The word strategy pops up almost as often in boardrooms as risk. Directors recognize that ensuring that the company has an effective strategy in place is among their most important responsibilities, following just after selecting the right chief executive. There are almost as many variations on the strategic planning process as there are businesses, although we've seen commonalities. Numerous books and other resources on the topic are readily available, and what follows is certainly not a treatise on the subject. Rather we highlight here key elements of what works well in a board's carrying out its oversight responsibilities for strategy development, and what doesn't.
For context, it's worth noting that a majority of directors admit to shortcomings in their board's attention to strategy. The NACD's 2009 survey found strategic planning and oversight rated as the most important issue to board governance, but less than 20 percent of respondents rated their boards as highly effective in this area.
In many boardrooms the senior management team introduces a strategic plan and discusses it with the directors, with the main goal of gaining concurrence. Often strategy consultants provide expertise, with the plan sometimes based on the well-known SWOT (strengths, weaknesses, opportunities, and threats) analysis, along with relevant information on such matters as markets, competitors, economic forces, risks, and related indicators. The strategic plan is honed during a one- or two-day ...