When it comes to making your business more resilient the business owner has 3 roles.
An owner commonly has 3 roles in the business. They own it, they direct or control it and they work in it.
The 3 roles are bundled together both in activities and mentally. They are so welded together they become one identity for the business owner. The longer the identities are bundled together, the harder it is to create any form of separation. As you build your team, they see the behaviour of the business owner acting in all 3 roles without being able to see any separation.
The team behaviour then reinforces the 3 merged roles with their tolerance of the business owner’s behaviour. This appears in the everyday acceptance that, while the working day is 9-5.30, if you are the boss, you can roll in at 10am. Even if the owner is acting in a job role.
With no transparency in the roles, the team see it as one rule for us and another rule for “them”.
A company joins the actions of 3 groups of people – shareholders, directors, and employees. The first step to understanding what impact the roles have on the value of the business is being clear on what is the purpose of each role.
Business ownership and shareholder
As a shareholder, your role in the organization is to invest money in the share capital and receive a return from the trading profits. A shareholder’s financial responsibility is restricted to the value of their capital investment. In small and medium size businesses the relationship between the shareholder and the business is often more complicated. More than money, there is time, effort, sacrifice and emotional investment in a business.
There are a few rights that a shareholder has. They include having access to company records, regular statutory meetings, voting rights etc. Most of the details are written in the Articles of Association or a shareholder agreement, if there is one. More details on a shareholder agreement can be found in Chapter 7.
If you are working in the business, as the owner, you’re likely to be setting the culture and acceptable behaviours (especially what happens when you aren’t there). Leadership comes from you and everything you do, whether you are aware of it or not. Everything that happens is your fault.
Shareholders define strategic goals for the business by investing in the resources to achieve them. They set the return-on-investment expectations by the dividends they want to receive.
Director of the business
The board of directors are responsible for the management of the business. Directors make strategic and operational decisions as well as being responsible for keeping the company legal. Directors participate in board meetings and facilitate decision making.
The directors are appointed by the shareholders to manage its business’s day-to-day affairs. Directors act together as a board but typically there is some delegation of powers to individual directors or board appointed committees i.e., managing director, CFO, remuneration committee and audit committee.
There is a difference between shareholders responsibilities and duties and those of directors. If you are in both roles, it is crucial that you understand the difference and can separate roles. Understand which role you are in at any one time. Being both a director and a shareholder removes some of the protection you can enjoy as a shareholder. Being a director has legal implications, which are often overlooked when signing up to be a director. As your company grows so do the liabilities.
A company director has 7 key duties:
- Act within their powers under the company’s constitution (usually the articles of association).
- Act in a way that they consider, in good faith, would be most likely to promote the success of the company for the beneﬁt of its members (shareholders) as a whole.
- Exercise independent judgement. Directors are meant to develop their own informed view on the company’s activities.
- It’s the duty for directors to exercise reasonable skill, care and diligence in their role.
- Avoid or manage conflicts of interest which may affect their objectivity.
- A director of a company must not accept a benefit from a third party.
- If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors.
Directors must also keep minutes of board meetings to provide a record of the board’s decision-making process.
Employees within the business
Employees have a responsibility to give a fair day’s work for a fair day’s pay. The employees are one of a company’s main assets and biggest costs. When they know their roles and responsibilities and what is expected they generate much greater value than the sum of their parts.
Some are specific technical experts. All are expected to work together as a team to contribute to the business success by acting in the business’ best interests using problem-solving and taking the right decisions. The challenge is when the business owner is the only decision maker, they become a bottle neck in the business.
The work culture is also part of the employee’s responsibility. They must comply with the policies and regulations and respect one another in the workplace. Employees play a big role in all business activities including profitability. Business owners often get in the way of this without intending to, such as when they expect one type of behaviour and act differently themselves i.e., timekeeping.
Employees are required to obey the employment contract, reasonable orders, cooperate with the employer and serve in a faithful manner. They are also responsible not to divulge and misuse the confidential data of the organization.
Employees have rights as a matter of law.
Employees have a right to work in a safe and healthy workplace and they have a duty to make use of safety work equipment for protection. Employees are entitled to appropriate rest periods during the working day if their hours exceed legal minimums for a break. They are also entitled to annual paid holiday including bank holiday allowances and they can refuse to work during holiday periods and at weekends if these are not part of their contracted hours. On most employee contracts the working hours are fixed, exceeding these hours results in additional payments and benefits.
Workers have protection from unfair dismissal and can file a complaint to an industrial tribunal if they feel that they have been unfairly treated.
It’s one of the biggest fears of an employer that if you have effective processes and the support of a good HR advisor, you’re rarely going to experience the challenge of an industrial tribunal. The secret is robust policies and procedures, consistently applied ON EVERY OCCASION.
Ask yourself, as the owner, are you acting as a good employer? Does the team know when you are in shareholder mode, or the director role or being an employee?
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