Many business people are yet to be convinced that good governance results in a profitable business or even in a better business model. Imagine driving a car at night as running a business. Your headlights only show you what’s 50 metres ahead, but you lookout to avoid any potholes and other hazards that could damage your vehicle. The rear view mirror does not help in going forward.
A board of directors is like a team of navigators using floodlights to help you anticipate what lies 500 metres ahead. The board members have been down similar roads before and know what obstacles and hazards might be encountered. They will help you steer round them. The directors help identify the obstacles that lie far beyond the reach of the headlights. You’re still doing the driving, but they’re making the journey with you and helping navigate a safe passage. It’s good to have them along, at all times.
As well as seeing where you’re going, you need to have the right resources operating at their optimum levels. You also want to have confidence that the lights on the dashboard are giving you the information you need to drive the car safely and achieve its best possible performance. The good governance provided by a board can act like the dashboard – it makes sure that performance is maintained and improved, without affecting the day-to-day requirements of keeping the business going. A good board will also review the indicators and help the company get within the range of its goals. Governance puts sound business practices and forward planning in place so that your business stays in good running order, meets all its legal obligations, and heads in the right direction, rather than straying towards a dead-end.
When the fuel level drops or an indicator is red, you will take appropriate action and seek advice if its not a basic issue with the car. Similarly, the board would help in resolving certain issues within their expertise or ask for professional advice. At the same time help the company with risk management, like making sure the brakes are properly oiled and the airbags are operational. We also know that some issues may not be reflected on the dashboard. Like a flat tyre. For such matters, a bit of instinct may help to take corrective action. The board with yes men appointed by the shareholder, without the right skills may not be helpful, mostly. Directors appointed under good governance principles may have the instinct to understand business challenges and to be able to avoid or manage them.