Our experience, through board evaluations we conduct, repeatedly tells us that more than 80 per cent of directors feel they don’t spend enough time on strategy or are as effective as they should be when it comes to setting strategic direction.
That’s a startling – and scary – finding, especially as strategy and strategic direction is one of the primary functions of a board.
What’s perhaps even more startling and scary is that boards, generally speaking, tend to continue to walk down the same ‘strategy path’ even when history tells them it’s not the cure-all, the magic bullet it’s made out to be.
It reminds me of the old Albert Einstein observation that the definition of insanity must surely be doing the same thing over and over again and expecting a different outcome.
So what are these tried and tested paths to strategic nirvana that don’t end up cutting the mustard? And more importantly, what should we replace them with?
The first is the well-intentioned but misguided belief that strategy can be attended to at a full day or weekend away once a year.
The logic of this is flawed, as PhD student at Melbourne University, Shey Newitt, found and expanded on in a thesis entitled ‘Compliant but contributing? Why Australian Boards are being underutilised’.
She discovered that while 76 per cent of companies conducted dedicated strategy days, these tended to be static rather than dynamic events – and all because for the most part, much of the thinking had already been done by management, with little or no board involvement, and was presented to the board on the strategy days.
She noted, too, that in many cases, by the time the strategic proposal reached the board, it had already being implemented!
The second sees the board at the monthly board meetings leaving the most important discussion items – usually the strategic ones – to the end of the meeting. It’s highly unlikely, probably impossible, to put the required energy into strategy after interminable agenda items dealing with compliance responsibilities like receiving management reports, reviewing financials and worrying about regulatory matters.
In many ways, the monthly board meeting is usually about the board spending a whole heap of time looking at the status quo.
So what’s the solution?
Why not reverse the agenda for board meetings and start with strategy?
More contentiously, in my experience, the best strategic results are achieved when the board steps out from its traditional role and operates behind the scenes with management. For example, if management is working on a certain approach, the two or three best-placed directors (in terms of their skill sets in relation to what management is working on) should join the think tank.
After all, they’re smart in this sector, that’s why they’re on the board – and they should be involved.
This is a far more dynamic scenario…and one I’m sure Mr Einstein would have been happy with!
Until next time,