“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” — Jack Welch
A defining characteristic of good corporate governance is a Board that adopts a role of ensuring that the organisation’s purpose, long-term vision, strategy and execution are aligned.
The objective of having a corporate strategy, in the first place, is for the organisation as a whole, to gain a clear view on what steps the stakeholders need to pursue to maximise its impact and achieve its purpose.
The importance of developing a corporate strategy
As the Australian Institute of Company Director (AICD) acknowledges:
“The old perception that Boards simply ‘rubber stamp’ strategic decisions made by management has been replaced by a clear expectation that Boards will be actively engaged in shaping their organisation’s strategic direction.”
This involves Board members having a level of industry knowledge, engagement with the organisation’s stakeholders, skills, competencies, and strategic thinking, that is now challenging for many directors who are now needing to step up to the mark.
Hence as the AICD further says,
“Boards must work with management to identify and agree:
- The process which will be adopted to develop and review strategy;
- The organisation’s goals – what does the organisation want to achieve? Is it trying to be the biggest, the most profitable, and/or focused on a particular area?
- The organisation’s present position in relation to its strategic goals; and
- What steps need to be taken if the organisation is to move closer to achieving its goals.”
Agree on periodic reviews
An agreement should already be in place from the time of strategic plan approval day for biannual, quarterly, and even monthly (in some cases) reviews. This ensures that as a director you are providing proper oversight on a regular and known basis.
More importantly, this enables you in your governance role to check if what is agreed, is still on track, and, if not, ensure that the necessary adjustment and/or correction can be delivered in a timely and effective manner.
This important role of the Board supports a more collaborative and mature relationship with the Managing Director/CEO and/or senior leadership team, benefiting both those involved in executing the plan and overall, the organisation achieving peak performance.
Following Board approval of the strategy, then the operationalised part of the strategy journey starts. Hence, at this outset, Boards need to ensure that there is an agreed timeline for reporting to of the progress to the Board.
Any reporting needs an agreed collection of KPIs that establishes a consistent and meaningful way of tracking progress and monitoring the successful achievement of the objectives agreed.
It is rather late if the Board waits 12 months and then conducts a mini strategy review and adjustment. Too much water will have flowed under the bridge, and possibly the wrong bridge at that!
Bold Corporate Governance questions you need to ask yourself
- Does your organisation’s Board, MD/CEO, senior leadership team, actively collaborate in the crafting and execution of the strategy?
- Does your organisation’s Board adopt a more passive role in their support of the CEO and senior leadership team, without fully engaging and understanding what the strategy is?
The Execution Challenge
The execution part of a corporate strategy is well known to be more difficult. It is also well known that the majority of organisations fail to successfully execute their plan.
In many cases this failure has nothing to do with the external operating environment. Too often the contributing factors sit within the control of the organisation itself, hence, it is the creator of its own inevitable failure.
So, what a wonderful opportunity it is for Boards to step in and step up. Boards have an opportunity to truly lead the organisation in their successfully achieving the approved corporate strategy, and thereby setting their organisation apart from its peers.
Today’s CEOs are over-stretched and confronted with increased complexity from consumer demands, regulators, new opportunities/risks, and global shifts in economic conditions. Even the very best CEOs and senior leaders cannot be expected to respond consistently well to all these challenges, especially when the environment turns chaotic like recent times.
If we accept that the Board can play a pivotal role in their organisation’s strategic success, then Boards need to consider what needs to change to meet this opportunity.