There are two jobs in every company, and most owner-managed businesses only do one of them properly. Managing is running the business: resourcing it, delivering the work, making the hundred decisions a week that keep things moving. Governing is deciding what the business is for, what it will and will not do, who runs it and to what standard, and whether it is still heading where the owners want it to go.
In a large company those two jobs sit with different people in different rooms. In yours they sit with the same person, and only one of them has deadlines attached. Managing wins by default. Protect a small, deliberate amount of time for governing, because nobody will chase you for it.
What is the difference between governing and managing?
The distinction is the question being asked.
- Horizon. Governing looks three to five years out. Managing looks at this week and this month.
- Question. Governing asks whether we are doing the right things. Managing asks whether we are doing things right.
- Output. Governing produces decisions, standards, mandates and boundaries. Managing produces work delivered.
- Cadence. Governing needs a few hours a quarter, done properly. Managing needs a rhythm every week.
- Accountability. Governing answers to the owners for the value of the business. Managing answers to the governing body for performance against the plan.
The traffic between the two runs both ways. Downwards go the mandate, the standards and the spending limits. Upwards go results, exceptions and anything that has become a risk. If either direction is missing, governance is not happening.
Why does managing always win?
Because managing is urgent, visible and satisfying. Somebody is waiting for the answer. The job goes out. You can see at five o’clock what you did with the day.
Governing has none of that. Nobody chases you for a decision about which clients you should no longer serve. No customer is waiting on your risk appetite. The work that determines whether this business is worth anything in five years is precisely the work with no deadline attached, so it moves to next month, every month, for years.
There is also a competence trap. Most owners are extremely good at managing — it is what built the business. Governing feels like an unnatural act: sitting still and thinking, which is uncomfortable for people whose identity is built on getting things done.
How to do the governing job
Put two hours in the diary, off site, monthly
Go away from the building, with your phone off and the management accounts in front of you. Two hours a month is roughly one per cent of your working year.
Write a governing agenda and ban everything else
Performance against plan, the numbers that matter, people and structure, risk, cash, and one strategic decision. If an item could have been settled by a competent manager, it does not belong on the agenda.
Write down three boundaries this month
For example, a spending limit, a margin floor or a type of work you will not take. Boundaries are how governing scales, because each one removes you from every future instance of that decision rather than solving a single case of it.
Give one person a written mandate
One page: what they decide alone, what they must bring to you, and what they are measured on. Most managers in small businesses have never been told any of the three, and then get criticised for guessing wrong.
Decide what you need to see, and by when
Name the reports and the date they arrive.
Invite one outsider once a quarter
Choose an accountant, a non-executive or a coach: someone who will ask why rather than how. The single largest weakness of governing yourself is that nobody in the room ever disagrees with you.
The mistakes to avoid
The first is thinking governance is paperwork for large companies. Governance is the discipline of deciding things about the business rather than inside it, and it applies to a five-person firm as much as a large one.
The second is holding a board meeting that is a management meeting under another name. The test: read the minutes and ask whether every item could have been dealt with by a competent manager. If it could, you spent your governing time managing.
The third is appointing somebody else to do the governing while you carry on managing. A non-executive is useful, but you cannot delegate the owner’s job. What you can and should delegate is a great deal of the managing — which is exactly what the boundaries and the written mandates are for.
Questions to ask yourself
- Out of 10, how much of last month did you spend on decisions about the business rather than decisions inside it?
- Who currently holds you to account for the performance of this business, and when did they last do it properly?
- Which standards or limits exist in writing, as opposed to existing in your head and being applied unevenly?
- If you were a shareholder in this company but not an employee of it, what would you be asking the management team right now?
Where this fits in coaching
Governing vs Managing is worked through in Business Coaching, and it sits alongside two related mindsets: Innovation and Kettle Logic.
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Frequently asked questions
Does a small business really need governance?
Yes, and it needs it more than a large one does, because there is nobody else to do it. Governance is the discipline of deciding things about the business rather than inside it: direction, standards, who runs what, what you will not do, and what level of risk you are willing to carry. The scale of the business changes the size of the decisions, not the need to take them deliberately.
What is the difference between a board meeting and a management meeting?
The question being asked. A management meeting asks whether we are doing things right this week: the jobs, the people, the problems in front of us. A board meeting asks whether we are doing the right things at all over the next three to five years, and sets the standards and limits inside which managers then decide freely. There is a test if you are unsure which one you just held. Read the notes afterwards and ask whether a competent manager could have settled every item. If they could, it was a management meeting.
Can I appoint someone else to do the governing for me?
You can bring people in to strengthen it, but you cannot hand it over. An accountant, a non-executive or a coach in the room once a quarter is valuable, largely because they will ask why rather than how, and because governing yourself means nobody ever disagrees with you. What none of them can do is carry the owner's accountability for what the business is for and what it is worth. The part you can and should hand over is a great deal of the managing, which is what written boundaries and one-page mandates exist to make possible.