As we close the book on another year, corporations are faced with continued unanticipated challenges and issues. While hope remains that the economy is on the mend, the business climate has again taught everyone that the only constant is change. Last year at this time, not many anticipated the full impact of the subprime crisis and resulting credit crunch that welcomed in 2009. As such, unforeseen events implicated the execution of many corporation’s strategic plans. This past year was a painful reminder that strategic plans need to be living documents and that strategic planning has to be a task that provides structure going forward but that is flexible and can easily adapt to changes in the business environment. Now more than ever, the board of directors needs to play an active role in the strategic process as it is the body charged with providing direction and oversight to the corporation.
Depending on the size of the organization, management may bear the burden of getting the board involved in the process. Involving boards jointly with management in determining strategic direction generally results in stronger bonds between both groups.
Boards should play an integral role in all levels of the strategic process including thinking, planning and oversight of the execution of the strategic plan.
The strategic thinking process involves collecting and analyzing the current status of your industry, competitors and the position of the corporation. Boards should collaborate early with management in this process and provide an outsiders’ perspective and expertise to test management’s thoughts.
The Strategic Planning Process takes the strategic thoughts developed by the board and management and develops priorities, actions and objectives for the core components of the strategic plan. Boards need to understand the core components of the plan and the potential legal, financial, reputation and operational risks to the organization that the plan may create. Boards need to provide additional considerations, question management and, when comfortable, approve the plan.
Boards can fulfill their role of oversight to the organization by reviewing the process and progress of implementation of key initiatives and core components of the strategic plan by management as compared to established benchmarks and objectives.
Here are some steps to consider in involving boards in strategic direction that also includes determining competencies needed in the future:
- Explain to the board the need to be constructively involved in determining strategic direction. The goal is to build long-term stockholder value for the benefit of all stakeholders.
- Urge the board to do this as a whole rather than through a committee. Determining direction requires the view of every perspective available to the company.
- Clarify that the process is a joint role of both the board and management. Both should participate jointly in establishing the process as well as determining the direction.
- Agree upon the elements that are going to be considered in the process. One of the key considerations is the background, experience and expertise needed among management and the board to achieve the strategic direction.
- Direct management to propose strategies for discussion. The board’s function is to discuss and question management’s proposals, requiring management, where appropriate, to reformulate strategy consistent with guidelines instructed by the board.
- Schedule, as one of the later considerations, the background, experience and expertise needed among management and the board to achieve the strategy.
- Require the board and management to jointly map out the changes or additions necessary to management and the board to acquire the needed background, experience and expertise.
Involving boards jointly with management in determining strategic thinking, planning and direction generally results in stronger bonds between both groups and provides a structure for a strategic plan to easily adapt when unforeseen circumstances, like those of the past year, make changes necessary.