Develop & Deploy Strategy

As a shareholder, what would you think if a company you invested in produced poor results through lack of a strategy or by adopting an obviously mistaken strategy? Who would you blame? And who should get the credit for success if that company spectacularly succeeded through a brilliant strategy?




(The article was first published in "Boardroom" by the Institute of Directors in New Zealand and is under copyright. If you use or quote from this material please attribute it to the author and publisher.)

The answer to those questions has shifted over time. Twenty years ago, the most common answer would probably be "the Chief Executive" or "the management". Of course the Board would get some blame or credit too, if only for appointing the wrong or right people to run the company. But development of business strategy was primarily a management responsibility, with the Board taking mainly a review and authorisation role. If things went wrong, then the Board’s fired the Chief Executive and hired another one.

Today we see directors, not just Chief Executives, biting the bullet when business strategy goes wrong. I believe that is entirely correct. So do participants in Institute training courses on business strategy. When asked "Who is accountable for the success or failure of the enterprise?" most groups firmly state "The Board!". They typically expect the Board to play some more active role in strategy development than just review and authorisation.

But getting business strategy right demands more than just the right ideas and plans. That splendid strategy also needs effective implementation. So if the Board is accountable for the success or failure of the enterprise, then it also needs to take responsibility in some way for strategic implementation. That is harder than it sounds...

Many under-performing companies have a stream of strategic thinking and planning that makes good sense, and a stream of operational processes and activities that make equally good sense -- but the waters in those two streams just don't mingle as they should. Studies repeatedly show that strategic initiatives designed to drive strategic thinking through to operations fail more often than they succeed.

Because strategy is usually about change, implementing strategy means implementing change. So having decided what should happen -- as part of its role in development of the strategy -- what is the Board's role in making that change happen? And what tools can directors use to fulfil that role?

Here governance effectiveness often breaks down. Implementation of the strategy is an ongoing management activity that will not occur at Board meetings, and (in most respects at least) not directly involve directors. And these days we know well the peril of not distinguishing clearly between governance and management roles. But if directors only find out too late that things are going seriously wrong, major damage has already been done. More typically, directors find out progressively that the strategy has had only limited impact. The "hockey stick" phenomenon, where performance breakthroughs are repeatedly predicted but never achieved, is all too common!

Key responsibilities of directors in the strategic implementation process include:

  • Understand clearly -- and then accept and manage-- the risks of the strategy adopted
  • Establish and apply a framework of objectives and measures for strategic performance
  • Review and confirm how strategic change processes will operate, and ensure that those processes are effectively resourced
  • Maintain an overview of strategic change management, including "soft" aspects like organisational culture and internal communication
  • Sponsor and oversee key projects, especially those with direct governance implications

Yes, we may nod. True. Of course. But how often do we hear stories like these?:

  • A company embarks on a strategy that offers attractive returns. But it fails to fully understand the accompanying risks, or devotes too little time or resource to managing those risks. That attractive story has an unhappy ending...
  • The Board has a full "dashboard" of KPIs (Key Performance Indicators) to keep it informed about current performance, but no SPIs (Strategic Performance Indicators) to provide "forward radar" on future performance.
  • The challenge of change is underestimated. Projects are under-resourced. "Change managers" who are poorly suited to those roles are appointed. Results disappoint the Board, but how things went wrong is never clear.
  • Directors informally hear worrying staff, supplier or customer comments, but remain keen to support senior management. Uncertain how to raise their concerns, they talk (or even act) "off-line". Management feels mistrusted and undermined.
  • Directors invest time and effort in governing key projects. But they grow frustrated by committees that seem to lack a handle on what is really going on and add to project overheads without adding value.

There is formidable evidence that New Zealand companies -- of all sizes -- tend to under-perform in strategic management, especially when the competitive playing field extends to Australia and beyond. It's no dearth of ideas that holds us back. In fact we seem good at generating ideas, and ambitious strategies. But with lean management teams often fully occupied with operations and limited resources to invest in strategic change, we need Boards who are enterprising and skilled in ensuring strategies are feasible and effectively implemented.

A new one-day Institute course -- "Deploy and Monitor your Business Strategy" -- will focus particularly on those directorship skills. The course has no prerequisites. It specifically targets three groups:

  • Individuals who have completed the five-day Company Directors course or the one-day course "Develop and Deploy a Business Strategy", and want to increase their skills in this specific area of directorship
  • Directors and general managers who want to focus on the linkage between strategy and operations or extend their overall strategic management skills
  • Individuals experienced in strategic management who would like to share the experiences of others (the course format will encourage participants to confidentially "workshop" specific issues for their own organisation).