Opinion: No business is too small for regular doses of independent advice.
Ten years ago this month, Australia saw its largest corporate collapse when insurer HIH was placed into liquidation with losses of $5.3 billion. It was once considered Australia’s largest insurer with $7.8 billion in assets.
There was a Royal Commission, numerous articles were written on it and most of the protagonists are now out of their government-provided exclusive accommodation units so, on this anniversary, I wondered what we can learn from the coal- raking to apply to our businesses?
HIH Royal Commissioner Justice Neville Owen’s three-volume report found HIH’s “board had 13 directors of whom five were executive . . . and eight were non- executive . . . only [Alexander] Gorrie and [Neville] Head would be considered independent”.
Owens found HIH’s Ray Williams was a “dominating chief executive” and “any attempt to oppose [him] was ineffective”. “For the most part the board accepted what Williams had put to them,” Owens said.
I get the feeling that Williams, who was long at the head of the business he founded, was used to being in control.
I know regular readers of this column may beg to differ, but no one person can be the fountain of all knowledge and no one person knows the best way to run a business. It is a lesson for all of us. In a large company environment, it is recommended to have a board that is mainly independent and non-executive. What a CEO really wants is a bunch of no men. A great CEO should have to justify his decisions to a group of people who are more likely to say no.
Sure – it makes the job a bit harder but if the idea is such a great idea, then the no men will have to say yes.
Having to create arguments and logic and provide supporting research means that only the best ideas will be implemented by the organisation.
I recommend this approach even in the smallest companies. If you are a one-man band, you probably have the best no man right beside you. Your wife is the best no man you will ever come across. If you meet with your wife once a month and tell her your ideas for the company and the reasons why, you will quickly gain an appreciation of the strength of your idea.
I often talk about running your organisational structure like you are BHP from day one. Hold a monthly board meeting – even if all you do is invite a couple of mates around and pay them in beers after the meeting, there is nothing better than someone external to view your company operations on a regular basis.
It also means you have to prepare paperwork on a regular basis. You need your P&L completed each month ready for the “board meeting” – and if you don’t like your mates seeing your profits then just prepare a financial report against budget. You do have a budget don’t you? Then you start to make sure the ideas you bring forward are aligned with your strategy document. I know you have one of those. Without a strategy document how could you possibly decide whether individual decisions are aligned to the company direction?
Of course, as your company grows just a little – and well before you have shareholders – it is a great idea to formalise your board and actually appoint people. You also want to encourage every single staff member to send ideas through to the board. Sometimes the best ideas are bouncing around in the minds of the guy at the end of the chain
because he sees so much waste and inefficiency. He needs to have somewhere to go to have this information heard. It can be a formal process to bring ideas through to a monthly meeting
What you are trying to avoid is a larger than life dominant confident character from taking complete control of your company. In many circumstances, you are trying to save the company from yourself.
With a world of change in the IT air now is not the time to have a bully who likes to hear his own voice setting the direction of the firm.
It’s time for a collaborative approach and take in ideas from all levels to ensure your organisation is the absolute best it can be. Tell me if you or your boss are their own worst enemy at md@smallbusinessrules.com.