The vexing issue of SMEs ability to manage the relationships between board members and management can prove detrimental without a considered approach.
SMEs should focus on nurturing these relationships with proactive planning and well-informed decision making, enabling for business improvement to be made possible.
Business culture stems from the attitude of those at the top of the workplace hierarchy. The culture of board management, their level of respect for the business, their peers, and their ability to communicate and be honest shapes the culture of the business.
Harmonious and productive relationships rely on board and management’s ability to respect each other’s role within the business. All employees have to play as one team, working towards the same goal. This is parallel to sport teams that rely on mutual respect and trust to consistently produce positive results.
Issues with harmony often evolve from a lack of respect and boundaries. This is a result of employees being left to understand and interpret their role within the business, with many finding it difficult to set their own boundaries or understand their role in the overall business equation.
This can be mitigated by the board being transparent with their expectations and management identifying everyone’s role in the business. The result will be an enhanced level of mutual understanding and respect amongst peers with their respective roles, necessary delegations and boundaries being understood from the onset.
The role of the board is to “plan strategy and direction and develop a strategic plan that should guide staff and members to achieve identified objectives”. However, the size and maturity of the business will influence just how that role is fulfilled.
In larger organisations the management team often assist in the development of strategy with the board taking an oversight role of enquiring, challenging, and clarifying. The lack of appropriate resources in smaller organisations often results in the board being more involved with the development of strategy.
Regardless of the size of the organisation, it is crucial that strategies are not developed in isolation. Engagement with employees will give strategic plans a greater chance of success.
Strategic planning and budgeting
Strategic planning involves having a well thought out budget and forecast. When preparing the budget, past revenue and expenses should be taken into consideration including; the goals that will drive more revenue opportunities, what will have to be spent in order to achieve specific goals and the timing of cashflows. Having 3-way budgets is a very effective way of forecasting income, expenses, cashflows and movements in the balance sheet.
Well-prepared board reports facilitate relevant and effective decision making by aligning strategies, objectives, and risks. Management must provide more than just volumes of data to the board and have an opportunity to add value by providing insights and analysis to assist the board to fulfill their role. .
Factors that board members need to consider considering when analysing and board reports, include accuracy of the data, relevance to critical issues and the risk assessment level. From this the board must be inclusive and consult management on report results, working with them to form tactics that will best drive results. Much like a coach hosts post-game team meetings to learn and improve on performance.
SMEs ability to successfully achieve continuous business improvement depends on the ability to create a positive business culture. Through respectful and transparent relationships between board members and management, employees are able to work together to achieve a common goal.