Corporate governance: The cornerstone of your company BY: DIANA BUSTANI, SINTEC Follow us: @Perspectiva Sintec From the beginning of Henry Ford to the technological startups of Silicon Valley, organizational management has changed over the years. Today’s companies are facing increased complexity in business due to excessive growth in operations, legal restrictions, competitive environment, new technologies, etc. This complexity translates into a constant challenge for organizations in achieving profitable growth. One of the most common ways for a company to face this challenge is through the creation of strategic business units (SBU’s), as it permits them to diversify the company’s strategic vision and focus autonomously on the business strategy, aligning the client’s needs with the environment. However, during the implementation of this new organizational scheme, companies often focus on maintaining growth and overlook the very element that enables this new way of working, that is, the organization’s corporate model. The corporate model is one of a company’s internal management systems that defines the main functions and responsibilities @Sintec_ @PerspectivaSintec of the corporation as well as of each SBU, the manner in which they relate and their respective management routines. The role of the corporation1 must be to create a business strategy, that is, find ways to stimulate competitiveness and growth, create economies of scale and synergies, guarantee fulfillment of strategic objectives and exercise governance between distinct organizational entities. In contrast, the role of the SBU’s must be to identify the specific challenges of the environment in order to define the strategic objectives that are aligned with the vision of the organization, thus creating a specific strategy for each of its needs. The corporation is responsible for managing the performance of the SBU, obtaining and allocating funding (internal and external) and monitoring the development and fulfillment of business strategies. The corporate model is one of a company’s internal management systems that defines the main functions and responsibilities... Despite the importance and impact of the corporate model on organizations, it is common to find companies that fail to place necessary importance on this topic, many times because they relate it to isolated aspects or problems in the organization rather than viewing it as part of a whole. The most common problems of this type of organization are: difficulty in management and decision-making, misuse of resources, lack of accountability in processes, role duplicity, poor business focus, information asymmetry and tension in the relationship with the corporation and other SBU’s. This article focuses solely on the relationship between the corporation and the SBU’s. It does not consider the role and interactions between the board of directors and the organization’s stakeholders. 1 2 CORPORATE GOVERNANCE: THE CORNERSTONE OF YOUR COMPANY In view of these common problems, the first steps an organization must take to implement a corporate model are: Implementation of a well-defined corporate model is critical to the organization as it permits alignment of the strategic vision of the SBU’s, clarification of roles, prioritization of common objectives, increased information transparency, timely risk management, more efficient coordination between SBU’s and, finally, facilitation of growth of the organization and progression in the market and its environment. Diana Bustani [email protected] MEXICO CITY MONTERREY BOGOTA www.sintec.com [email protected] Copyright Sintec SAO PAULO