Finding the right balance: the board’s role in strategy development
In our work evaluating over 500 boards, we have encountered a wide spectrum of beliefs regarding the board’s role in strategy development. On one end, some boards view strategy as their sole responsibility, insisting on holding strategy retreats where they set the organisation’s course. On the other end, some boards take a hands-off approach, believing their role is merely to approve or reject the strategy presented by management. Both of these extremes are unlikely to yield optimal results.
The most effective approach is typically an iterative process where the CEO leads strategy development while ensuring the board is engaged at crucial stages. If the CEO doesn’t involve the board at these critical points, the board must proactively ensure its involvement. This collaborative process can be broken down into three key steps:
Step 1: Initial engagement
The process should begin with the CEO seeking the board’s input on the strategy’s main challenges. A common disconnect occurs when a CEO’s strategy focuses on issues that the board doesn’t consider the most critical. Early dialogue about these challenges helps ensure that both the board and the CEO are aligned from the outset.
During this step, the CEO should also gather the board’s views on the broad parameters the strategy should achieve. Misalignment often arises when the executive team develops a strategy only to find that the board has different expectations. At the start, a constructive conversation about the key challenges and desired outcomes will help prevent these issues and set a strong foundation for the strategy.
Step 2: Strategic options and feedback
Once the board’s initial input is considered, the CEO should return with high-level strategic options that address the identified challenges and align with the board’s parameters. At this stage, the goal is not to seek approval but to gather feedback. The board should discuss the proposed options, identify which resonates most, address any concerns and explore how the options might be refined.
These discussions help ensure the strategic options are realistic, rigorous and well-thought-out. They also allow the board to guide the process while giving the CEO and executive team room to innovate and propose creative solutions.
Step 3: Final strategy and approval
The final step involves the CEO and executive team refining the strategy based on the board’s feedback and presenting the completed plan for approval. By this point, the board should be familiar with the strategy’s key components, ensuring smoother buy-in and approval.
Throughout this process, the CEO should maintain control of the strategy’s development, with the board providing oversight, input and valuable advice. Sometimes, the involvement of an external consultant can facilitate this process, bridging gaps between the board and the executive team and ensuring the strategy is sound.
In fact, 70% of boards agree or strongly agree that they should set the broad parameters for management to develop the strategic plan, including new investments, borrowings and risk considerations. Following the steps outlined above fosters alignment between the board, CEO and executive team, creating a more substantial commitment to executing the strategy successfully.
Ensuring strategic alignment with Board Benchmarking
If your board and executive team want to ensure they follow the proper steps in strategy development and execution, our Strategy Effectiveness Survey can provide valuable insights. This tool helps boards and executive teams navigate the strategy process effectively, ensuring alignment and a clear path to success.
