April 2011 Issue 8
BoardWorks International
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Is Your Eye On The Road Ahead?

Evaluation of past decisions, learning consciously from experience and knowing whether the organisation’s performance is on target are important aspects of a board’s work. When, however, a board spends the greater part of its meeting time dealing with reports about the past it ignores a fundamental reality. A board can only influence that which has not yet happened! In other words, a board’s primary focus should be on the future.

Barriers

An effective board realises its primary job is to ensure that its organisation has a future. Despite this ideal many boards struggle to maintain a strong commitment to strategic or future thinking as a primary and ongoing task. Typical inhibitions to a sustained strategic focus include the following:

  • Misplaced assumptions about the board’s role, i.e. it is used as a vehicle to ensure compliance alone, rather than to map a future and ensure compliance.
  • A misplaced belief that strategic thinking is for ‘strategic thinkers”, that it is an esoteric, somewhat ‘academic’ pursuit; not ‘real work’ for a board. At best it is something a board does once in a while (e.g. at an annual strategic planning retreat).
  • Directors do not pay sufficient attention to scanning and interpreting changes in the external business environment.
  • Directors are not selected on the basis of their ability to contribute to an intellectual process that is fundamentally conceptual in nature and seeks to define a ‘big picture’ future.
  • Directors lack skill in framing questions that would enable the board to engage in meaningful and productive strategic dialogue.
  • Adequate documentation of strategic direction to act as the platform for further strategic dialogue is missing.
  • Chief executives collude with the board’s retrospective orientation by reporting in detail on past operational actions rather than in terms of progress in achieving planned strategic outcomes.

Setting the scene for strategic dialogue

There is a variety of steps that can be taken to ensure that a board does have its eyes on the road ahead.

  • Instil a focus on rising above the ‘day-to-day’ to instead address ‘the big picture’. Create a culture of, and a commitment to, looking ahead rather than backward.
  • Both the Board’s Annual Agenda (i.e. work plan) and its meeting by meeting agendas should be structured so that there is dedicated time for strategic or forward thinking and that this is focused on the most important issues and opportunities.
  • Chief executive reporting should lead the board’s thinking towards the future implications of today’s results and circumstances. In other words the chief executive reports against the board’s job - the protection and enhancement of the organisation’s future.
  • Reporting to the board should assist the board to monitor organisational well being quickly and effectively. This is done by ensuring that both financial and non-financial performance measures are valid at the governance level. This facilitates ‘exception reporting’ (1) and frees up valuable and scarce board time for other essential governance responsibilities.
  • Every board meeting should be treated as a board meeting, not as a management meeting with directors in attendance.
  • The strategic thinking process should be well resourced, e.g. background papers prepared and circulated well in advance, directors active in gathering their own data and preparing themselves for the dialogue, key personnel present to provide technical interpretations and additional data etc.
  • A boardroom culture is nurtured in which strategic thinking is regarded as just ‘one of the things we do around here.’ Reinforce the view through practice that it is not a magical, esoteric or academic pursuit. Help sceptical or reluctant directors understand that their business knowledge, experience and common sense, both naïve and informed, are highly valued inputs to the process.
  • Reward inquiry by valuing the opportunity to explore an issue, ensuring always, however, that the inquiry and resultant discussion remain at a governance level.
  • When an executive makes a presentation to the board on a strategic issue or on some aspect of the strategic plan, ensure that the time allocated to discuss the issue is not dominated by the presentation. For example, a scheduled half-hour strategic discussion might be structured so that the formal presentation occupies no more than 10 minutes. The remainder of the time is devoted to questions and discussion.

A sample of strategic dialogue starters

With these initiatives in mind, the following is a set of questions that boards might find useful to draw from when engaging in strategic dialogue.

  • What is the fundamental reason for the existence of this organisation?
  • Is the reason this organisation was originally formed still valid?
  • What are our clients’ (and other key stakeholders) perceptions of our business and the worth of what we do?
  • What do we know about the likely changes in the business operating environment in the period ahead of us? (E.g. Is there any proposed legislative change in the wind that could result in change?)
  • How we are compared with other competing companies?
  • What real difference have we made to the lives of our clients in the last 18 months? How do we know? Is this the difference that we set out to make? Is this difference one that clients’ value?
  • How does the impact we are making line up with our mission?
  • What should we expect the situation to be in 3-5 years time if we continue down the current path without any major changes in direction?
  • If they came about what ‘unthinkable’, ‘highly unlikely’ events would derail our work or have a serious negative impact on it?
  • What are the ‘what if?” scenarios that we should be considering in relation to this possibility?
  • What is ‘world best practice’ in our field? How do we measure up against such benchmarks?
  • What do we know about our competitors and their products and services that could have an impact on our future thinking? What are their strengths and weaknesses? How can we capitalise on gaps in their services to our advantage?
  • Is our competitive position sustainable? Do we need to strengthen our differentiation factors, or develop new capabilities that would keep us ahead?
  • What are the indicators that assure us that the demand for our products and services is as we believe it to be?
  • What would be the impact on our business if demand dried up or reduced significantly?
  • Do we (assuming a heavy reliance on government or any other single source of income) want to continue to have the bulk of our revenue derived from one source? What risks are inherent if we maintain this situation? What opportunities can we exploit that might eliminate or mitigate these risks?
  • What opportunities exist to add value to our current products and services so that we might better serve our clients or generate increased revenues?
  • Are we at risk of having a ‘business as usual’ mentality? What will be the likely consequences if we continue in this vein?  

Keeping your eye on the road ahead is not difficult provided your board acknowledges its importance and makes the time available. Spending more time seeking answers to the type of questions set out above will assist the board to get a better focus on its real job and improve its performance. As John Carver said many years ago, a board’s job is to ‘create the future, not mind the shop.’

 

(1) ‘Exception reporting’ means a focus only on those things that are falling outside of an acceptable range of variation from what is expected (e.g. policy) or planned (e.g. budget performance).

 

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