KEY POINTS:
As every day throws your business new challenges, it's worth remembering that now is the key time for you to position your company to gain market share when the recession lifts. If you play your cards right, you may well emerge with a bigger share than you had
before.
In tough times, taking early action can be a lifesaver and your company will emerge leaner and tougher. It's the businesses that make the decisions too late that are the most vulnerable, says Deloitte partner Dean Ellwood.
As well as taking cost out of the business, and the usual fundamental procedures to ensure the company stays on an even keel, management still has to come up with new strategies and tactics. It has to have a picture of what the business is going to look like in three years' time.
And to help you do this, you'll be needing one hell of an advisory board to hold your hand. Fast-growing companies are under particular pressure in the current environment and they are strong believers in hands-on advisory boards.
The Managing High Growth Ventures report carried out recently by Professor Mark Ahn, chair of Science & Technology Entrepreneurship at Victoria University, for Deloitte and business incubator Creative HQ, showed that almost three-quarters of the 300 Deloitte/Unlimited Fast 50 companies surveyed had advisory boards.
Start-ups are in dire need of expert advice and yet often believe they can't afford it, says Ahn. He advises companies to go for the best directors possible - the "best in breed" as he puts it.
Young companies might be surprised at who they can attract. Many experienced directors are enthusiastic about young companies they are helping to grow. Don't be afraid to rotate your board and have an evaluation process in place to make sure your directors are doing the job you want them to do, says Ahn, who is on two Nasdaq company boards. Give them a job description; don't leave anything to chance, he says. "And be boundary-less about where you get advice."
Rather than preoccupying themselves with governance issues, advisory boards of fast-growth companies need a whole other set of skills, says Ahn.
Such companies should look for help in financing growth, strategy, preparing a business for exit, providing breadth in managerial experience, and networking to build strategic alliances, he says.
"Managing high growth is like leaping over a bridge and attaching a bungy in mid-flight - you need help," says one Fast 50 company in the survey.
The benefit of an advisory board is that they try to take a lot of emotion out of decisions, says Ellwood.
"The board is helping the guy with the blind spot," he says. At a time when things are turning to custard, often the business owner is out of depth and the team wants to be positive so they won't speak up about problems.
The benefit of an advisory board is that it brings discipline and formality to their business, says Ellwood. The board makes the boss accountable to someone.
Advisory boards around the world are facilitating some hard-to-make decisions: why the company can't launch a new product; why it's a good or bad idea to invest in a new marketing channel; how to take cost out of the business. It may be something as simple as reducing a team of four people to three, something which can be incredibly painful to do in a small business where the staff member has stuck with you in the hard times.
Ellwood says the valuable thing about board members is they don't have a vested interest like the owner and so can look at things more objectively and take cost out of the business.
"You can't know everything, but selecting an excellent board who can provide advice and guidance can make all the difference to surviving the proverbial entrepreneurial valley of death," says one Fast 50 company surveyed.
Advisory boards are far more action-
oriented than typical boards, says Deloitte partner Andrew Gibbs. "Management needs advice that is pragmatic. They need to be back in the office or the factory after a board meeting and able to implement the changes that will see things done in a fundamentally different way.
"Too often advice is out of reach because it is 20,000 feet up and unable to be interpreted at the practical 'hands-on' level that management requires."
At the same time, making the best use of these experienced advisers means providing them with top-notch information.
Gibbs warns that "advisory boards will only be as good as the information they are given - businesses should not be shielding their cards or making their advisers do number-crunching and analysis that can be done elsewhere."
The Deloitte report says: "Quarterly meetings with board papers distributed two days before are often nothing more than 'ceremonial'." Although many of the Fast 50 companies talked about time spent on compliance and regulation, companies in the survey also said it was hugely important that sufficient hours are focused on strategy and value-add: customers, networks, products, people.
Strategic plan development was seen as twice as important as any other activity during board meetings - and it was an area where most wanted to substantially increase their time.
Keeping a cash-thirsty company solvent and ready for acquisition can be a key area where board members can help.
For example, the PGG Wrightson board is no doubt using every finance contact it has at the moment to keep its Silver Fern Farms acquisition alive.
"For every board, right at the top of their agenda at the moment is: How is the company going to fund things - how are you going to fund growth?" says Ellwood.
"Often they are making lots of money but they don't have any cash in that growth phase and in a downturn that can bring a heck of a lot of risks. Making sure your company is good for cash, is key."
* Gill South is a freelance business writer based in Auckland
