The role of corporate boards in strategy development

The role of corporate boards in strategy development, as distinct from strategy approval, can vary widely from organisation to organisation and over time as circumstances change.

How Strategic Is Your Board?

MIT Sloan Management Review, September 2014

The role of corporate boards in strategy development, as distinct from strategy approval, can vary widely from organisation to organisation and over time as circumstances change. Some recent articles have considered what factors influence the strategic role that boards play in particular organisations. Professors Didier Cossin and Estelle Metayer consider the issue in a recent article in the MIT Sloan Management Review titled “How Strategic is your Board”. They recommend that boards assess their optimal strategic function through the following steps:

(a) Define what your company means by strategy

     There are at least five ways of looking at strategy - as:

    (i) planning;

    (ii) a redrawing of competitive boundaries;

    (iii) a focused response to a key challenge;

    (iv) the development of core competencies;

    (v) optimising the value created for stakeholders.

(b) Determine what role the board should play in light of its strategic priorities

     Boards typically play up to three roles:

    (i) a supervisory role:

    (ii) co-creator of strategy;

    (iii) support to management.

(c) Consider how the context in which the company works should inform the board’s strategic leadership stance

     The authors typically see four context types:

    (i) simple;

    (ii) complicated;

    (iii) complex;

    (iv) chaotic.

The authors comment that most contexts demand that the board follow a particular strategy. For example, in a simple context (consisting of repeating patterns that have clear cause and effect) boards should generally take a supervisory role that focuses on execution and optimisation. Conversely, in a complex context (which is ambiguous and unpredictable) boards should support and supervise strategy and sometimes co-create it.

The authors observe that boards should be ready to shift their strategic goals and their understanding of their own role. That strategy should never be static was recently emphasised by a senior partner with Strategy& who warned against confining strategy to an annual planning process where big strategic issues and opportunities are often addressed superficially. Instead, strategy development must be “an ongoing, deliberate, and purposeful process that is governed by a rolling agenda of strategic issues and opportunities”.

An article by Tony Featherstone in the Company Director Magazine titled "Plotting the future" also considers board involvement in organisational strategy. The article observes that many company directors believe that the strategy pendulum has swung too far towards management; academic research and consultant surveys suggest that many boards want better engagement in strategy. The article notes that a debate on the board’s role in strategy is long overdue.