ACCA: How vision and strategy helps small businesses succeed: Governance needs of SMEs
Many businesses start their life with a brilliant idea but struggle to turn it into a star company. We have identified the key components that build a robust organisation both internally and externally.
Governance for small and medium-sized entities (SMEs) is about leadership directing the organisation to long-term prosperity and bringing both internal and external stakeholders along on the journey towards prosperity and success. There is a huge variety among SMEs, all with different governance arrangements; however, challenges they face are often common. To succeed, the leaders of SMEs need to recognize elements both within and beyond their enterprise and build a resilient organisation.
The key drivers for success - within the organisation
The vision of an organisation signposts its stakeholders a direction of its journey. Any organisation needs to picture how it wants to look like as an organisation, what it delivers, and even how people external to the organisation would see it in the future. The journey will be unique to each organisation, but everyone internal needs to be aware where it is heading to.
Strategy and processes
If a vision is about where the organisation wants to go, strategy and processes are about how to get there. Strategies break down the vision into manageable stages, set achievable goals and objectives, and plan actions for execution, monitoring and reporting. Detailed processes enable this to happen.
Even with the best leadership, business growth will ultimately depend on people. With advancing technology, including automation and artificial intelligence, we may jump to the view that fewer people are needed, but this change has actually increased the scope for judgement and decision making. The innovation and creativity of people is fundamental – all organisations require human involvement.
Leaders are responsible for these key drivers and need to be aware of how they interact, and ensure that they support each other to optimize efficiency by creating synergies.
An ever-changing world
The organisation must understand and interact appropriately with its internal and external stakeholders to get their buy-in with the vision and strategy of the organisation - and win their support.
Any individual stakeholder can prove to be vital to an SME. Because of the relative significance of each stakeholder, it is fundamental that organisations understand and respond to the needs and goals of each one, and so obtain their long-term commitment.
Aligning strategy drivers and rewards
Employees, including temporary employees, must understand the organisation's vision and strategy. People would appreciate better that the organisation truly values employees who align their individual responsibilities and performance with business goals, when they receive the right rewards, benefits and incentives.
Flexibility, adaptability and resilience
When all parties, both internal and external, share and are committed to the organisation's vision and strategy, they will see the future of the organisation as their own, which leads to better collaboration and willingness to support each other.
The leaders of organisations again play a critical role in enabling this. Besides setting the tone at the top, it is important that they communicate the goal of the business to the workforce and the external stakeholders and explain what 'success' will mean, and that all parties will share the fruit of their hard work.
***This article was originally written on October 4, 2018. To read more, visit ACCA Global ***