The importance of the micro and small business sectors in the UK can be evidenced by the fact that small enterprises (those with 1–49 employees) in the UK account for 47.5 % of business employment and 37.4 % of turnover in the UK economy in 2014. Yet in spite of the undoubted importance of the sector, small businesses largely remain a riddle in terms of their dynamics and day to day functioning.
Academics in the business schools generally share a consensus that a “small business” is not a small version of a big business, but increasingly more and more of the professoriate accept that there are small companies that can be described as displaying “The Anti-Small Business Concept”. This alternative paradigm – the big small business – is characterised by features such as:
- Its small size
- A decision making structure that is not restricted to the owner-manager
- High levels of labour specialisation
- A clear vision of the future with an explicit and long term strategy
- Complex and formal internal and external information systems
- Appropriate, relevant and meaningful corporate governance
It is the last of the attributes listed above that demands greater investigation as it is more open to interpretation that the others. The term “corporate governance” is in itself a misnomer when it comes to small businesses that are perceived by internal and external stakeholders as anything but “corpora
te” in the normal usage of the word. Looking at a thesaurus, the second of the two words within the term – “governance” – attracts synonyms such as domination, authority, control and supremacy. Such behaviours may still abide in relatively few small businesses where owner-managers are locked into a 19th century mind-set, but they have little relevance to business management in the 21st century.
We therefore need a new term that refers to the way in which boards of small company’s function. I suggest that an aspirational phrase such as “boardroom brilliance” could be adopted as an auditable standard similar to those proposed in the Institute of Directors Code for unlisted firms or BS 13500, both of which are geared towards small companies.
What then represents boardroom brilliance for small companies? Let me offer a shopping list that, in no particular order, allows a little business to punch way above its weight and in so doing creates resilience that offers implicit security to customers, suppliers, colleagues and public agencies.
Firstly, create a board of directors all of whom are then registered at Companies House and are covered by insurance for directors and officers. Then ensure that directors receive induction training in what it means to be a director and that further CPD occurs. Develop an annual board calendar that includes board meeting dates in addition to other activities in which the board must engage such as strategy review, policy formulation, board and director evaluation and risk oversight.
Introduce appropriate board processes that provide an audit trail and a policy that determines the authority levels between shareholders, director and managers. Create financial metrics to assist in the control of profit, cash and assets and adopt a pro-active policy of colleague communication.
Moving from a “small company” to a “small company thinking and acting as a big company” is far from an act of vanity but rather represents a leap of imagination and ambition that is good for the internal stakeholders as well as for society at large and the wealth that it creates for the common good.
M12 Solutions Ltd, a small business where I have been privileged to chair the board for the past three years has undertaken the journey towards becoming a big small company. The driver behind our goal of boardroom brilliance was a desire to create a business that could withstand “the slings and arrows of outrageous fortune” and in so doing could continue to serve our customers no matter what came our way from either an internal or external source. We examined in detail our threat orientation and created a risk register to highlight the likelihood and impact of a range of scenarios and are developing plans accordingly.
Great practice in the boardroom is similar to good driving. We use the accelerator to move the business forward, the brake to stop when needed and the steering wheel to guide our progress as we proceed down what is rarely a straight road free from obstacles. Director development and coaching has featured in ensuring board members are aware of their legal obligations and board meetings feature comprehensive director reports with follow up minutes that act as action plans. Declarations of conflict of interest and hospitality given or received are made at the outset of each board meeting and a brief “how did we do” post meeting analysis takes place at the conclusion of the meeting. The agenda recognises that it is the board that is taking the company purposefully into the future and the content is so designed that the time budget of 75;25 reflects a forward and outward perspective against a backwards and inward view.
The board is still a work in progress and we are not complacent in this regard, but we are nevertheless well on the way to becoming an exemplar of boardroom brilliance.
By Leslie Spiers, M12 Solutions Board Chairman
