Now that we’ve completed our two-post series on board evaluations and five-post series on corporate compliance for governing boards, we shift our focus to how to engage a board in strategic planning for the first time.


Under state corporation law, all authority for:

  • Decision-making as to matters of policy, direction, strategy and governance; and
  • Oversight as to matters critical to the health of the organization for its various stakeholders

is to be exercised under the direction of the organization’s board. Accordingly, the role of the board is to provide direction, and the role of management is to execute that direction. 

A board provides direction by:

  • Granting authority; and
  • Setting limitations

e.g., the board establishes benchmarks to achieve and grants management the authority to pursue, while providing limitations on how.

Most boards provide direction by approving an annual budget that management is typically authorized to carry out. A more important way to provide direction is the authorization of a strategic plan that covers multiple years (typically three to five). Because of the Great Recession that began in 2007, authorizing a strategic plan is becoming one of most important responsibilities of the board of any organization.

We find that when board members first engage in strategic planning, their eyes may glaze over and their attentions may wander. Often, the board will become more involved in the strategic planning process if outside facilitation is used instead of management. However, even with facilitation, boards get bored hearing that they must be constructively involved and learning someone’s definition of what constitutes a strategic plan.

We find the best way to engage the board is to use a customized simulation of a factual scenario where the board is faced with a paradigm shift. The simulated factual scenario is determined in advance, typically with the CEO and board chairperson, and then is played out so that the board is making what it believes are real-time decisions.

For example, in one scenario the board is informed that one of its major competitors is being acquired by another competitor, or a strategic buyer, that has unlimited resources. The board is then advised by the organization’s legal counsel that its duty of care requires the board to oversee that there is direction as to what the organization should do in response. To make the scenario appear as real as possible,  it includes simulated press releases, phone calls from the competitor CEOs and statements by other stakeholders.

Outside facilitation is important to remind the board that state corporation law expects, and gives board members protection for, relying upon management to provide input and suggest directions for the board to consider.

The focus of the facilitation is to get the board to ask management, “What do you recommend we do?” Management needs to come prepared with strategies that address the paradigm shift.  Then the board needs to be led to ask, “Why are you recommending the business should take this strategy?”  The board, as policy makers, should ask:

  • Whose interests are benefited by this strategy?
  • What red flags are there?
  • What is being asked of us as a board?
  • What is to be expected of management?
  • What financial, legal, ethical, strategic and reputational issues are involved?

And the most important question:  “What if things don’t go as expected?”  Policy makers, such as board members, must consider all possibilities, especially those that could have a high impact (albeit remotely probable) and not just the normal.


The next post will focus on how to engage the board in succession planning, which is another of the board’s most important responsibilities.