How board strategy evolves to drive dynamic growth

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By Greg Dickason, Managing Director, LexisNexis Pacific

• How should governance frameworks shift as a business transitions from startup to scaleup to corporate?
• After the global disruption of the last two years stemming from COVID-19, now is the ideal time to evaluate organisational purpose and consider whether it still holds good and strong.
• Against this background, LexisNexis led a series of conversations in collaboration with Governance Institute of Australia to discuss how businesses of all sizes can prepare for growth while scaling up their governance.

• How should governance frameworks shift as a business transitions from startup to scaleup to corporate?
• After the global disruption of the last two years stemming from COVID-19, now is the ideal time to evaluate organisational purpose and consider whether it still holds good and strong.
• Against this background, LexisNexis led a series of conversations in collaboration with Governance Institute of Australia to discuss how businesses of all sizes can prepare for growth while scaling up their governance.

Every business is a machine — one with moving parts, interrelated components and an engine that provides power, momentum and drive. Initially that engine is the founder and their passion and vision, with time and growth it becomes the shared vision embedded in the culture, systems and processes. While each organisation functions in an inherently unique manner, the focus on evolution and growth remains uniform across every industry, sector and stage of business.

But how should governance frameworks shift as a business transitions from startup to scaleup to corporate? How, for example, can a business with only ten employees and no directorial history efficiently begin to implement robust governance processes throughout their organisation that scale dynamically with them and support them as they grow? Governance frameworks are critical for businesses of any size, helping them access capital, avoid risks, and gain access to larger customers.

With these questions in mind, LexisNexis led a series of conversations in collaboration with Governance Institute of Australia to discuss how businesses of all sizes can prepare for growth while scaling up their governance.

Growing pains

Let’s take a moment to consider a startup. Founders are undeniably passionate about their work, but may not have any prior experience running a business. Part of their journey is to learn to implement robust and appropriate structures that will allow their business to flourish as it grows. One participant in the roundtable remarked that their process for authorising capital expenditure, or acquiring debt, was simply to email their colleagues and ask if “everyone was comfortable”. Such a thing would be unthinkable in a large organisation, which would have numerous checks and balances in place to ensure such an undertaking is not mismanaged.

This simple example speaks to one of the major challenges that businesses must face in their journey from startup, to scaleup, to corporate: finding the right balance between the agility needed to facilitate rapid growth and innovation, and the directorial rigour required to ensure measured — and compliant — operation.

So, what are some key considerations for businesses of all sizes in navigating these challenges?

1. Evaluating (or re-evaluating) organisational purpose

After a highly disruptive global event like that experienced over the last two years, it’s an ideal time to evaluate organisational purpose and consider whether it still holds good and strong.

For startups, digital-natives, and young businesses of all sizes, purpose often sits at the core of their being. Many are now founded with a social outcome in mind, even one that’s only tangentially related to their main line of business. Similarly, a startup with few staff and a malleable culture can reflect on, reconsider, and recast their purpose with minimal cultural realignment. This is a considerably more onerous task for larger businesses who may need employee, board, stakeholder, and even shareholder buy-in to complete the process.

Larger, more traditional businesses may find that aspects of their purpose need to be adjusted in keeping with the prevailing socio-economic zeitgeist. Shifts or changes to the market, customer sentiment or global supply can create gaps between where the company previously stood and the space it’s moving towards.

And in this, experience counts. With a thorough, objective overview of the reasoning behind key organisational decisions, large company leaders can not only reassess the purpose itself, but whether it’s being achieved in practice.

2. Uniting people behind your ‘why’

The reduced interpersonal connection of the last two years means many professionals now engage with fewer people throughout the typical working day and can unknowingly find themselves in what one participant of the Governance Challenges Roundtable referred to as an ‘echo-chamber’ — resulting in a loss of unity and, at times, feelings of displacement. This is a quick way to break down the unifying culture of the business.

The key is communication and information-sharing. Some key questions to consider might be:

• Are teams exposed to insights, information and resources from the wider business that will expand their thinking and unlock the new professional opportunities needed to progress?
• How does the lack of communication between different teams or across different sectors of the business influence the company culture?
• How can we effectively distribute the resources within the company to ensure all teams are supported to do their best work?
• How can we get them to collaborate even if not on work items to maintain communication and trust?

Taking the time to ask these relatively straightforward questions can have strong positive impact on organisational unity. In turn, this ladders up to stronger company-wide outcomes such as better decision making, stronger culture, and greater visibility throughout the organisation. A strong culture with a positive ‘why’, focused on doing the right thing, is the best underpinning of good governance and reducing risk.

Maintaining clarity throughout growth

While evaluating organisational purpose and uniting the workforce are essential to support the cultural and operational growth of a business, many find it difficult to manage the increasing number of organisational stakeholders that join during growth periods. Going from a startup with only a few people, to a business with multiple layers of seniority, management and leadership teams — and a board — is a challenge.

These concerns are common amongst businesses transitioning through the stages of their growth, and while there’s no easy fix, the bumps can be significantly smoothed through the recruitment of experienced senior managers or directors. By bringing in the people who have been there, and done that, businesses take a large amount of the trial-and-error out of these complex tasks.

What remains is for the business to consider whether their particular issue is best handled by the board, or by management. And while boards are generally selected and respected for their expertise across a wide range of business issues, they’re typically a step removed from the day-to-day operations of the business. When dealing with issues that affect the BAU activities of the staff, it’s important to have the ongoing observation of a manager within the business to ensure things run smoothly.

Conclusion

As any business leader or governance professional knows, balance is key to organisational success. And nowhere is this more true than in supporting a business through the stages of growth.

By evaluating — and re-evaluating — organisational purpose, businesses can ensure they have a clear, relevant mission to follow. This is especially important for larger, traditional businesses whose purpose may have changed in the time since the business was founded. Then, ensuring people are united behind your ‘why’ is crucial, and given the workplace disruption and social isolation of the last two years, now is a great time to check that employees are still on board! Finally, finding ways to maintain clarity through the sometimes discordant choir of stakeholder voices that emerge during business growth is essential. Acquiring the right seniority of staff and establishing clear roles and responsibilities between management and boards is one way to help.

By taking these steps, businesses can ensure they systematically build the right scaffolding around them to support — not stifle — their progress and growth through the transition from startup, to scaleup, to corporate.

About LexisNexis

LexisNexis is part of RELX Group, a world-leading provider of information and analytics for professional and business customers across industries. LexisNexis helps customers to achieve their goals in more than 175 countries, across six continents, with over 10,000 employees.

Material published in Governance Directions is copyright and may not be reproduced without permission. The views expressed therein are those of the author and not of Governance Institute of Australia. All views and opinions are provided as general commentary only and should not be relied upon in place of specific accounting, legal or other professional advice.