Boards want to spend more time on strategy. McKinsey's Global Survey in 2008 showed that 53% of Board members wanted to spend more time on long term strategy. And, over the last few years, when for many businesses there have been big questions about the right future direction, this hasn't changed. In 2011 fully 70% said they want to spend more time on strategy. What's even more worrying, about 1/3 said they had "limited or no understanding" of the risks the company faces, and only 14% said they had "complete understanding". For the company's strategy, 22% said "limited or no", only 21% said "full". Given the well known human tendency to overrate our own performance, I suspect it may be worse than that. While time allocation is part of the issue, there's a deeper problem. Most Boards are just responding to what the management team puts in front of them. That can spark a bit of Q&A, and some spirited discussion. But, it inevitably puts the NEDs on the back foot. They are challenging, rather than contributing fully of their insights, experience and intuition.
Put differently, it's really hard to really add to the debate once the slide deck is done. So Board members are often left with a choice of approving a strategy they may not even fully understand, raising a few issues to be addressed at the next Board meeting, or rejecting the proposed strategy - which often means starting a search for a new CEO.
To make a more effective impact, NEDs should push for a different approach to strategy development that allows them to contribute their experience earlier, before the models are all constructed, the charts carefully drawn and all the messy reality of decision making tidied up. Imagine having a "pre-strategy" away day to develop a shared perspective on where the business is, what challenges and opportunities it faces, and the broad directions the Board would like to see explored.
However, even if NEDs push hard for this, it make take a while for Exec members of the Board to see why it's a good idea. So, if you're on a Board and are faced with providing input to a set of strategy proposals, here's a list of questions to ask that should open up the debate in a more useful way.
- In examining the various options in front of us, how did you decide amongst them? Whose interests have you considered and how did you balance them?
- Did you evaluate the various options based on how attractive they are now, or how attractive you expect them to be in the future? If the future, how did you arrive at your view of what the future will be like?
- Where in your evaluations did you take into account the reaction on the part of others to our potential actions?
- How have you included outcomes (positive or negative) that are perhaps unlikely to occur, but game-changing if they do?
- Besides the options you’ve shown us here, what others did you examine and eliminate? Why were they taken out?
- Of the options you left in, do you think they are all strategies that reasonable people might pursue? For each, under what circumstances would they be your preferred option?
- Could you let us know – of the facts you’ve shown us and the assumptions you’ve had to make to reach your conclusions – which are the ones that you are least certain of?
- Where are you most concerned that your models may not have captured all the key dynamics or may in other ways be incomplete or potentially misleading?
- Which of your assumptions has the most impact on the conclusions you have reached? How much would these key assumptions (together or individually) have to change before you reached a different conclusion? How have you estimated the likely range of outcomes for these key assumptions and what were the results of that analysis?
- How have you taken into account the desires, hopes and aspirations of our people?