“Strategic discipline galvanizes a company to capture more value for its shareholders by creating more value for its customers, better than its competitors can. And that's why strategy is a priority matter for boards.” - A Cecile Watson

Introduction:

In the ever-changing landscape of business, the boardroom plays a pivotal role in steering organizations towards success. The board's oversight responsibility goes beyond being passive and limiting their work to reviewing past performance. It requires that they become forward thinking, which includes being strategy-centric and actively participating in the formulation and execution of a robust strategy.

However, one persistent issue overlooked by many boards is the strategy execution gap—a divide between the formulated strategy and its effective implementation. In this post, we will explore the imperative of strategy-centric boards and delve into strategies for bridging the execution gap to elevate board performance.

The Need for Strategy-Centric Boards:

Historically, boards were predominantly focused on governance and compliance. While these roles remain essential, the contemporary business environment demands a shift towards a more strategy-centric approach. Strategy is the essence of an organization's competitive advantage and long-term sustainability. By becoming more strategy-centric, boards can ensure alignment between organizational goals, capital allocation, and performance evaluation.

As directors, applying our strategic acumen and oversight has the power to significantly impact the organization's trajectory. When we are deliberate in framing our discussions to be strategic, it fosters proactive decision-making, promotes innovation, and creates a culture of continuous improvement. When directors embrace a strategy-centric mindset, it therefore empowers organizations to effectively navigate disruptions, capitalize on opportunities, and drive value creation.

Closing the Strategy Execution Gap:

Recognizing the importance of strategy is just the beginning. Research indicates that many organizations struggle to translate their strategic vision into actionable initiatives, leading to unrealized potential and suboptimal outcomes. Closing the strategy execution gap then becomes a worthwhile strategic pursuit. Norton and Robert Kaplan noted in their book The Balanced Scorecard that 90% of organizations failed in executing strategy. It is an uncontested fact that the amount of time senior leaders spend on strategy is woefully inadequate. Just stop and reflect on how your board manages strategy. Can you even articulate what the company's strategy is? Do you understand its capabilities that it is seeking to leverage to outplay its competitors?

To bridge the strategy-execution gap, boards have a key role in actively participating in steering strategy to ensure there's clarity in strategic priorities that are well founded. Then they must step aside and let management formulate the strategy. After that they must be at the table to approve a strategy that is effectively reasoned and defended by management. That process must include decisions on how the board will work to ensure that the strategy execution gap is closed and it should consider the reporting, review cycle and continuous horizon scanning, inter-alia.

With that said, here are 4 key considerations that directors should check for when they are approving strategy! 👊🏾

1. Aligning Strategy and Execution:

Boards must work collaboratively with management to align the formulated strategy with the organization's operational capabilities. By fostering open dialogue and understanding the organization's strengths and weaknesses, directors can ensure that the strategy is realistic, achievable, and appropriately aligned with the organization's mission and vision.

2. Setting Clear and Measurable Objectives:

It is too often the case that sufficient care is not taken by boards to ensure that the performance management system is supportive of effective strategy execution. Lots of time is taken with the strategy and little to no oversight thinking goes into understanding how accountability for results can be effectively fostered. Yet that's a key oversight responsibility of the board.

Ambiguous or overly complex strategic objectives can hinder execution. The board must champion clear and measurable objectives that empower management and employees to understand their roles in strategy execution. These objectives should be supported by appropriate key performance indicators (KPIs) that enable progress monitoring and foster accountability. And the board must know and understand how all these parts hang together.

A strategy that is not adequately supported by resources to enable its execution is nothing more than a wish or a dream.

3. Resource Allocation and Risk Assessment:

Effective strategy execution requires appropriate resource allocation and risk assessment. Boards should actively review and approve the allocation of resources to strategic initiatives. A strategy that is not adequately supported by resources to enable its execution is nothing more than a wish or a dream.

