Right mix of people, and the right governance structure, can tip export scales for innovative companies.
New Zealand's innovative early-stage, fast-growth high-technology companies are considered an important part of growing and improving the country's economy. The question is, can we maximise the potential?
Are there ways we can improve their ability to compete in international markets? More particularly, are the traditional ideas of corporate governance right
for these types of companies?
Like the All Whites, they are often seen offshore as unlikely contenders. However, while they too "box above their weight", good governance is needed if they are to succeed long term.
There have been some good initiatives to help these young companies. For one, New Zealand Trade and Enterprise's (NZTE) recent Focus on Health business development challenge attracted 104 entries from companies in New Zealand's healthcare industry.
The challenge provided valuable insights. Nine were selected to take part in a six-month market readiness programme to help them network and maximise commercial opportunities in the United States.
Attracting the necessary capital for driving expansion requires a company to deliver a convincing and consistent performance. Two keys to achieving that are having the right people and good governance.
The time is perhaps ripe for fresh strategy on both those fronts.
Winning deals efficiently in new markets requires talented representatives with international business skills and disciplines. Finding those people doesn't have to be, and shouldn't be, restricted to searches in New Zealand. For example, with much of Europe and Britain struggling with sovereign debt, the opportunity to lure internationally seasoned migrants and expats from those places for reasons other than lifestyle, or time to start a family, is here.
However, there are deep seated problems with the governance of some of our high-growth firms. According to the 2010 ANZ Privately Owned Business Barometer, many New Zealand companies do not have boards, yet 53 per cent of the 804 respondents (turnover between $2 million and $150 million) expect to have international sales within three years.
Sometimes in these early stages, the founder remains as an executive (eg chief executive) and chairperson, causing a blurring of lines between management and governance. Bigger company skills brought in - through sector experts and experienced, independent directors - can help build businesses and mature the board and management relationship. They can help ensure a culture that is attractive to talented and experienced people.
A well-defined board structure sets values and ethical standards and demonstrates that by the way its directors manage risks, provide leadership and structure and ensure appropriate systems are in place to enable managers to perform effectively.
Obviously there is not a "one-size-fits-all" and board make-up and style should vary according to external and internal influences. The lifecycle of a company is one key influencer of how its board should function. Mature companies need a different board style than start-ups. Matures might need a board that is less involved in guiding execution, while younger companies require an engaged, intervening or operating board.
High-tech, fast-growth companies also have another important consideration when they appoint directors. While legal and financial knowledge is important, so are marketing, sales and communication skills and entrepreneurial flair. The right mix of those skills is needed to understand the products, services and marketing positioning, and to be a counterbalance to the often highly technical and scientific management.
Younger directors may also be an important part of the mix for high-tech companies. If a company's target market is 16 to 24-year-olds who use Twitter, or consumers keen on other social media such as Facebook, the board needs people who use these communications tools and understand the dynamics.
Growing new directors is a role many highly experienced directors readily accept, but more could do this. Some work is being done to help younger, emerging directors by the likes of the Springboard, which has 600 members under the age of 45 who have some corporate governance experience. There are also public and private organisations providing a mentoring role.
Both initiatives should be celebrated. And it wouldn't hurt for more mature directors to consider young, overseas talent in that light. A seat on a board might tip the scales towards New Zealand.
It would certainly help high-tech companies towards international match fitness.
David Clarke is a director of Cranleigh Merchant Bankers, and was the NZ representative judge for the NZTE Focus on Health challenge. He is a Fellow of the NZ Institute of Management, a member of the NZ Institute of Directors, and is on nine boards.
Christien Winter is a director of Sheffield. Her present focus is on executive and leadership assessment and development, change and governance. She is a member of the Institute of Directors and the HR Institute of NZ.
