Governance is an issue that is more generally associated with bigger businesses and establishing governance best practice is rarely top of the agenda when an entrepreneur is getting their idea off the ground.
Startup founders have so many other areas to focus on when growing a business, it is easy to assume that governance is something that can be addressed later, when the company is bigger and has a more pronounced need for it.
But recent controversies with Uber, a highly successful startup, involving allegations of sexual harassment, have illustrated how a dysfunctional company culture can grow as the company does, particularly if it grows quickly. How can an entrepreneur ensure good governance in their startup right from the off?
The importance of good governance
It is advisable to address governance as early as possible, and to continue to make it a focus. Governance is such an amorphous thing but essentially it requires the right culture, policies and procedures and leadership.
The hardest to control is culture. People don’t change easily and it is much harder to change a culture than it is to get it right in the first place. If there is a culture of bad behaviour going unpunished, it becomes difficult to turn it around. Maintaining a good culture is an ongoing challenge, even for some of the largest most successful companies.
Governance also comes into play if a startup is looking to attract investment. VCs look at many factors when assessing a company. The ability to scale and make money are two of the most important, but they will also factor in how well that startup is governed. It shows that the business is fit for the future and has smart management behind it. But if there is a lack of governance structure across the business, it can be harder to attract funding.
Getting governance right
When it comes to establishing good governance, there are measures that a startup founder can put in place:
Identify the culture you want – good governance doesn’t just happen. Deciding what your company stands for, what it wants to achieve and the type of company it wants to be is a good place to start.
This will inform the current and future culture of the organisation and encourage good behaviour across employees. eShare was founded with this in mind, but you must also bear in mind to revisit and refine as the company grows – what was effective at one point may not be a few years later.
Policies and procedures – these are often ignored during a startup’s infancy, but play a huge role in long-term good governance and culture. We developed our own software to manage procedures when we started out, which helps greatly and gives reassurance we are in control. If people know what behaviours are expected of them and what will happen should they not do so, it helps greatly with governance.
Strong leadership – equally important is the building of a cohesive leadership team, filled by individuals with industry expertise, ethics and integrity, and who must act as a team. The leadership team’s qualities can then permeate throughout the organisation as it grows and expands. This is an approach that my company eShare has followed with great success. We had the procedures in place but needed more focus and collective senior responsibility to start seeing the benefits.
Transparency in decision-making – when the board, or leadership team makes a decision about the future of a company, knowing how that decision was reached and the thinking behind it can reassure internal and external stakeholders that the board has best interests at heart. Consistent communication is the best approach, so after every management meeting, agree what needs to be shared and go share it.
Assign responsibility – ensuring an organisation stays on top of industry-specific regulations and compliance can be a challenge, as can adhering to more general rules of business with Companies House. Governance requires investment, in tools and technology, and resources, in terms of someone to make it happen and remain on top of it. So it’s vital that someone is given the responsibility to make this happen, otherwise it can fall through the cracks.
Alister Esam is the CEO of eShare.