Governance Blind Spots Caused by Over-Reliance on Experts

¥1.5 Million Wasted and Broken Equipment Left Unattended Due to Over-Reliance on Management Company

“Zero patrols for three years,” “¥1.5 million ($10,000) on unnecessary surveys,” “Broken parcel locker left unattended.” A governance failure at a condominium management company, reported by THE GOLD ONLINE, is a cautionary tale that SME owners cannot afford to ignore.

In this condominium, leaving everything to the management company resulted in inadequate inspections and repairs, along with massive wasteful spending. The management company was the “expert,” and the association had no choice but to trust their judgment.

This scenario is strikingly similar to SMEs outsourcing their accounting and legal work entirely to tax accountants or legal advisors. The comfort of “leaving it to the experts” can actually create serious governance gaps.

Why “Leaving It to the Experts” Erodes SME Governance

SME owners often say, “I leave everything to my tax accountant” or “My legal advisor checks it, so it’s fine.” However, relying on experts doesn’t always strengthen governance.

Experts Are “Translators and Implementers,” Not “Decision-Makers”

As our editorial policy repeatedly states, experts are “translation tools” for achieving business goals, not “decision-makers” for management. A tax accountant may propose tax-efficient treatments, but whether it’s optimal for the entire business is a decision for the owner.

In the condominium case, the management company, as the “expert,” proposed unnecessary surveys, and the association approved them. Similarly, SMEs often implement a tax-saving scheme proposed by their accountant, only to have it rejected during a tax audit.

The Risk of “Total Delegation” from Information Asymmetry

Experts have overwhelming information in their specialized fields. When owners delegate decisions without fully understanding the content, thinking “if the expert says so,” the following risks arise:

• Inability to refuse proposals for unnecessary services or surveys
• Being forced into methods that don’t fit the company
• Failure to recognize problems as the owner’s responsibility, blaming the expert instead

In the condominium case, the association never suspected the management company until the anomaly of “zero patrols for three years” was discovered. This is a classic example of excessive trust in experts creating governance blind spots.

Three Ways for Owners to Maintain Proper Distance from Experts

This isn’t about eliminating experts. On the contrary, using them properly can be a powerful tool for business growth. The key is for owners themselves to design how they “use” experts.

1. Schedule Regular “Briefing Sessions”

Once a quarter, invite your tax accountant or legal advisor to explain “this quarter’s risks and countermeasures” to your management team and administrative staff. Make it a habit to always ask experts, “Why is this proposal necessary?” and “Are there other options?”

In the condominium case, a system requiring regular reports and explanations from the management company would have allowed early detection of unnecessary surveys and neglected repairs.

2. Always Request “Options A, B, and C”

When asking experts for proposals, always demand multiple options. For example, instead of asking your tax accountant to “think of tax-saving measures,” ask them to present options like “Plan A: Immediate write-off, Plan B: Deferred asset, Plan C: Do nothing,” with pros and cons for comparison.

This method allows owners to make decisions based on a “risk level from 1 to 99,” significantly reducing the risk of blindly accepting expert proposals.

3. Introduce a Third-Party Check System

Create a system where another expert or a different internal department reviews the proposals and work of your primary expert. You may think it’s costly, but considering the ¥1.5 million ($10,000) wasted in the condominium case, investing in prevention is well worth it.

Specifically, even a once-a-year review of your “current governance structure” by a different tax accountant or consultant can be effective.

The First Step to Breaking Free from Expert Dependency

The first thing owners should do is visualize “who is handling what” in their company. Use the checklist below to assess your current situation.

• Is accounting processing completely left to the tax accountant?
• Do you rely on the lawyer to check contracts without understanding them yourself?
• Have you ever “refused” a proposal from an expert in the past year?
• Is there a system for a third party to verify the expert’s work?

If you answered “yes” to even one item, you may be at risk of expert dependency.

Conclusion: Experts Are Tools, Owners Are the Main Players

The governance failure at the condominium management company vividly demonstrates the danger of leaving everything to experts. For SME owners, tax accountants and legal advisors are powerful partners, but you must not delegate “management decisions” to them.

Governance is a “higher-level management design concept” that arranges and integrates rules from an overall optimization perspective to achieve business goals. Experts support the implementation of this design; they do not do the designing for you.

Only when owners themselves become the designers of governance and properly “use” experts can true control be achieved. Starting today, why not review your relationship with experts and redesign your company’s governance?