Playing To Win
Strategy & Boards of Directors
It’s About the When & the What
Frustrated executives and board members, from little non-profits all the way to Dow Jones 30 behemoths, routinely vent to me about the unsatisfying role of the board in strategy. So, I have decided to write my 48th Playing to Win/Practitioner Insights (PTW/PI) on Strategy & Boards of Directors: It’s About the When & the What. (Links for the rest of the PTW/PI series can be found here.)
Nature of the Frustration
On most modern board calendars, there is a strategy day. I know this because I have been to innumerable such days as a board member, facilitator, or advisor. I would argue that if the board members and the executives who attend were to answer honestly, they would find it hard to give these strategy days a positive review. There are positive exceptions to the rule to be sure, but most are somewhere in the B- to D+ range.
The main critiques are strikingly consistent. From executive management, it is that boards engage more in nitpicking rather than in adding real value. From board members, it is that executive management comes to the day with a fixed point of view and doesn’t really want the discussion and dialogue that they claim to desire.
Set up for Disappointment
In many respects, the board’s role in strategy is set up for disappointment, making success the exception not the rule. There are two overarching problems.
First, there is typically unhelpful confusion over who is in charge of strategy? Is it the CEO/executive management? Well sort of because the CEO is the chief executive officer. Getting strategy right is one of the most if not the most important executive responsibility of the CEO. But isn’t the board the boss? Isn’t getting strategy right one of the most if not the most important task for the board to ensure on behalf of shareholders? So, shouldn’t the board be in charge?
Second, the stakes for strategy days are too high. Regardless of how much discussion these days are supposed to entail, they aren’t set up for real discussion even though all strategy day agendas officially include time for discussion. Management typically spends a staggering amount of time and effort getting ready for its strategy day. Because meeting with the board on strategy is so important, management wants to make its preparatory work as perfect as possible to look and feel great in front of its all-powerful board. What would signal to management that it is indeed as perfect as possible? It would be for the board to pat management on the back for a perfect job. When the board instead asks probing questions or suggests alternative ways to look at the situation, it is a disappointment to management. It feels like nitpicking. It is very hard for management to hide its disappointment and take on the thoughts, advice, and pushback of the board. As a result, the board feels that management doesn’t really want a discussion.
Both end up disappointed because both have been set up for its likelihood. And the reaction tends not to be helpful. At the next strategy day, management tries to be more perfect still — which makes it even less enthused about feedback — and the board tries to insist on more dialogue/discussion — which makes management feel still more nitpicked.
A Better When and What
The solution lies in having a better when and more nuanced what.
The key to a better when is to ban the strategy day and instead have multiple touch points with the board on strategy. You can’t in a single day get board and management together on strategy in a productive way. Holding a single day after management has done all its thinking just sets board and management up for the above dynamic. Alternatively holding the single day up front just produces brainstorming/visioning sessions that tend to leave board members frustrated. It would be tough enough to get one group to coalesce productively on strategy during a single day offsite. But two groups? The probability is tiny.
Three times is a better idea that sets board and management up for success.
The First When & What
The first when should be at the inception of the strategy process and the what should be board input on the problem to be solved. As I have argued earlier in the PTW/PI series, strategy is a problem-solving exercise. Strategy is most frustrating and least useful when it is done because it is that time of year on the annual cycle. Strategy should make choices designed to cause the key problems of the organization go away.
On this front, I believe that the great American pragmatist philosopher, John Dewey, was right: a problem well put is half solved. Framing the problem is an important and high-leverage time for the board’s input. The board has a big stake in making sure that management heads off to work on the most important problems to be solved. Having that up-front dialogue creates positive alignment. It enables management to work on a strategy agenda that the board cares about. This avoids a big problem that I see at strategy days. Not infrequently the board judges management to have done high-quality work but sadly not on the issues that the board feels are most important. That just serves to discourage management and lower the confidence of the board.
This problem can be avoided entirely by having an upfront conversation between management and the board on the key strategy problems they wish to solve. Management should come to the meeting with the problems it thinks are most critical but be very open to getting input from the board that hones and refines the problems and their framing. It is easier for management to be open to ideas at this point because it hasn’t invested a huge amount of work in the answer.
The Second When & What
The second when should be in the middle of the process and the what should focus on exposing the board to the strategy possibilities — the alternative approaches with which management has come up to address the problem(s) laid out in the first session. At this stage, I favor carrying out three steps of the Strategic Choice Structuring Process (pictured above) with the board: 1) laying out the strategy possibilities; 2) providing the logic of what would have to be true (WWHTBT) for each possibility; and 3) identifying the barriers to choice (the WWHTBT that management is least confident are true for each possibility).
This serves to lay out the interim logic of management and enables management to receive valuable feedback from the board before doing all sorts of analytical work, research, and study — and getting wedded to one particular answer. Management should ask the board whether it feels that the possibilities address the agreed upon problem(s) and find out now, not when it is too late, whether the board is allergic to any of the possibilities, and/or if board members have additional possibilities to add to management’s list. In addition, management can edit and enhance the WWHTBT based on board feedback and align on the barriers to choice that must be tested for management and the board to feel confident in choosing one of the possibilities.
This feedback enables management to work on possibilities about which the board is interested and enthused, and to design tests of those possibilities that will be compelling to the board when the results come back.
The Third When & What
The third when comes at the end of the process when management comes forward with its recommended strategy choice and the what is board approval. But unlike at a one-time strategy day, the board is ready for it. It knows that management has been working on the problem(s) board and management have agreed is (are) the most important. And that management has been studying strategy possibilities that board and management think are most promising. And that management has been doing tests on the aspects that board and management agree are most uncertain.
All the board needs at this point is to see how the results of the barrier tests and management’s recommendation and plan. The board is ready to agree with management because it has been intimately involved in the thinking process along the way. At this point, its feedback will be on nuances that management will be inclined to accept — because they have been thinking about the whole thing together.
Don’t fight about getting to an answer of the first question: who’s in charge of strategy? This approach obviates the need for an answer because the board and executive management work together in a productive way that both makes the answer irrelevant and hard to determine. One could make an argument that in the above process executive management was ‘in charge’ and an equally strong argument that the board was ‘in charge.’ But who cares? It doesn’t matter when the output is a great strategy in which board and management have confidence.
Eliminate your board strategy day. It is designed to make success a very low probability. Expand from one to three the key interactions between board and management on strategy. Frame together the problem to be solved. Seek board advice and input on the strategic logic of your strategy possibilities in the middle of the process. And expect a positive reaction from a constructively involved board at the end!