If you’ve taken the time to put together a board of talented directors with relevant experience, there is no better place to harness the resources around your board table than in the area of corporate strategy.
Yet, many CEOs tend to simply present strategy to the board rather than engage their board on strategic issues. They typically work through strategy only with their executive team (and often consultants), then present it to the board as a finished product, concluding with: “Any questions?” They hope for as few as possible. Some CEOs believe that this approach is what the board expects from them. Others fear that greater board engagement on strategic issues will result in the board becoming the architect of the strategy—something that clearly lies within the purview of the CEO.
There is a better approach, however, that both capitalizes on the experience of board members and typically achieves greater alignment between the board and management [see chart]. It involves engaging the board at an earlier stage in the strategy development or review process—namely at the first stage, where an analysis of strengths, weaknesses, opportunities, and threats (SWOT) is considered.
Boards we’ve worked with that have gotten the most out of this approach have followed the same steps. First, well in advance of the board strategy or off-site meeting, interviews are conducted with all board members to gather their perceptions of key issues relative to the SWOT analysis. These interviews give the CEO the answers to two vital questions.
Do board members have a sufficient understanding of the key issues? If there are gaps, it will be important to take time at the outset to provide the board with a better understanding of these topics— either through written information or presentations— to equip the board to effectively engage in strategic debate about these issues.
Do board members see the key issues in the same way as management? For example, if management feels the corporate brand has lost its luster but the board views the brand as a key strength relative to competitors, this critical issue needs to be discussed and resolved prior to the development of strategic alternatives.
Armed with this understanding, a working session for the board is designed to address and achieve alignment on these SWOT issues. Often this takes the form of an off-site meeting, although some boards prefer to use one or more regular board meetings for this purpose. Regardless of format, the most effective approach is to avoid the “presentation after presentation” design and aim to create a true working session to generate dialogue between management and the board on SWOT issues. It can be helpful to define the roles of the board and CEO at the outset of the process— clarifying that strategy is the CEO’s decision and specifying that the goal of the working session is to provide the CEO with the benefit of the board’s perspective on a range of issues underlying strategy development.
This approach creates a very different dynamic than discussed earlier, where the CEO enters the boardroom already committed to a strategic direction and less open to new ideas and challenges from the board.
Moreover, this approach typically yields excellent insights from the board that might never have been generated otherwise. In today’s challenging business environment, getting the best from your board on corporate strategy is more important than ever.
Beverly A. Behan is managing director of the board effectiveness practice at Hay Group. She can be contacted at Beverly.Behan@haygroup.com.