Governing Board Strategic Planning

by Bill Dann

Recently we had a leader in the banking world complete a micromanagement assessment on our website.  The question echoed one I have heard many times before, so felt the response might be valuable for sharing with our readers.

The primary area of concern with the board in question was their failure to stay focused on the “why” and “what” of strategy rather than delving into “how, when, where”, i.e. execution.  When a board begins digging around into the “how, when and where” of implementation of the strategies they have chosen, they are perilously close to micromanagement, if not guilty altogether of it. So, the question on the floor is what should be the appropriate role of the board re. strategy and why is it that boards tend to stray from that role.

micromanagement of strategyThe role of the board in strategy formulation is to assure that the strategies chosen to grow the organization are founded on sound research and data re. markets, competitors, customers, costs etc.  It is also to assure that the assumptions made about these areas are sound.  Selection and adoption of strategy is the board’s bailiwick; how best to execute that strategy is usually not.  That’s because execution involves assessing how much effort/time is required, who best to do so, whether the resources and bandwidth are there to execute, timing and pace of execution etc.  The CEO or Executive Director is the person best suited to make those determinations.

So then, why do boards tend to delve into the “how, when and where” of strategy when that is management’s role? It may be as simple as the fact that board members are experienced in strategy, like discussing it, feel like they can contribute positively to executing strategy properly etc.  In sum, they do this because it is what they like to do.  If they are simply spending time talking about it, as long as the conversation does not come at the expense fulfilling their function as a board, then it may be an annoyance but not a critical issue of micromanagement. If, on the other hand, they are questioning management’s execution plans or, worse, vetoing those plans, they have overstepped their bounds and are guilty of micromanaging.

So how does the board know that management is getting the job done, i.e., handling the “how, when and where”?  After the strategy for the organization has been determined, management should put forward for the board’s approval specific goals or targets for accomplishment for each strategy.  Those targets become a major part of the “contract” between the board and management, i.e, they provide a measurable achievement that management can report on at each board meeting.  The board should judge whether the targets are too much or not enough of a stretch, but their role is not to determine the methods to achieve the targets. Again, that is the “how, when and where”.

Additionally, and this is very important, management should inform the board as to what data, wherever feasible, they will use to demonstrate whether the strategy is working, is having the intended effect.  This will inform both parties when strategies need to be modified, abandoned, or doubled-down upon.

To avoid micromanagement of the board regarding strategy, then, the lane the board should stay in includes a) are these the right strategies?, b) are these the right targets for accomplishment in a given period of time and c) does the data tell us they are working or not.  Based on the answers to these questions, board and management can take corrective action appropriately and avoid micromanaging strategy.

Questions? Contact us to start a conversation.