Understanding the risks associated with strategic choices allows boards to make informed decisions that support sustainable growth. Directors will therefore also want to ensure that adequate risk mitigation measures are in place. It is not sufficient for management to just prepare a risk matrix as part of documenting the strategy. It is incumbent on directors to ensure that they sign off on the strategies that management has formulated to address (manage, tolerate or mitigate) the foreseen risks.

Considerations on the risk oversight responsibility of boards will be covered in our next post.

4. Communication and Accountability:

Clear and consistent communication is essential to ensure that the entire organization understands the strategic direction. The board plays a crucial role in setting the tone from the top on what's to be expected in disseminating strategic information and fostering a culture of transparency and accountability. Regular updates on strategy implementation progress keep everyone aligned and motivated to achieve strategic goals.

ACT IT OUT : 7 Key Focus Areas To Elevate Director Oversight on Strategy

So what can one lowly director do to be a catalyst of change in the boardroom and elevate board performance in the strategy role? Perhaps you can take the following actionable steps:

1. Embrace Continuous Learning:

Make time to inform yourself on industry trends, emerging technologies, and best practices in strategy formulation and execution before you participate in your next board retreat. Keep current on the latest developments in strategy execution by engaging in workshops, seminars, and webinars to enhance your strategic acumen.

2. Develop a Strategic Mindset:

Shift your focus from mere governance to becoming actively involved in strategic discussions. Ask questions, challenge assumptions, and contribute insights that foster innovative and strategic decision-making.

3. Engage in Scenario Planning:

Advocate for management to involve the board in scenario planning exercises to anticipate potential challenges and opportunities. This proactive approach enables the board to adapt quickly to changing circumstances and make informed strategic choices.

4. Entertain Diverse Perspectives:

Be open to the diverse perspectives on the board and actively listen to enhance strategic discussions. Engage other members with varied expertise, experiences, and backgrounds to hear their perspectives on matters with which you have little to no experience.

5. Foster a Culture of Accountability:

Be a strong advocate of promoting a culture of accountability throughout the organization, from the boardroom to the frontline. Encourage the management team to cascade strategic objectives and foster accountability at all levels and to provide evidence of how they're doing that.

6. Monitor Execution Progress:

Regularly ask the questions about progress on strategic initiatives during board meetings. Seek to stay informed about potential roadblocks or delays and provide support to ensure the smooth execution of the strategy. When management expects you to be interested, they're more likely to come armed with the answers.

7. Seek Stakeholder Input:

Engage with stakeholders to gather valuable insights into the organization's strategic direction. By understanding their needs and expectations, the board can ensure that the strategy aligns with stakeholder interests.

8 Key Questions Directors can pose On Strategy

As directors, you can sow into creating a more strategy-centric culture in the boardroom by posing eight critical questions that foster strategic thinking:

1. What are our core competencies, and how do they align with the chosen strategy?

2. Are there any risks that could impede the successful execution of the strategy?

3. How do we plan to measure the success of our strategic initiatives?

4. Are the strategic objectives aligned with our organization's purpose and values?

5. How can we ensure that our strategy remains adaptable in the face of uncertainties?

6. What investments or divestments are needed to support the strategy?

7. Do we have the right talent and leadership to execute the strategy successfully?

8. How can we foster a culture of innovation and continuous improvement to support our strategic goals?

Conclusion:

Embracing a strategy-centric approach is a transformative step for boards, enabling them to be architects of the organization's future. By actively participating in strategy formulation and bridging the execution gap, boards become catalysts of change that drive value creation, sustainable growth, and long-term success.

The role of the director in strategy oversight is just one of the 3 key focus areas in the boardroom. The other two, Risk & Compliance and Financial, will be topics of upcoming posts.

You too can take actionable steps and pose critical questions to unleash the full potential of strategy in the boardroom, and watch your organization thrive in an increasingly competitive landscape.

Stay tuned for more enlightening discussions, gripping stories, and actionable insights. And if you haven't already, be sure to subscribe so you never miss a post. Together we're set to build better boards and build boards better by reshaping the landscape of boardroom leadership, one director at a time.

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