Business Advisor: March 2013

Here are the five key steps to implementing a good governance strategy for your bakery.

Here are the five key steps to implementing a good governance strategy for your bakery.

As the population becomes increasingly sensitive to social accountability, a company’s reputation with consumers and stakeholders is as important to a company’s bottom line as revenue growth. Managing your company’s reputation effectively begins with strong corporate governance.

Implementing a corporate governance strategy is much more than simply setting policies. It is a series of calculated steps that must take the objectives of all stakeholders and legal and regulatory requirements into account, while ensuring the company’s growth targets and overall business plan can be achieved. Every corporate governance strategy will have its own parameters, but there are five fundamental steps that every organization should consider when putting a program in place.

Step 1: Identify and understand your stakeholders
You cannot create a holistic governance strategy for your company until you truly define and understand your stakeholders. Traditionally, stakeholders are thought of as the owners and investors, but you also need to consider and include management, employees, suppliers, customers, lenders and the community. Specific to the baking industry, it is also important to consider the needs of the regulatory and health and safety bodies that govern your business. If you do not have a board of advisors, strongly consider creating one. A robust advisory board can help challenge you to take your business to the next level. 

Step 2: Identify your company’s key objectives
This is essential to setting the expectations of your stakeholders and encouraging ethical decision making at all levels. Start by developing a long-term strategic plan that will satisfy all identified stakeholders. Build or revisit your company’s mission statement to ensure that it encompasses “good governance” attributes such as honesty, trust, integrity, openness, accountability, responsibility, mutual respect and commitment to the organization. It is also important to make sure that growth remains a key element in defining your objectives.

Step 3: Define internal control and reporting requirements
This step involves two elements. The first is to review financial reporting processes and the frequency of reporting. In this current economic climate, it is advisable to accelerate your cash flow forecasting to a quarterly, maybe even monthly, basis to accommodate rapidly changing assumptions and business conditions.

The second element is to monitor your working capital carefully. This includes staying on top of your receivables and proactively identifying specific customer credit issues. Keep in mind that both your financial and operational processes need to be documented and communicated so that lenders and regulators can be sure you are taking the right steps to protect your finances, your products and the future of your operation.

Step 4: Ensure your team has the right tools and resources to roll out their responsibilities successfully
Ultimately, a company needs to be prepared to make the necessary investment to ensure that the right tools are in place to meet the corporate governance objectives. If your management team does not have the adequate training, support and technology to run the business effectively, then the owners or board of advisors cannot hold them accountable for excellence (or lack thereof). Consider surveying the management team to identify what resources will allow them to optimize their performance and encourage them to contribute their opinions to improve the success of the company. By doing so, you will not only gain loyalty, but you will also enhance and strengthen the corporate culture.

Step 5: Enforce your policieS
Effective governance begins with a strong corporate culture, which is set by the leaders of the company. It is essential to communicate regularly and effectively with your entire team so that you foster a culture where people believe in and live the corporate values and responsibilities. That means setting clear expectations and guidelines for the team, rewarding achievements and behaviours that reinforce the company’s values, as well as celebrating company successes. However, effectively managing corporate culture also means dealing swiftly with behaviours that are not in alignment with the company’s values. 

It is important to remember that governance is an evolving process that demands a corporate-wide effort. Companies should take the time to express their needs with professional advisors who can help guide them through these processes.

As your policies evolve, it is a good idea to schedule monthly or quarterly meetings with your key business advisors and solicit their advice on best practices for financial modelling and strategic planning. This will allow you to be proactive in providing your executive or senior management team with the information they need to make smart business decisions that will help you grow your business.

Wayne Gelb is a partner in Fuller Landau’s Food & Beverage practice group. He can be reached at 416-645-6546 or by e-mail at  wgelb@fullerlandau.com.