And What You Can Do About It
With Audi’s CEO arrested for fraud, it’s time to shine the spotlight on corporate governance. Inexperienced leaders, confusion over the role of governance and a lack of commitment means that time and time again, we see the same mistakes made by companies across all industries. This article shares three mistakes companies make when managing corporate governance and how to overcome them.
With the feedback we are seeing from the Global Governance, Risk and Compliance Trends Report 2018, more leadership teams are engaging with governance, risk and compliance than ever. The survey of more than 200 GRC professionals found 53 percent said leadership is engaged – an increase of 15 percent in the past year.
Why is a good corporate governance so critical for a successful business? For a start, businesses with highly advanced corporate governance spend considerably less on fixing mistakes, but they are also able to adapt faster, and they have a much better rate of employee retention.
Here are three reasons your business is failing at corporate governance and what you can do about it.
1. Leadership Experience
Most companies are led by directors without training or experience in this area, and so they lack commitment to it. Short-term profitability, cost-cutting initiatives and asset management take precedence over the less-tangible challenge of enhancing the company culture.
This means company culture issues receive inadequate attention from the top. There are no goals, KPIs or benchmarks in place. A lack of focus then permeates down through the business, creating conflict, chaos and confusion for stakeholders at all levels.
2. Confusion Over the Role of Good Governance
Most companies do not understand that that governance is a business philosophy that requires a complete change in attitudes and practices for everyone in the organisation.
Instead, they think of good governance as setting up a compliance department. To do this, they hire someone or a team of people they would trust with external auditors, document compliance requirements and make sure the boxes are all ticked.
The business is then pushed toward a culture of compliance, rather than a culture of excellence. The problem with this is that the business is missing out on endless opportunities to improve.
3. Change for Good
For some businesses, quality gets its time in the spotlight. Leadership show attention to quality to implement a new initiative. However, the initiative goes no further than being a “flavour of the month” project.
Most leadership teams underestimate the time, energy and resources involved in making good governance part of the culture. Results are expected after a year, and process completion in two.
Positive change takes ongoing commitment. As Rob Gibson, EQMS Manager at Sodexo, quite rightly points out, implementing cultural change is a roller coaster of emotions, as you must navigate and adapt to understand sub-pockets of cultures within your organisation.
What You Can Do: Create a Culture of Excellence
As the chief compliance officer, your role is to develop a leadership engagement strategy. You need to get leadership buy-in, mentor your work force and establish key performance metrics to measure performance and demonstrate the value of good governance.
To help you get started on your journey to a culture of excellence, Download this Organisational Culture toolkit for tried and tested tips, templates and tools.