Ten Questions the Board should always ask about strategy proposals

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.     

1. 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?
2. 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?
3. Where in your evaluations did you take into account the reaction on the part of others to our potential actions?
4. How have you included outcomes (positive or negative) that are perhaps unlikely to occur, but game-changing if they do?
5. Besides the options you’ve shown us here, what others did you examine and eliminate? Why were they taken out?
6. 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?
7. 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?
8. 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?
9. 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?
10. How have you taken into account the desires, hopes and aspirations of our people?

The trend of comment

It's been interesting to see how commentators about the economic situation in Greece have been largely lagging the situation. First, most of them started on "Greece must (and will) sort itself out, default is not an option", with exit from the euro an unmentionable and almost unimaginable event. Then, the tone moved on to "default could theoretically happen, but it won't - and it shouldn't - because the other governments will put such pressure on the Greek government that they will be forced to do what they should", through "it might happen, but that would be a disaster (which of course we will avoid)", and now starting to come to "it might happen if we're not careful", and a few brave souls at "actually, default and exit from the euro is the best hope Greece has". Of course, as and when Greece does default and leave the euro, there will be detailed discussion of 1) why that was always inevitable and 2) why it was a still bad idea. When you see this sort of drift in comment from established "opinion leaders", it's a good reminder of how unpredictable the world can be.

Not just decision-making, Decision Power

A key factor in business success is often said to be good decision-making. But it's a mistake to focus too narrowly on the decision itself. There's a broader organisational ability that connects your "openings for action" with the results you want to deliver.  I call that capability Decision Power. Making a decision is only one step on the road to results, not even the first one. Before you can make a decision you must recognise there's a decision to be made. Then you need to creatively shape and evaluate the choices - the good ones aren't always immediately obvious. Of course, after the decision you do need to take action. And, having done so, you need to make sure you get the intended results.

In many businesses, these steps are separated from each other, often leading to delayed action and reduced impact. The way in which a decision is made has a huge impact on the speed and completeness of its implementation - yet this is often ignored in an attempt to make the "best" decision.

In today's complex and fast-changing world, business leaders need to move beyond trying to optimise their decision-making. They need to consider how much Decision Power their organisation has - and what their role is in building it.

What's the meaning of your business?

If there's an industry that's been through a more disruptive and challenging time over the last few years than the music business, then I don't know it.  And, within the music business, I don't think there's been a bigger distraction from the challenges at hand than the Terra Firma / Citibank saga. In light of that, it's encouraging to see what, as reported in The Guardian, EMI's chief executive, Roger Faxon, said recently to their employees about becoming owned by Citibank:

"The history, tradition and heritage of this company cannot, and will not, be erased by a change in shareholding. We are EMI not because of who owns us, but because of who we are - the home of the greatest artists and songwriters of the past, present and future."

A great example of knowing, and being able to communicate, the meaning, the real identity, of a business.  Which, despite what some leaders say, is almost never "growing shareholder value".  That's just something you have to do. Like breathing: you do it, but it's not what life's about.

In the midst of change, turmoil and distraction, a strong sense of what your business is really about - and how you personally contribute to that - is perhaps your biggest asset.   What's the meaning of your business?

The Hidden Limit to Change

Many organisations struggle to react fast enough to the ever-increasing rate and unpredictable nature of strategic change. Sometimes that's because it's not clear what needs to be done.  However, even when that's obvious, leaders face huge difficulty in getting change to happen quickly enough.

Let's Take It Up Again...

Not long ago, I facilitated a strategy session with the management team of a new business within a leading financial services company.  They had big hopes for the business, but faced questions about which specific goals to pursue and how to go after them. The team felt it was critical to get these questions resolved, so had set aside time to focus on them - and had brought us in to help. 

As we always do, we were working hard to get tangible outputs, to get clear actions nailed down. But, to my great frustration and embarrassment, there were still some fundamental questions unresolved at the end.  I expected we would form a sub-group to get together to carry things forward, meeting again perhaps later the next day or - at worst - later in the week.  Instead, the collective decision was: "let's take it up again...next month".  

Organisational Clockspeed

Now, I'm not criticising that team: they had deeply engrained habits for operating on a monthly "clockspeed" basis. 

And, they aren't alone.  Through our work with multiple clients, we've identified clockspeed as an often-hidden constraint on the rate of change.  We've found that each organisation has a clockspeed, a heartbeat as it were, that determines how fast it can make decisions - and therefore how fast they can move.  For many businesses, the clockspeed for the top team is monthly at best.

In most large organisations this clockspeed was set years, if not decades, ago - when the pace of change was much slower.  The things that determine this clockspeed are usually invisible: at least to employees, for whom they are like water to a fish, just part of "the way things are".  As a result, leaders often don't address these factors, and therefore their change initiatives don't have the impact they desire.