Will your governance and management make the cut ?

By Linda Julian

When leading and large clients determine their professional service relationships, one factor influencing their decision is how well prospective service providers fit with their own values, culture, and aspirations.

Will your firm governance and management make the cut ?

Sensible clients don't expect exactly the same standards and processes of every prospective professional adviser.  Just like in corporate life, organisation size is an important determinant of the nature and extent of formal governance protocols and management practices.

Here's a guide to what you should implement to make sure that your governance and management don't put you at commercial disadvantage.

If you are a micro-professional practice or sole practitioner, you need:

• fair employment practices  -  both in document form and in practice
• a documented policy on conflicts of interest
• preparedness to make disclosures of pecuniary interests to certain public sector clients
• evidence of a management system covering professional and financial functions and workflow
• ethical professional and business behaviour.

For small firms to avoid elimination on grounds of inadequate governance and management, you should also establish:

• an organisation chart which defines functional roles and accountabilities
• a risk management framework
• a process for detecting and avoiding conflicts of interest
• client service standards
• a framework for eliciting and responding to client feedback
• financial reporting at better-than-average standard as evidence of competent financial management
• formal human resources management practices.

Mid-sized professional practices need to do more, commensurate with their scale:

• self-assessment framework for legislative compliance
• formal systems for identifying and monitoring possible conflicts of interest
• increased emphasis on and evidence of internal monitoring of risk
• a client complaints and disputes management protocol
• policies and procedures which evidence ethical dealings with the wider business community
• movement toward the ASX best practice governance framework.

Expectations of large professional service firms are similar to those of highly regarded ASX-listed corporates.  Compliance with OCED and best practice in annual reporting will get you there.

One size does not fit all  -  and this is not an exhaustive list.  Just as governance and management sensitivities and requirements vary across clients, there is no uniform approach for each professional firm.

The advantages of getting governance and management to these standards are wider than making the cut in competitive selections.  In time, there should be considerable business benefit.

The author gratefully acknowledges the important work of Bob Lewis and Phil Scott from Local Government Procurement whose recent presentation ‘LPG solutions on improving outcomes for local councils and suppliers’ (2007) stimulated and provided a foundation for this article.  Details can be found on their website at www.lgp.org.au.