The ability to make connected, agile strategic decisions at board level is forcing many directors to redefine their role to meet the demands of a changing world.
The higher we ascend in any organisation, the fewer decisions we make. It’s just that those decisions become very important ones.
For boards, the two most important decisions come down to this: what is the company’s strategy and who is the best chief executive officer to implement it?
But “strategy” is not the beast it used to be. The five-year business plan was replaced by the three-year business plan and then the one-year business plan. More recently, many companies are working on a 90-day planning cycle.
It begs a big question: How can directors contribute value to the companies they govern in this period of relentless disruptive change?
Boards face two risks in the new world of strategic decision-making.
One is that directors slide down the slippery slope from the governance role into the swirling world of execution.
For example, they meet more often and work harder to make their skills, expertise and networks more available to the executive team. Taking this approach, however, jeopardises their ability to rise above the day-to-day and stay focused on overseeing the executive team.
On the other hand, there is also a danger that directors rise so far above the day-to-day that their input lacks any tangible connection to business realities. They simply lose touch with the challenges their executives face.
It’s a fascinating predicament. When I recently spoke to one-time PwC partner, Paul Hunter, about it, he admits that solving this issue is so important that it spurred him to found the Strategic Management Institute.
Hunter believes the strategic plan is dead; but strategy is not. I agree. The boards that are succeeding in today’s conditions have found the answer lies in two seemingly conflicting actions.
Two-step strategic rethink
The first of these actions is to reassert their company’s commitment to a single core purpose. This sounds simple, but in an age of innovation, it’s not. For example, for 7-Eleven, adding petrol to its stores’ offer is consistent with its primary purpose as a convenience retailer.
For Caltex (and other fuel companies), however, fuel is their core business. To compete effectively with 7-Eleven, should they put more effort into their petrol station shops, or more effort into being seen as a preferred fuel provider? Making the wrong choice can be an expensive mistake.
From this base, boards are able to make a second transition – to transform the strategic plan into what Hunter calls a “continuous strategy renewal program”. In other words, the executive is reviewing its strategy against the company’s core purpose as fast as is necessary.
The simplest way to do this is to make sure the monthly board report includes a review of corporate strategy, allowing directors to track and, if necessary, approve any changes.
However, in certain periods, strategic decision must be made weekly, daily or even hourly. In this case, directors need to be available and willing to make quick decisions.
This might be a rare situation, but it’s a key skill for a director of an agile company. This is uncomfortable territory for many directors who are used to having time to discuss ideas and to canvass all the differing views represented on the board.
The fundamental shift is from strategic certainty to strategic experimentation. It’s about learning fast, failing fast, and moving on fast.
While directors may be able to delegate some between-meeting decisions to the chair, there will be times when they need to instantly connect and canvass ideas.
Welcome to the virtual board meeting. The modern director needs to be technology savvy and connected, able to access their archive of board reports, any information that has relevance to the decision, and each other.
So, what is to become of the board’s monthly, bi-monthly or quarterly get-togethers? Nothing, for the time being. Face-to-face meetings with time to discuss and review decisions and strategy form the bedrock of high-value governance.
The ability to make connected, agile strategic decisions at board level is a new capability for directors. Directors must join the ranks of those redefining their role to meet the demands of our extraordinary age.
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