What would lead Slim Othmani, CEO of a mid-size, family-owned food manufacturing firm in Algeria, to adopt corporate governance practices? What would it mean for his company’s growth, investor relations, and family relations? For Othmani, his motivations to adopt new practices were about managing growth, plus the fact that if the company didn’t expand, the family would outgrow the company. Many SMEs pursue better governance as a means to access cheaper financing. Good governance can also improve their business performance and chances of long-term survival.
Then where should an SME begin? After all, most existing governance solutions were developed for large, publicly listed corporations. In Othmani’s case, he began by introducing structured communication with his shareholders, publishing an annual report, and designating a lawyer in the family to coordinate decision making with family members. Other SMEs might start in a different place, depending on their growth stage, characteristics, and unique risks.
IFC has developed the SME Governance Guidebook to help SMEs grow into governance organically by offering solutions that are fit for purpose as the company evolves from start-up to mature business. It accounts for the different challenges SMEs face as they grow. The guidebook does not push entrepreneurs toward universal best practices; rather, its SME Governance Action Planning Tool is designed to help companies develop a tailored governance-improvement plan.
The guidebook contains a wealth of information. Tables in chapter 2 quickly orient the reader to the “Evolution of SMEs” and the “SME Governance Matrix.” These tables illustrate an SME’s progression and governance choices along the way. Among the topics that the guidebook covers, including culture, decision making, and disclosure, the advice on risk management and internal controls is quite interesting. It identifies simple steps that firms can take early in their evolution before they develop more formal systems. Be sure to look at the worksheets in the back of the guidebook, since these help an SME owner or manager to plan their action steps.
If you would like to know more about Slim Othmani’s story or other aspects of SME governance, check out the following links: