Strategy and the Board

Some governance experts argue that when it comes to a company’s strategy, the buck stops with the CEO. They say the board’s most important purpose is to choose the CEO, evaluate his or her performance, and make a change if and when necessary. Their view is that inserting the board into the company’s strategy just muddies the CEO’s accountability.

But most CEOs see value in having their boards actively involved in strategy, and most directors want to spend more time on their companies’ strategies, too. This makes perfect sense. Often by design, boards are usually stacked with people who have experience, contacts, knowledge, and perspective that can be tremendously helpful to guiding a company’s strategy.

Moreover, a board can, should, and usually does have a strong role in implementing a company’s strategy by, for example, reviewing and approving its implementation plans, signing off on large capital expenditures it calls for, and making connections through their networks to support it.

Take the typical planning process. It ends each year with a formal request of the board to approve next year’s budget and bless the company’s longer-term plan. The board is pummeled with detailed forecasts of the company’s financials. Left implicit are the choices that differentiate where and how a company competes: what business the company is in, how it adds value to its businesses, who its target customers are, its value propositions, and its winning capabilities. These choices comprise the company’s strategy and give life to its strategic plan. It may be a planning process, but it’s hardly strategic — and it leaves boards hard-pressed to contribute much to their companies’ strategies.

Perhaps realizing that the usual planning process is not enough for effectively engaging directors in strategy, most companies have adopted the practice of having board “off-sites.” These are typically an all-day (or even two-day) event that’s meant to engage directors once a year in deep discussion about the company’s strategy. They tend to occur between annual planning cycles, well after the previous one ended and just before the next one kicks off. There is usually a roll call of presentations from each of the company’s businesses, geographies, or functions. There’s a discussion of goals, market developments, competition, and performance. Often there’s some dialog around possible market expansion (“adjacencies”) and M&A. And, sometimes, there are interesting outside speakers, entertaining videos, and other bells and whistles to spice things up a bit.