Given Whitecap’s focus on strategy development and strategy implementation, this blog reviews these requirements, which only relate to a small number of organisations.
More than 96% of private companies, whilst happy not to have additional regulation, will continue to rely on their own view of best practice and operational habit to navigate their way through these essential business disciplines.
Following consultation with Department for Business, Energy and Industrial Strategy, the UK Corporate Governance Code for listed companies, was published in 2016 by the Financial Reporting Council. This was updated in July 2018 and effective from January 2019.
As a strategy focused consultancy, we have highlighted two of the five main principles associated with Board Leadership and Company Purpose:
- The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture.
- The board should ensure that the necessary resources are in place for the company to meet its objectives and measure performance against them. The board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed.
Publicly quoted companies, which equates to approximately 0.2% of all registered companies in the UK, need to comply with this code and evidenced through their annual report and accounts.
In December 2018, the Wates Corporate Governance Principles for Large Private Firms was published, which is also effective in January 2019.
Of the six main principles, here are two of the key elements within the first principle relating to Purpose and Leadership:
- Purpose: A well developed and defined purpose will help companies of all sizes and structures articulate their business model and develop their strategy, operating practices, workforce and approach to risk.
- Strategy: An effective board develops a strategy and business model to generate long-term sustainable value. It is responsible for ensuring that its strategy is clearly articulated and implemented throughout the organisation, and that it, along with the company values, supports appropriate behaviours and practices.
These principles apply to companies with a turnover of over £200m, over 2,000 employees and a balance sheet of over £2bn. As a result, these apply to approximately 3.8% of all registered companies in UK. The remaining 96% of firms fall outside these requirements; which may be a blessing for many in not having to comply with additional regulation, especially during a period of considerable political uncertainty.
However, we and many others would advocate that all organisations should adopt and embrace these fundamental principles, with rigour and enthusiasm, as good business practice. We believe clarity, focus and alignment are all essential ingredients of successful strategy development, delivery and above all, organisational effectiveness.
- Clarity of purpose and direction. Clarity of decision making, investment prioritisation and resource allocation.
- Focus on critical activities, deliverables and developments. Focus on key performance indicators and critical measures of success.
- Alignment across the board and senior management team. Alignment and engagement with the whole organisation.
In summary, it is good to see purpose, values, strategy development and strategy implementation being strengthened in corporate governance for enterprises. However, the leaders of most high performing organisations, of any size, know that these lie at the heart of their sustained success.
Hopefully you’ve found this article useful. If you feel that your strategy development and strategy implementation process would benefit from independent review and challenge, please get in touch.
Established in 2012, Whitecap Consulting is a regional strategy consultancy headquartered in Leeds, with offices in Manchester, Milton Keynes, Bristol and Newcastle. We typically work with boards, executives and investors of predominantly mid-sized organisations with a turnover of c£10m-£300m, helping clients analyse, develop and implement growth strategies. Also, we work with clients across a range of sectors including Financial Services, Technology, FinTech, Outsourcing, Consumer and Retail, Property, Healthcare, Higher Education and Professional Services, including Corporate Finance and PE.