What is your board’s role in company strategy?
The board of directors exists to safeguard the company’s and stakeholders’ interests and ensure value creation in the short as well as long term. As part of that role, it is responsible for the company’s strategy and for following up on its execution.
So HOW should the board be involved? How should it interact on this topic with the executive management team, who are also deeply engaged with strategy creation and implementation?
There is no one-size-fits-all solution. Examples exist of boards who have been the primary creators of the company strategy, as well as those who more or less rubber-stamp what the executive management is suggesting. Many board members we speak to are not completely sure of how they should be involved, so we have written these suggestions as a starting point.
A good way to handle the topic is for the board to first discuss and agree how they would like to be involved. Given the company’s history, the culture of past interaction with the executive team, and how the company is performing with the existing purpose, strategy and goals, the board may agree it should be involved to a greater or lesser degree.
It is often a useful process to divide the strategy sessions into at least two sessions per year.
The purpose of the first session, together with key members of the executive team, can be to look outward, evaluating what is happening in the world that might affect your business. You should be looking at trends in your market, your industry, competitors, and customers, as a context or backdrop for assessing what the company should do. Often this session occurs early in the financial year, long before the overall strategy is discussed or and action plans set for the coming year.
The second session is often held (again, together with the executive team) just past the midpoint of the year (after the summer for companies which close financials at end December). At this session, the directors and executive team might choose to have a working session to agree on the implications of the external trends and findings from the first session – is there a need for any change in strategy, of HOW the company plans to deliver on its mission and meet the needs of its customers? (We assume the long-term vision and mission of the company are stable, and don’t need to be discussed annually unless there is serious market disruption). Does the company’s existing strategy adequately address the long-term opportunities and challenges, and does the company possess the required financial and managerial resources and competencies to execute the strategy? Boards also should be asking, and reporting on, how any changes to their strategy may impact each stakeholder group.
It is common practice for boards to be involved to some extent in these strategy discussions, but to really be able to ensure value creation in the company, the board must be deeply involved in this matter, and should make time for at least these two meetings and discussions per year. Moreover, it is crucial that every board meeting has key strategic questions on the agenda. If a board member experiences that the company strategy lacks clarity, strength, or alignment, it is the board member’s responsibility to articulate that opinion and bring it into the board room.
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