To become more strategic, a board needs to take a range of practical steps:
- Decide what it means by ‘strategic’
‘Strategic’ is one of the most overused words in the governance and management lexicon. For some board members, being ‘more strategic’ is just about the board having a more timely and active involvement with the organisation’s strategic planning process. For others, it is more fundamental; it is about how the board spends its time and whether that is on topics that matter. The kind that US governance theorist John Carver was thinking about when he urged boards to be designers of the future rather than minders of the shop.
Probing directors’ thinking reveals many different aspects to their sense of why their board needs to be more strategic. They may think their board needs to be:
- more focused on the future, generally
- less driven by, and reactive to, short-term exigencies
- more deliberate and thorough in thinking through the consequences of decisions
- better at articulating organisational purpose and desired outcomes and their rationale
- more alert to and better at understanding what is going on in their entity’s operating environment
- better at framing (and thus less reactive to) management initiatives
- more sensitive and responsive to the needs and expectations of different categories of stakeholder; and
- more explicit about their board’s appetite for risk.
It is also apparent that many boards think they are dealing with matters of ‘strategic’ significance when they are not. Things do not become strategic just because a board member thinks they justify board time and attention. At the very least there must be a common element—a change agenda that involves a significant shift from where the organisation is now, to a better future state. Boards do well to remind themselves that the future is all that they can influence. Anything else is likely to be the equivalent of water that has already flowed under the bridge.
So, each board should be clear about its thinking. Trying to fulfill differing expectations will likely point to different roles for itself, its committees, management, and ultimately different topics for board discussion and deliberation.
2. Have a clear understanding of its job and the value it must add to organisational performance
The board must understand why it needs to be ‘more strategic’? Has your board acknowledged its ultimate accountability for organisational wellbeing? Has it explicitly agreed what it must contribute to organisational performance that no other group or individual can? Does it have a board charter, governance manual or some other job description that clearly distinguishes what the board must do as distinct from management? Does its delegation of authority (decision-making rights) reflect this?
At its most fundamental, this documentation should confirm that the board’s primary job is to work on and not in the business. The board’s stewardship responsibility means, if nothing else, that it must take a longer-term view.
Codification of the board’s job is important but so are supporting processes such as effective new board member induction. The point of entry to a board (or even before) is when roles, responsibilities and expectations should be clarified. Even adding one new member to a board can require a realignment of thinking among the entire board membership. Regular professional development initiatives focused on continuous improvement in individual and group governance competency are also desirable.
3. Have an explicit board work plan
The starting point for a board that is consistently strategic is a thorough board work planning process that goes well beyond the schedule of board and committee meetings many pass off as a work plan. Every board has a ‘must do’ list that often relates to an annual cycle (e.g., reporting, AGM, etc.) and contractual obligations (e.g., chief executive performance and remuneration review). These are important particularly from a compliance perspective but not necessarily strategic. Effective boards identify the critical matters that go to the heart of a board’s ‘direction-giving’ responsibility that must have the board’s attention over, say, the next 12-18 months. These can then be scheduled into an annual agenda which, in turn, drives the content of each successive meeting.
This kind of work planning process ensures that the board does not just muddle along from one meeting to the next. The board can focus on what it must attend to, particularly longer-term matters that might otherwise seem less urgent.
Perhaps even more importantly, it helps put a board in control of its own meetings rather than waiting to see and reacting to what management will serve up. There are matters the chief executive must put to the board whether it is interested or not. Ultimately, however, a board meeting is the board’s meeting. Too many boards fail to be strategic because they are routinely fed an unnourishing diet of operational detail.
It helps if boards routinely remind themselves that they are, as Carver put it, ‘ownership one level down, not management one level up’. Boards are expected to have a different perspective to management and must think for themselves.
