Corporate governance is no longer a practice restricted to large companies and has become part of the strategy of medium-sized companies that seek to grow with more security. In a scenario of high interest rates, more selective credit and growing pressure for efficiency, businesspeople have anticipated the creation of advisory councils to reduce strategic errors, organize decision-making and strengthen financial management.

With Selic at 14.75%, wrong decisions began to have an even greater impact on investments, expansion and liquidity. At the same time, companies face greater rigor in granting credit and increasing demands for financial predictability.

For Farias Souza, business administrator, CEO and founder of Board Academy, an edtech specialized in the training and certification of advisors, executives and entrepreneurs, in addition to the development of corporate governance structures for companies in the growth phase, the change reflects a transformation in the profile of Brazilian organizations.

“For a long time, businessmen were able to compensate for management failures with market growth. Today this has become more difficult. Money is more expensive, risks have increased and each decision has a greater weight on the results. It is in this context that advice gains relevance“, he states.

The movement follows a trend observed in family businesses and expanding businesses. Studies by the Brazilian Institute of Corporate Governance (IBGC) and KPMG show that formal governance mechanisms are being adopted earlier and earlier, driven by succession processes, professionalization of management, business expansion and preparation for future fundraising.

Why are companies creating boards earlier?

As the company grows, decisions related to expansion, investments, executive hiring, succession and financial management also increase. In many organizations, however, these definitions continue to focus exclusively on the founder.

According to a study by McKinsey & Company, companies with structured decision-making processes can increase operational efficiency by up to 20%. Deloitte’s analyzes indicate that organizations with more mature governance have greater financial predictability, better risk management and greater ability to adapt in the face of market changes.

In Farias Souza’s assessment, the main contribution of a council is precisely in improving the quality of decisions. “When the company depends solely on the owner’s vision, it creates a limit to its own growth. The board broadens perspectives, questions assumptions, brings complementary experiences and reduces the likelihood of costly mistakes”, he states.

In addition to internal gains, governance also influences the perception of banks, investors and strategic partners. More organized structures tend to convey greater confidence in the company’s ability to execute and manage resources.

Signs that your company needs advice

Although there is no minimum revenue to implement an advisory board, some signs indicate that the company has reached a level of complexity that requires a more robust decision-making structure.

1. The first of these is when revenue grows, but cash generation does not keep pace.
2. Another warning arises when practically all relevant decisions continue to depend on the founder’s approval, generating slowness and overload.
3. The absence of reliable indicators to guide investments and strategic priorities also tends to reveal weaknesses in management.
4. There are also situations in which growth starts to generate more operational problems than financial results, compromising efficiency and profitability.
5. Finally, when the entrepreneur dedicates most of his time to resolving emergencies and putting out fires, instead of discussing strategy and expansion, the management model usually shows signs of exhaustion.

“Many companies are looking governance when the crisis has already appeared. The ideal is to make this movement beforehand. The advice is a prevention tool, not just a correction tool”, says Farias Souza.

How to get started without turning management into bureaucracy

One of the most common mistakes among businesspeople is to associate governance with excessive rules. In practice, implementation can start simply and adapted to the company’s maturity stage.

The first step is to define what problem the board will help solve. Depending on the moment of the business, the focus may be on expansion, succession, professionalization of management, improving financial results or preparing for new growth cycles.

The choice of advisors is also decisive. The ideal is to bring together professionals with complementary experiences in areas such as finance, strategy, market, operations and business management.

Another important point is to establish a meeting routine, with objective agendas, clear indicators and monitoring of decisions made. It is also essential to separate governance from operations. While the executives conduct day-to-day management, the board acts as a body for strategic guidance, critical analysis and monitoring of results.

“The board does not exist to manage the company. It exists to improve the quality of decisions. When this happens, gains appear in efficiency, predictability and capacity for sustainable growth”, says Farias Souza.

The creation of a council is no longer a step reserved for large corporations or companies that intend to receive investments. For growing businesses, governance has been used as a tool to organize decisions, reduce risks and prepare company for new cycles of expansion.

According to Farias Souza, the most important thing is not to wait for problems to appear to structure this process. “Governance is not used to solve crises, but to avoid them. The sooner a company matures its way of deciding, the greater its chances of growing in a consistent and sustainable manner”, he concludes.

By Carolina Lara