Are you new to the world of corporate strategy, and the role the board plays when it comes to strategy? Don’t worry, this excellent guide will help you understand what’s involved.
A corporate strategy is the roadmap of an organisation. It’s designed to show the complete journey: an endpoint and a clearly defined route for getting there. But what is the board’s role when it comes to company strategy?
One of the essential roles of a board member is to play an active part in developing the company’s corporate strategy. Still, it’s more complicated than simply turning up and participating in the discussion.
A board member must strike a careful balance between hands-on and hands-off so that when the time comes for their input, they can give it with a fresh and independent mind.
So first off, what is a corporate strategy?
Anyone who reads through a corporate strategy document should be able to understand two key points about the company in question:
- What goals it is setting itself
- How those goals will be reached.
Not having a strategy means your business risks falling short of its maximum potential (at best). Other ramifications can include falling behind competitors, investment without significant return and, in the most extreme cases, business decisions that could push the company further towards insolvency.
The four pillars of corporate strategy
Corporate strategies are widespread and a frequent subject of intense scrutiny, so it goes without saying that differing opinions and tactics have emerged for how to approach them.
However, a generally accepted list of four “pillars” makes an excellent corporate strategy. Most organisations will live by these principles, with some variation depending on the type of business.
- Visioning. This is the top level of strategy, where management and the board will set the most simplistic overview of where the organisation wants to get to and what values it embraces.
- Objective setting. Each vision is fleshed out into a series of more concrete objectives. This is still, however, quite top-level, and those objectives will likely need further fleshing out down the line.
- Resource allocation. With visions in place and objectives set, the strategy must also assign capital and staff to them, so they have a realistic chance of becoming a reality.
- Prioritising around trade-offs. Every organisation has limited resources and approaches business activity with some risk. This final step in strategy-building involves considering all these limitations wherever they crop up and cementing the right balance so the company can move forward efficiently.
Put these four pillars in action, and you have the makings of a corporate strategy that will map out, on average, the next 2-5 years of the company’s existence.
What inputs should a board have on strategy?
It can be a little confusing, but any board member wishing to know more about corporate strategy should remember two things:
- It’s one of the most important jobs you can do as a board member
- However, work too much on it, and something is wrong.
How can a board member do one of their most important jobs while also trying to maintain a level of detachment? The answer lies in a very delicate balance between hands-on and hands-off. They seem to cancel each other out.
Developing corporate strategy
Ultimately, a board should not be taking a 24/7 approach to developing corporate strategy. They should not be thoroughly involved in every meeting and planning session because this responsibility lies primarily with the CEO and management team.
So if you’re a board member and you find yourself doing this, take a step back.
On the other hand, if you find yourself simply acting in a “rubber-stamp” capacity – contributing little more than a “yes” or “no” when the CEO and management come to you with a proposal – then take a step forward.
An independent mindset
Your core job is to stay in touch with the CEO and management during the strategy-building process.
Listen to their ideas, and offer feedback alongside the rest of the board when you feel it’s needed.
In not taking a 24/7 approach, you have at your disposal an independent mindset, unburdened by the nitty-gritty and far more able to stay connected to the top-level corporate goals that have already been agreed upon.
How to give advice on strategy
How this looks will be different for each organisation, but, in general, it’s helpful to provide feedback and suggestions to the CEO and senior management at fixed intervals:
- First, at the beginning of the process, the board can clearly communicate what needs to be achieved.
- Second, in the middle of the process, at the point where the CEO can share a list of optional strategies to reach those achievements. You use your experience and knowledge to decide which option is best.
- Third, at the end of the process, when the CEO has a ready-to-go proposal that needs final feedback and sign-off.
Along the way, there may be additional times when a board’s feedback is required to perfect corporate strategy. Maybe there’s been a sudden change in the market; perhaps the CEO resigns or is removed?
It’s also the board’s job to recognise when this additional input is required to keep the entire process on track.