Strategies in Swiss SMEs

As far as I know, Switzerland was the first country in the world, which created a corporate governance recommendations for SMEs. Typically corporate governance has been the topic of big publicly listed corporations. However, there is a clear need for sharing best practices as well among SMEs. Best Practice in SME - Recommendations for the Direction and Control of Small and Medium-sized Enterprises is a tiny brochure with simple and practical recommendations. This is how it handles strategies in SMEs. I'm delighted to see that here the difference between an ownership strategy and a corporate strategy is well understood.

Ownership interests within the SME

The shareholders of the SME should lay down a comprehensive ownership strategy which reflects the ownership interests and is to be periodically reviewed and revised as required.

The ownership strategy should comprise in particular of the following aspects:

• Corporate vision
• Independence
• Focus on results
• Awareness of responsibility towards customers, owners, employees and society
• Management structure
• Innovation orientation
• Growth
• Financing
• Risk policy
• Dividend policy
• Shareholders' agreement
• Treatment of minority shareholders
• Succession planning

Shareholders should have no entitlement to instruct the Board of Directors and the Executive Management and should only possess statutorily restricted rights to information and inspection.

Corporate strategy in the SME

The Board of Directors and the Executive Management are to formulate a corporate strategy on the basis of the strategy laid down by the owners of the company. This corporate strategy should be periodically reviewed and revised as required. The development and implementation of such strategy is to be clearly embedded within appropriate procedures and comprises the following six main stages:

• Situational analysis: competitive position, capabilities and core competencies, summarised in strengths and weaknesses
• Outlook: analysis of future trends as well as developments in the market and with competitors, the deducing of alternative scenarios, summarised in opportunities and threats
• Strategy: vision (derived from the ownership strategy), strategic direction of impact regarding products/services, target markets (market segments and regions), depth of added value and innovation, as well as financing
• Resolution: approval of strategy documentation by the Board of Directors
• Measures: the setting-up of the organisation, programmed measures and budgets
• Controls: periodic (e.g. quarterly or half yearly) verification of corporate objectives.

The Board of Directors should suggest changes in the ownership strategy to the shareholders if, on the basis of the given ownership strategy, no success-promising corporate strategy can be developed.

Source:

Best Practice in SME. Recommendations for the Director and Control of Small and Medium-sized Enterprises. University of St. Gallen. IFPM Center for Corporate Governance.