Thursday, February 21, 2013

Strategy and boards

I've published a number of posts on the importance and challenges of strategic planning, including a series of posts by guest blogger Marta Siberio. (Marta's post about the toughest moments in the strategic planning process, with links to her other posts, is here.) An article in the February McKinsey Quarterly, "Tapping the strategic potential of boards"  by Chinta Bhagat, Martin Hirt, and Conor Kehoe suggests an approach to engaging boards in the strategic planning process. (As usual with McKinsey materials, even though the article is written about a for-profit company, the lessons are equally applicable to not-for-profits. McKinsey Quarterly material is free once you have registered.)

What are the steps? First, the authors identify the issue: board member often have limited time to consider an agency, and other issues may take priority over strategy. Moreover, board members often have little expertise in an agency's areas of operations, so they tend to review and approve strategies without becoming fully engaged in them. The authors suggest that management and boards consider three questions together.

1. Does the board understand the industry's dynamics well enough? The authors suggest that giving board members time to understand the agency's operations and programs, "the structure and economics of the business." This is time that can be used to identify emerging issues, see how different programs fit together, and, perhaps, note where mission creep has begun to play a role.

2. Has there been enough board-management debate before a specific strategy is discussed? In the for-profit context, the authors say that board members should approach a company as an owner would, opening up a discussion to "should we be in this business?" Members of non-profits boards can profitably ask similar questions. In this discussion, the authors say:
[M]anagement’s role is to introduce key pieces of content: a detailed review of competitors, key external trends likely to affect the business, and a view of the specific capabilities the company can use to differentiate itself. The goal of the dialogue is to develop a stronger, shared understanding of the skills and resources the company can use to produce strong returns, as opposed to merely moving with the tide.
 3. Have the board and management discussed all strategic options and wrestled them to the ground?

This is where management steps up, considers the options, and thinks each through to its logical end, including the resources needed and the costs - and opportunity costs - of putting it into effect. (This, the authors caution, is not an easy discussion to have: it needs to be collaborative and productive, not blaming.) In the example the authors provide, the board and management made their decisions and then went farther, putting into place a system for examining implementation.

These are not simple questions, and in considering them you will face complex issues. One way of working through them is devoting some time to strategy questions at every board meeting, rather than relegating the strategy discussion to a separate process. Have you tried that particular approach? If you have, use the comments to let us know how it worked.


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