CORPORATE GOVERNANCE FOR MICRO SMALL AND MEDIUM ENTERPRISES

From my years of consulting for Micro Small Medium Enterprises (MSMEs) and also from my years of research on Small Medium Enterprises (SMEs), my discoveries has been that most companies that falls under these categories have a strong absence of corporate governance. More so, the absence of the practice of corporate governance in MSMEs and SMEs constitute part of the non-financial reasons businesses in these category close their doors of business within the first twelve months of its existence. The issues around the practice of corporate governance is the fear of uncertainties, fear of losing total control of the business and the fear of not being able to make the only and final submission as it concerns the business.

Unfortunately, most people don’t look beyond the immediate activities surrounding their business. They are focused on only increasing cost and reducing revenue without paying keen attention to factor that may be leading to that. They seem also not to pay attention to little details affecting the survival of the business in the next five years. Fortunately, corporate governance is meant to address all these uncertainties and ensure of business continuity. Corporate governance takes away the burden of thinking alone on the fate of the business, it ensures survival and continuity of business if properly managed.

Corporate Governance is a systematic control adapted in an organization to share responsibilities, roles and job functions. Corporate Governance ensures the existence of not just spelt out job responsibilities, but helps identify and mitigate certain management risk, optimizes performances and create a strong work culture. From my years of consultation for Small and Medium Enterprises, one can safely say that companies that adopts a good corporate governance in running their affairs, performance better than those who runs their affairs with adopting corporate governance in their affairs.

Some of the major concerns of corporate governances are:

1.     Establishing a vision and mission for the organization;

2.     Develop corporate strategy to be followed;

3.     Creating policies and procedures that guides conducts of the actors in the system;

4.     Creates transparency and accountability;

5.     Makes visible organizational hierarchy;

6.     Develops internal control and cost control mechanism; and

7.     Establish a strong monitoring and evaluations frameworks.

With the establishment of the right vision, a propelling mission and a workable strategy to achieve it, a company already has a head start and likely going to be among the leading players in its industry or any chosen market. The Vision, Mission and Strategies are usually created by the Board of Directors or the founding fathers of the organization. It is usually the foundation to which the other subsequent growth and development of the organization is built upon.

How can Corporate Governance be applied in Organizations?

First, it can be applied in establishing a robust Organizational Structure (An Organogram). A well written and structure organizational hierarchy gives employees more clarity on the operations of any organization, it helps manages expectations of all parties, provides consistency and shows a clear chart of assigned responsibility. For small business, it’s so importance are it could tells the future of the organization and ensures continuity.

Secondly, the importance of corporate grievance is also important in reducing cost and bringing about internal control. Internal Control brings about checks and balances in business operations. It ensures that no one person starts and ends a process. This is one of the healthiest ways of doing business recommended for small businesses since many of them are not computerized. A typical example of this is when an office purchased is to be made, the Administrative Department would raise for it to the Purchasing or Procurement Department.

The Procurement cost it and sends the document to the Audit Department to be sure the quality and prices are in line with the standards of the organization. The Audit Department sends it to the General Manager or Managing Director for approval if it’s up to standards for his/her approval. Upon the approval, it goes to the Account Department for the disbursement of funds. The Account Department releases funds to the Purchase Department and after the purchase; the Audit Department must check again to be sure that it was what was approved that was purchased. With these chains of check, standards are maintained, quality is checked and cost is also reduced.

In the application of Corporate Governance, we look out for the existence and application of policies and procedures. This in most organization we call Standard Operating Procedures (SOPs). Policies are established rules and regulations of what is and what isn’t obtainable in an organization. While, Procedures are how tasks and activities should be done in an organization. It is mainly difficult to separate policies from procedures as both works hand in hand with each other. So that, we could have a “Policy of Staff Attendance” or “Policy on Bulk Purchase of Office Consumables”. Then we would also have a procedure on “Procedure for Staff Attendance Management” or “Standard Operating Procedure on How to Make Bulk Purchase”. With such in existence, the organization would be built on systems rather than on people.

In all, one of the differentiating factors about successful organizations and others has been the presence of corporate governance and the level of application. It doesn’t matter the size of your organization, it is importance we begin from the earliest times of the existent of our organization to adopt various forms of corporate governances at our disposal. It’s not enough to have a Mission and Vision Statement alone but we should also have strategies on how we wish to achieve these written statements. Corporate Governance must be applied in your marketing strategy, human resources department, finance and accounting policies, risk management, general operations and in the general management and leadership of the organization.

KEY WORDS

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