4. Structure each meeting to put ‘first things first’
The pandemic-dictated practice of holding board meetings online has sped up this change but many boards still work laboriously through a traditional board meeting structure, dominated at the front end by long discussion of the minutes of the last meeting, ‘matters arising’ and reports from management and board committees. Environmental scanning, exploration of different scenarios, policymaking, risk characterisation and, of course, working through critical decisions, requires adequate time and attention. Instead, this vital work gets caught up in a kind of ‘six o’clock rush’ as the meeting runs out of time. The most important aspects of the board’s job thus get scant attention and the board loses the opportunity to give effective strategic leadership to the organisation.
An obvious solution is to start the meeting with the important ‘thinking it through’ content while people are fresh and present, physically and mentally. Push monitoring reports and other compliance matters to the back end (say the last third) of the meeting. If dealing with the earlier strategic topics means the board runs out of time, these reports can be skimmed over or simply ‘noted’. The reports (assuming they are written and pre-circulated) have already informed the earlier, more strategic, part of the meeting as far as they are relevant. Discussion, if necessary, can be postponed until the next meeting.
Turning the traditional agenda on its head also improves efficiency. Two handy tools are the ‘consent agenda’ and the ‘parking lot’. The consent agenda bundles up any pro forma decisions and rubber stamps them with a single motion. The parking lot deals with issues and ideas put forward that are not directly relevant to the discussion in hand. They can be acknowledged and ‘parked’ for possible future attention at a better time or in a more appropriate manner.
5. Hold ‘ad hoc’ board strategy sessions on-line
During the global COVID-19 pandemic, boards have learned that traditional scheduled in-person gatherings are not the only way to transact important board business. Many topics on the annual agenda readily lend themselves to 1-2 hour Zoom sessions, which can be conducted outside the board’s regular meeting cycle. Online meetings may not be perfect, but they free a board from the limitations of the traditional face-to-face meeting cycle—and save considerable meeting costs.
6. Ensure the purpose and ‘connection’ of each agenda item is clear
Regardless of the meeting venue, each agenda item should be prefaced with a clear indication of its purpose and context to help determine its relevance to the board and its strategic priorities. Done in a more disciplined and systematic manner, this would get rid of many items that typically appear on agendas.
Adding a policy reference to every board paper gives this even greater impact. What real relevance does a report or proposal have if a direct link to a board policy cannot be made?
Together, these two initiatives force both board and management to go back to first principles. Just what is the board’s job? Where can it (and must it) add value? Where is it starting its conversation from? Are the board’s deliberations directly connected to planned strategic outcomes?
7. Ensure executive reporting speaks to the board’s job
It is hard for a board to have a strategic dialogue if the meeting’s raw material is primarily operational or managerial. Executive reporting is often consistently delivered according to organisational units and activities (production, sales, HR etc.), which almost guarantees that reports to the board are about operational effort and activity rather than organisational achievement. Elsewhere we have been sceptical about the value of a strategic plan at the board level. However, even this supposedly essential framework for thinking about organisational performance is seldom used as a reference point for executive reporting.
8. Adopt and monitor future-facing performance measures
Too many boards steer their organisations as if looking in the rear vision mirror. Their key performance measures are those reported ‘after the fact’. This information is not actionable; results are reported when it is too late to influence them. These so-called ‘lag’ measures are an important component of accountability reporting but little use to boards that want to influence organisational performance. Boards can only influence what has not yet happened, so need measures that predict the likelihood of a desirable outcome and can be used to act—perhaps even reset direction—if performance is off track.
9. Deliver board papers in time for directors to give them proper consideration
Let’s face it; some board members leave their preparation to the last minute. At a pinch, a bundle of static financial reports and detailed operational reports prepared mostly for management can be skimmed over during a meeting without too many people noticing. If, on the other hand, board papers require active board engagement, an inadequately prepared board member will quickly be exposed. To conduct an intelligent strategic dialogue, a board needs the timely delivery of the sort of papers that require prior thought and reflection.
Management work is hands-on, but board work that matters is mostly about thinking things through. Your board may be fortunate enough to include directors who can provide the intellectual and principled leadership at the heart of a board’s ability to give direction. However, even then the board still needs to organise itself to give quality attention to the things that matter. None of this happens by chance.