It looks good on a business card and carries some weight in certain establishments. However, there’s a lot more to being a director than queue jumping at The Ivy.
The word “Director” should be clue enough as to what the role involves; a steady and capable hand directing a business through whatever is thrown at it. It’s a position that not only brings with it a level of kudos to those that actually succeed but also a fair number of legal, moral and commercial obligations.
Failure to meet some of these obligations can result in fines, disqualification and even imprisonment so it is always wise to consider the wider implications of the position.
Comply or fry
Before plotting how to go about the day-to-day running of a business, anyone new to the role should be clear on the level of compliance required to satisfy the authorities and the likely penalties for those who fall short. A thorough look at both of these aspects can be found in our article “What are my Responsibilities as a Director” which is a very worthwhile read as there are a lot of them.
Suffice to say the rules are there to protect everyone including directors from themselves as well as shareholders, staff, suppliers and other creditors.
The day job
Through boom or bust a good director will have an eye on the financial performance of the company. Apart from the necessary compliance requirements of ensuring the business is solvent it would be a poor show indeed not to at least know the bank balance on a daily basis.
Not all directors have to be a qualified bean counter but a basic understanding of cash projections, balance sheets and profit & loss accounts is fairly essential. Not only does it keep you informed and provide warning signs of trouble ahead, it allows you to ask pertinent questions and if necessary challenge those producing the figures, even if they are co-directors.
Most directors will have a key skill or area of expertise within a company but as is the case with financial understanding a level of knowledge of other departments is extremely useful. A broad understanding of all the aspects of a business allows a director to rise above the detail whilst not totally ignoring it. After all management and staff are responsible for the detail and can be asked to provide it if needed.
A director needs summary information in order to identify any obvious trends, either good or bad, and take the relevant steps.
All round vision
Successful directors usually have a wide network of contacts and not just within their own industry. Cultivating a group of people across a wide range of activities, and meeting them on a regular basis, can only help in focusing on the wider picture.
To enable a director to make sure he’s steering his business in the right direction it is imperative to know what the competition is up to and what threats they pose, how key suppliers are coping and to latch on to any murmurings of potential new markets.
It is also imperative to stay close to key customers to ensure that what you’re giving them is exactly what they want. After all it doesn’t take long these days for a quick search of the internet to identify other players in the market all too keen to steal the business.
A good network should of course include someone in the finance industry. Many businesses have struggled against their overdraft limit ignorant of the fact that alternative products are available to ease the burden. Indeed, the recent years of credit crunch leading to the reluctance of traditional lenders to part with their money has seen a raft of new and innovative ways to access cash.
Closer to home
The way any business adapts to change, caused perhaps by a need to address new competition or new market opportunities, is an area all directors should take time to get comfortable with. Any diversion from the normal course of business often requires a close look at what has historically been used to fulfil that business and more importantly if it is still up for the job.
This aspect can take both an impersonal and personal form but a successful director needs to be comfortable with either.
A review of the core technology required to move forward will only result in loss of sleep if you can’t actually afford a vital piece of new kit. However, if you have kept your eye on the basic finances and have a good relationship with the guys in the finance industry this problem should be greatly reduced.
Flesh and blood
The personal aspect of change of course comes when reviewing the people charged with firstly accepting and then being able to move with any change. This includes all resources from staff and management to those involved in the entire supply chain.
It is essential to have good negotiating skills in your locker if you need to modify existing supplier terms or embark on completely new relationships.
Ensuring the right staff are in place is also key to moving a business forward. A successful director should be able to identify where any skills are lacking and choose between re-training, replacing or adding, or perhaps a mixture of all three.
Don’t be put off
It is quite understandable that anyone looking at the legal obligations of a director and then reading this article might decide that it’s a bit too much of a burden to contemplate. However, leading a business to success can be a rewarding experience both in personal and monetary terms.
Clearly not everything mentioned is relevant to all businesses but it cannot be emphasised enough that the role is not just a status symbol on a card and a key to the executive washroom. At the end of the day, by being alert to all of the aspects of running and growing a business, you will not only protect yourself but your staff, customers and suppliers as well.