Generally, boards do two things that have a positive impact on their organizations:
- Plan strategically; and
- Hire a competent CEO who is accountable to the strategic plan.
Nearly any other things the board involves itself with will have either a neutral impact or a negative impact. Unfortunately, the neutral impact list is rather short.
Understanding strategy and staying on the strategic level is very difficult for boards as a group and for directors individually. This is because most directors come from the ranks of “professional managers” in their day jobs. They have had success managing, which has made them attractive as directors. Sadly, what makes a good manager (which is the sphere of operations) and what makes a good director (which is the sphere of governance) are often unrelated and sometimes, in conflict with each other.
Developing a Strategic Mindset
For a director to be of greatest value to their organization, he or she must develop a strategic mindset. With the world changing as rapidly as it is, boards with strategic mindsets are those who can assist the CEO and Management Team in navigating turbulent waters, help them achieve short-term success and long-term stability and growth. Boards who fail to move into a strategic mindset become a kind of “Operations Oversight Committee” and no competent CEO needs that sort of help.
Developing a strategic mindset requires a few basic steps.
- Start with the “Why”
Keep the purpose, mission and vision at the forefront of every meeting or retreat the board takes part in. These are all part of the “Why.” (Aside: This is an area well covered, and covered well by Simon Sinek. I encourage you to check out this video from Sinek. It’s great to use for team meetings too.) The board members are the “Keepers of the Purpose,” (a phrase that sounds lofty and important, because it is). Management should be able to handle operations just fine. They don’t need the board’s help with that. But since the owners elected the board, the board is only directly responsible to the owners in part. So, as such, the board must consistently keep reminding itself why the company exists and what good it is attempting to do.
Every board meeting, every board retreat, should start with a reminder of why the organization exists. This will help shape the discussions and decisions, keep the group on track and prevent the group from chasing after every new idea or market that pops up.
- Use the “Why” as a Filter
The purpose, mission and vision can become a filter. If a new opportunity arises, these can be used to determine whether it’s a great idea and fits your purpose perfectly. Or the opposite could be true, namely, it may be great for someone else, but it has nothing to do with moving you in the direction of your purpose.
This can require some great discipline and it is the reason behind number 1. Start with the “Why.”
- Recruit and Nominate Directors who are Strategic Thinkers
When looking for new directors, include in your process a way to ascertain if they are strategic thinkers. Alvin Toffler said, “The Illiterate of the 21st century with not be those who cannot read or write. It will be those who cannot learn, unlearn and relearn.” These are the strategic thinkers. Those who see that changes taking place and contemplate how we must evolve with them.
In addition, orientation for new directors should include a great deal of assistance on strategic concepts. This could be in the form of books, articles, white papers and the organization’s own philosophy on strategy. It should certainly include the company’s purpose, mission, vision, strategic plans, critical measures, industry issues, etc.
- Change Board Meetings to Strategic Board Meetings
We’ve already mentioned starting the board meeting and agenda with the strategic “Why.” Next, align your dashboard of critical measures. These should be clearly linked to the purpose and strategy. All reports, whether from directors, committees or staff, should be aligned with the strategic purpose. They should include an introductory paragraph on how they are helping achieve the strategic direction and how they fit into the strategic plan.
Here are some other suggestions for keeping the meetings strategic:
- Professional Strategic Development: Once a quarter, include a brief training on strategic insights in the environment the business is operating and evolving issues that will effect the future of the business
- Staff Presentations: Once a quarter, have a staff member make a presentation regarding the strategic issues that that staff person faces in their area. Allow the directors to ask questions regarding those strategic issues.
- Strategic Environment Section: In each agenda, allow time for directors or management to bring issues of strategic importance to the table. This could be pending issues, new developments, intuitions, market changes, economic issues, etc.
- Attempt to spend most of the meeting on these big, important, strategic issues and less time on rehashing operational issues or worse: advising the CEO on operational issues.
- Match Short-Term Results to Long-Term Goals
At each board meeting and retreat, the board should assess how short-term results relate to the “Why.” Ask these questions: Are we moving toward our purpose? Are we treading water? Are we moving away from our purpose? Have we lost track of our purpose. By consistently reminding themselves of purpose, the board can persistently work to keep management aiming toward it.
- Directors’ Responsibilities in Keeping Up with Strategic Issues
Directors should be expected to become knowledgeable about the company’s industry and trends affecting the company and its competitors. This knowledge will help the board evaluate management actions. Further, when decision points arise, the directors will hopefully be more familiar with the issues and alternatives.
- Annual Planning Retreat
By following the steps above, the board and management will already be mindful of the “Why.” But still, make sure to put it at the start of the planning process. And measure against it. Determine if you are achieving the important results.
Keeping the group focused on the purpose can keep them from chasing shiny objects, distractions of the moment. If you always know why you exist as an organization, what you’re trying to accomplish and what the strategy is to get you there, making decisions is often so much easier. Strategy is as much about saying “No, that doesn’t fit,” as it is about saying “Yes, that fits.” By keeping the “Why” at the forefront, your company can keep smooth, consistent direction and avoid erratic, unneeded course changes.
These seven steps can help your board become a strategic board. Following these can help you more effectively prioritize responsibilities, identify problems earlier, and focus on implementing strategy in light of the company’s competitive environment. Every company faces a unique set of issues internally and externally. Boards, however, must look beyond the issues of the moment to focus on strategic decisions and direction. Using a step-by-step framework can establish a process for strategy to take the forefront. The practical steps described can help board members increase their understanding of the company, provide better oversight, and help achieve strategic goals.