This week, Small Business editor Caitlyn Sykes talks to business owners about their firms' governance structures.

Marjory Embleton is CEO and Graeme Nahkies is chair at corporate communications business Ideas Shop.

When and why did you first bring on an independent advisor to the business?
Marjory: Within the first couple of years in business we called on external expertise to advise us on putting in place a strategy and governance framework for the business. The partners knew from the beginning they wanted to grow the business but as entrepreneurs they thought they'd benefit from some guidance on managing the risks associated with growth and having regular access to independent business expertise to challenge and test their thinking.

What process did you go through to find Graeme Nahkies, the chair of your board?
Marjory: We had an initial advisor the partners worked with, who referred us to Graeme because of his governance experience and knowledge of professional services businesses. He was initially engaged to facilitate two weekend workshops with the three partners to develop their strategic plan and one of the issues that came out of that was the need for a governance framework for the business. There was good chemistry with Graeme during the workshops, so the partners thought he'd be an excellent chair for the board they were about to set up.

Graeme, what attracted you initially to take on that governance role with the company?
Graeme: I've always resisted taking on directorships with my consulting clients but I enjoyed working with Idea Shop's founding partners on a strategic plan for the future of the business. I really liked their philosophy and the type of business they were trying to create. As part of the work we did I encouraged them to develop a more formal governance process to oversee the further development and implementation of that strategy. I suggested they should consider bringing in an independent external director as chair of the board.

Appointing a potentially influential outsider is always a big step for the founders of a private company and it's important they feel comfortable with any individual who might fill that role. When they asked me if I'd take it on I felt a degree of obligation to help but I saw my personal involvement as a short-term appointment just to get the governance process set up — a sort of extension to my consulting assignment. I'm conscious that was seven years ago now.

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What changes did you see from bringing on an independent director?
Marjory: The real benefit was a clear focus on strategy, understanding what success would look like on implementing that strategy and being held to account. That allowed the business to grow in a managed way and avoid a lot of traps, like trying to pursue too many initiatives at once.

It also provided a great discipline around the financial management of the business. Board meetings create a regular forum with a clear structure for monitoring performance of the business and identifying anything that needs to be done to keep things on track. Having an independent chair who sits outside the day-to-day operations also moderates the risk that partners would spend too much of their time 'operating' the business and not enough time working on its medium and longer-term evolution.

Graeme, what benefits have you gained from being involved with the company since?
Graeme: It's important when you take on a role like this that it's not about personal benefit because both legally and morally an independent director's primary responsibility is to act in the best interests of the business as a whole. But I get satisfaction out of bringing to the board table the kind of external, independent perspective that can't come from those who are active in the business. And obviously I continue to get pleasure out of working with the founding partners and the people they've recruited along the way. It has been very rewarding to see the business take some big steps and, associated with that, appointing a chief executive and a new partner because these are the kind of initiatives that we envisaged when we were undertaking that initial strategy work back in 2008.


Coming up in Small Business: German Unity Day is on its way, so I'll be looking at some of the opportunities being explored by New Zealand small businesses with German connections. If you've got a story to share, drop me a note at nzhsmallbusiness@gmail.com.