertheless the question of governance is one which businesses should be aware of from the outset. Strong corporate governance is a crucial ingredient of business success. Boards which look towards corporate governance ideals are therefore far more likely to ensure that, no matter how it grows, the company will continue to serve the needs of its customers and investors.
