northland chamber

ADVOCATE COLUMN 1st WEEK MARCH 2011
When the performance of our regional economy is discussed, generally the importance of increasing Northland’s productivity is highlighted. Productivity is often measured in terms of gross domestic product per capita or income per capita. Looking at New Zealand’s economic and business profiles indicates what a challenge this presents. New Zealand’s low productivity is further reflected in the fact that an overwhelming majority (97 percent) of businesses is small to medium sized enterprises yet they account for only about 40% of our economic output.

In part this has to do with the nature of these businesses, which by necessity are forced to focus on the day-to-day running of their operations and often with very limited resources. These conditions result in business decisions being reactive rather than strategic. Yet while there are issues relating to increased productivity that can be resolved by way of improved training and experience over time, another factor critical to increased productivity and sustainability is governance.

Although some New Zealand businesses have good governance models, most do not. This is hardly surprising since a large percentage of them are small scale of family businesses. When family businesses do succeed, it is often due to an in-depth knowledge of the sector in which they operate and a long-term view.

It is when developing a long-term view that good governance is critical, it provides a framework for shared objectives, planning for growth and most importantly developing a succession pathway for future generations or other stakeholders. Lack of good governance is reflected in the fact that only a very small percentage of family businesses pass to a fourth generation.

In simple terms it is about deciding where the business owner wants to be in the future and implementing a series of actions that will enable this to occur. In doing so the business owner is forced to identify what opportunities they can take advantage of and what factors need to be mitigated or remedied to ensure their long-term goals can be achieved.

Governance through diverse and capable board members is not the exclusive domain of large business. All business can benefit from it and all business should examine developing governance models appropriate to the scale of their enterprises and aspirations. Through their networks business groups such as the Northland Chamber of Commerce provide the opportunity for small businesses to access a capable and diverse range people who can assist in these roles.