In his previous contribution, entrepreneur Alister Esam, CEO and founder of two businesses – technology company BoardPacks and social polling network Peepoc – touched upon the importance of building a team with shared objectives and a shared vision within the context of establishing and growing a successful business.
This article explores a related issue: the role that corporate governance plays in managing and maintaining a set of core business principles.
If you ask the founder of a small business why they set it up, by and large the answer will not be “to get rich”. Yet, if we look at most large corporations, the majority are governed by their balance sheets. The logical inference is that at some point in most companies’ lifecycles, the founding principles upon which the business was established either get lost or are poorly managed. Especially in light of the recent crisis at Volkswagen, this raises the question of ‘how does a business make sure that it’s good’.
Most small businesses are founded because an individual has something (s)he wants to achieve; something they want to improve; or a problem to solve. Armed with that vision and the courage of their convictions, the next step is to build around them a team of individuals who are bought into what the business is trying to achieve: a shared understanding of the business’ founding morals and principles. Whilst not necessarily easy to achieve, it is possible for a small business to be ‘good’ based upon the actions and behaviour of one individual.
Extrapolating this further and taking Volkswagen as the example, what happened is that – at some point – the company lost sight of its philosophy and what it was trying to achieve. What the business collectively should have been focused on is building better cars and making the world a cleaner place. It is therefore no surprise that the current investigations will in part be focused on at what point and how did it lose sight of its morals. It’s likely that it’s due to the perceived pressure that’s applied by capitalism, but the lesson learned is that society doesn’t care about profit; people care about morality.
If Volkswagen had stuck to this ethos, I genuinely believe it would be a greater business and make greater profits.
The trouble occurs when an individual is given short term targets and markets falsely take a short term view. This then allows business to be jeopardised for short term gain. The same happened in the banking crisis.
Going back to the question of ‘how does a business make sure that it’s good’; this therefore shines a greater spotlight on the role of the board. It becomes clear that not only should the board of any organisation – large or small – have responsibility for the oversight of the business, it should also be about preserving the fundamental reason why the business was set up and making sure no-one loses sight of this. This provides long term balance to the short termism of individuals in the business with their own short term targets.
Ultimately, irrespective of size, if you want your people to believe in and work hard for the business and your customers to buy your product because of what you stand for, then you need to make them both feel part of something that they can respect. In a small business, it is relatively easy to for the individual with the long term vision to lead in this manner. But in a bigger business with greater capitalist pressures the board needs to step up to the plate.
Having a good objective and a shared set of moral principles has as much of an influence on a big multi-national as it does a small family-run business. But, whereas it is possible for an individual to make sure a small business stays ‘good’, what’s increasingly evident is that as companies grow so does the importance of good corporate governance; individuals and the markets do not operate by the same rules as small business owners.
And this places the responsibility firmly on boards to put in place systems, processes and controls that ensure that those founding principles which they follow, are applied with the same ethos by other boards, management teams, committees and individuals throughout.