The corporate environment has become more and more complex: organizations are increasingly globalized and international, and management is concentrated in the hands of few individuals. In this environment, the risks become more evident. It is within this context that Corporate Governance emerges, providing a tool to regulate and ensure transparency in the organization’s management. But, is it only large organizations that can benefit from a corporate governance process?

The answer is no. Any company, whether small or medium sized, can benefit from the concepts of governance for structuring a management process that integrates operations with strategy.

According to Eduardo Pardini of CrossOver Consulting & Auditing, governance is transparency, it is balance – it is the instrument that provides a balance between the power structure and the operational structure of the corporation.

Every organization needs a management, direction and monitoring system for its operability. From the moment we are able to integrate them in an efficient and effective way, we are already ensuring that part of governance exists. It is important to point out that this process must suit the needs and level of complexity of each organization. Each case is different and there is no universal solution. What exists is the application of governance concepts to the environment of each organization.

Let’s now look at the elements Eduardo highlights as being the minimum requirements for an organization:

  • A business plan with defined strategic objectives and goals that will guide all actions of managers and/or the entrepreneur.
  • A defined organizational chart that clearly and transparently demarcates the responsibilities and authority of each collaborator. It is important that there are targets for each collaborator and that they are intimately tied to the objectives outlined in the business plan.
  • The implementation of a periodic monitoring system to evaluate the performance process of collaborators toward the fulfillment of their objectives and/or targets. In this process it is also very important to measure the performance of the company as a whole, mainly in two main areas: the generation of wealth through profit and the generation of operational cash flow.

You will notice that we are not talking about the implementation of boards, committees and audits, not that it is not good to have these in the structure, but we must first evaluate their costs and benefits, taking into consideration the size of the corporation and its composition of shareholders/quota holders.

The positive results for an enterprise that uses management with governance are clear when we look at its ability to access capital more easily to finance its growth. According to studies, investors feel more comfortable paying a premium price to companies that demonstrate management with governance.

Companies need to know where they want get, with clear goals that make sense in the business. They must also know the dynamics of the sector and the inherent risks in their operations. Finally, they should aim for quality and excellence in the management of the business to ensure the perpetuity and preservation of the business.

Tobias Schroeder

Author

Tobias Schroeder

MBA in Strategic Management from UFPR. Business and market analyst at SoftExpert, a software provider for enterprise-wide business processes automation, improvement, compliance management and corporate governance.

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