Management and regulation

There’s a positive to compliance.

A key part of assessing a business acquisition is the “due diligence” process. Few people will buy a venture without thoroughly kicking the tyres.

Sometimes it’s a modest exercise focusing on obvious concerns. In more sophisticated acquisitions, it involves a prolonged examination of every aspect of the business in question. Buyers don’t just want to know the upside; they also want to check the downside.

Have you ever done due diligence on your own business?

Why would someone want to buy your firm? For that matter, would you want to buy it? You may think it has great prospects, but what about the downside?

Due diligence is an exercise in risk management. That’s management with a four letter word in front of it. The aim is to see how well-managed the business is.

That means looking at effectiveness of the systems you have in place, or whether you actually have them in place at all.

Good business thrives on systems, but many focus only on financial or operational issues.

An obvious one is cash flow management. An efficient firm bills promptly and recovers monies owed in a systematic fashion. Terms and conditions are clear to all customers. There is a process for recovering aged receivables. It’s clear who does what, when and how. It involves dealing with people in a systematic fashion.

In fact, people generally are the biggest risk factor in most businesses – not just those outside the firm; more important are those within it.

The upside of regulations.

Most managers baulk at growing compliance demands, and in a lot of cases rightly so. But you can probably do more for you business by using regulatory guidelines to minimize people risk.

Do you have a clear and transparent process for dismissal?

Most jurisdictions demand that an errant employee be consulted about their problems and that some attempt is made to address the issue, maybe even solve it. Isn’t that the way to manage most difficult employee situations? On the one hand you may get a result. If you don’t, you have a documented process that proves your compliance. That can save your firm hefty penalties in cases of unfair dismissal.

Ditto for occupational health and safety laws. Your employees are more likely to feel you actually care about them if you treat the regulations with respect. Safer workers mean healthier workplaces and usually more productive ones. There’s less time lost to accidents and less likelihood of running afoul of the law. All help the bottom line.

Much of what is seen as irksome compliance demands are better integrated into your overall people management policies. Many regulatory frameworks make a good template for sensible people management. 

There may be a cost to that, but if it leads to a more systematic and robust management of the firm, you are likely to produce a more robust return on your investment in it.