On clarity, pace and accountability - and the kind of governance that helps a business get faster, not slower.
Governance has earned itself a bit of a reputation problem. In a lot of SMEs – especially those just through an ownership change – the word lands somewhere between “compliance” and “box-ticking”. Something the lawyers and trustees worry about. Something that happens in board packs nobody reads. Something that gets in the way of getting things done.
Done well, governance does the opposite of slowing a business down. It gives the leadership team somewhere to bring the difficult decisions, somewhere to be properly challenged on the assumptions behind them, and a clear view of what’s theirs to decide versus what needs to be decided elsewhere. The boards I work with that take governance seriously tend to be the ones whose businesses move with more confidence.
What governance actually does
Strip away the formal language and governance is doing three things. It’s making sure the right people are making the right decisions at the right altitude. It’s holding the business accountable to its commitments to shareholders, employees, customers, lenders, and (in an EO context) to the trust. And it’s providing a structured place for challenge and judgement to happen, so the team running the business has appropriate checks around it.
Compliance with the Companies Act matters, and filing on time at Companies House matters. They sit underneath good governance, rather than being the substance of it. The same goes for board composition, NED appointments and trustee directors – all important structural pieces, but the substance is in the decisions getting made, properly held, with consequences.
Why ownership transition exposes the governance question
Under founder ownership, governance is often implicit. The founders are on the board. The founders run the business. The founders are usually the dominant shareholders too. Decisions get made because the founders make them. It works, after a fashion, until ownership changes.
The moment ownership changes (whether it’s an EOT, MBO, PE deal or family handover) governance becomes load-bearing in a way it wasn’t before. There are now other stakeholders whose interests have to be represented. There are decisions that genuinely need a different kind of conversation than the one that used to happen in the founders’ office. There are new layers of accountability (to a trust, to investors, to the next generation) that didn’t exist in the same way before. And the existing governance structure, designed for the previous model, often doesn’t fit the new one.
The question that helps the most
When I’m in a conversation with a board or a leadership team about their governance, the question that opens the most useful territory is whether it’s proportionate. Proportionate to the stage the business is at, and nimble enough to allow growth, while still providing the right level of guidance.
A small post-transaction business doesn’t need the governance machinery of a FTSE 250. But a business growing into £20m+ revenues, with a leadership team stepping into ownership and a wider set of stakeholders to answer to, needs something more substantial than the governance that worked when it was £4m and run by the founders over the kitchen table.
What does proportionate look like in practice? A board agenda that spends real time on strategy and forward decisions, rather than only retrospective performance review. Clear decision rights, so the team isn’t waiting on board permission for things that should sit with management. Clear escalation paths for the things that genuinely should reach the board. A board with the right mix of skills for the issues this business will face, not just the ones it faced last year. NEDs and trustees who challenge constructively, ask the questions the executive has been avoiding, and don’t try to run the business themselves.
Governance as growth enabler
The boards I see that genuinely accelerate growth do a few things consistently. They have a strategy that’s owned by the executive, supported by the board, and tested often enough that it actually responds to what’s happening in the business. They have honest, evidenced conversations about performance. They make decisions and own them, rather than revisiting them every quarter. They invest time in their own effectiveness, because a board that doesn’t periodically look at itself tends to become part of the problem.
There’s also a piece that gets less attention than it should: holding the board to a definition of governance that includes whether the business is performing. Governance isn’t only about avoiding things going wrong, it’s also about whether the business is creating the value it’s capable of creating. A board that meets every quarter, processes the management pack, asks polite questions and signs off the minutes – while the business underperforms – is failing at its job, however good the paperwork looks.
What this looks like across different ownership models
Lately, more of my work is in EOT-owned businesses, and the dynamics there are specific. The relationship between the trustee board, the executive board, and (where relevant) a founder-shareholder needs to be designed deliberately. Each has a different role, a different set of accountabilities, and a different lens on the business. When the design works, the trust board protects the beneficiaries’ long-term interest, the executive runs the business commercially, and the founders transition out of executive responsibility while preserving the relationships and judgement that matter. When the design doesn’t work, every decision becomes a three-way negotiation and the pace of the business grinds.
The same proportionality discipline applies in other ownership models, with different specifics. In PE-backed businesses, the question is usually how the investor relationship sits alongside the executive’s day-to-day operating authority. In MBOs, it’s about how the new owner-managers shift from running their functions to genuinely governing the business they’ve bought. In family successions, it’s about how the family shareholders, the operating board and any holdco arrangement work together as ownership moves between generations. The configuration differs. The need to design the relationships explicitly doesn’t.
Where I’d leave it
Good governance is the structure that helps a growing business make better decisions, faster, with the right people accountable. It’s worth investing in properly, because businesses that take it seriously tend to make better decisions and grow faster than those that don’t.
If you’re on a board where the meetings feel like compliance theatre, that’s a fixable problem. And the cost of fixing it tends to be less than the cost of leaving it broken.