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Governance Workshop: The Strategic Board

!June 2014

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ObjectivesThe overall objective of this session is to consider the role of a governing body in the strategy process:

Basis of governance body involvement

Key decisions around involvement

Strategy content

Strategy process

Strategic thinking

What other objectives do you have?

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Always remembering…

http://thedoghousediaries.com/5460

“If you want to see God laugh, show him your plans” !

Woody Allen

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What’s working

• • • • • • •

What could improve

• • • • • • •

Suggested changes

• • • • •

Think about how strategy takes place at your organisation. What is working well, and what could we improve? What changes does this suggest?

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Proposed Agenda

Time Session Person/Format

5:30 - 5:35

5:35 - 5:45

5:45 - 6:00

6:00 - 6:20

6:20 - 6:40

6:40 - 7:00

7:00 - 7:15

7:15-7:30

Introduction

Objectives & Goals

The board and strategy

Strategy Content

Strategy Process

Strategic Thinking

Strategy Implementation

Wrap up and questions

Glenn Poole

Plenary

Gavin Nicholson

Plenary

Plenary

Plenary

Plenary

Gavin/Glenn

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Why strategy?

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Strategy: Within board powers

The standard wording in most constitutions is similar to Replaceable Rule s198A, which states:

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The business of a company is to be managed by or under the direction of the directors.

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Strategy: A core board function

At board level, there was little, if any, analysis of the future strategy of the company. Indeed, the company’s strategy was not documented and it is quite apparent to me that a member of the board would have had difficulty identifying any grand design. If the HIH board discussed strategy at all, it was in the context of an annual budget meeting. But budget sessions are generally about numbers, and there is no indication that the board seriously grasped the opportunity to analyse the direction in which the company was heading. !

Owen from HIH Royal Commission

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Strategy: A core board function

Boards are charged with: Setting the goals of the corporation

Appointing the company’s CEO

Overseeing the plans of management for the acquisition and

organisation of financial and human resources

Reviewing, at reasonable levels, the company’s progress towards

these goals

Rogers, J from AWA case

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Financial management

Risk management

Recruitment & rention (Board/MC)

Fundraising

Evaluation of Board/MC

Legal compliance

Org. monitoring

Policy development

External board/MC communications

Director/Committee member duties

Supervision & support of CEO

Chairing and leading the board/MC

Understanding org. and programs

Working relationships (MC/Board and mgt)

Delegations to mgt and cttees

Working relationships (MC/board members)

Meeting processes

-1.0 -0.3 0.4 1.1 1.8 2.5Source: Governance Development Needs of Funded Nonprofit Organisations (DOC and DSQ funded research)

Strategy & business planning

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Yet, strategy is often the most sought after development area

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Governors and Strategy

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Evolution of Governance

This is a model both through time and for individual organisations

1850 - 1920

1920 - 1980

1980 - Present

EntrepreneurialCapitalism

ManagerialCapitalism

InstitutionalCapitalism

ReputationFounder and

familyFounder/founder

and family

Resources and networking

Professional management

Corporate/ Gov’t ownership

Performance

Board of directorsFunds industry/ general public

Control

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Board Roles

PerformanceConformance

Risk versus Return

Accountability and Monitoring

Developing & implementing the right strategy

“Taking and managing risk is at the heart of ... value creation...”

Cohen & Peacock 1997

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Tricker’s model

Compliance Roles Performance Roles

External Provide Accountability

Strategy Formulation

Internal Monitoring & Supervising

Policy Development

Past and Present Future

Work with and through the CEO

Strategy

Working with and overseeing the Key Executive‣ Defines who to recruit & keep and what to assess

Risk & Compliance‣ Vast majority of corporate risk is strategic in nature‣ Compliance largely defined by strategic approach

Networking & Communication‣ Strategy will define resources required‣ Strategy defines both target and message of board

communications

Governance‣ Governance systems should reflect strategy‣ Ability to act in crisis depends on strategic insights

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Board orientation

Rubber Stamp

Review

Test

Guide & Trigger

Formulate

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The engaged board

Goal formulation/

boundary setting

Information gathering & networking

Ideas/ options generation

Detailed planning and

feasibility

Assumption testing and

choiceImplement-

ation

Monitoring & Adjustments

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What’s working

• • • • • • •

What could improve

• • • • • • •

Suggested changes

• • • • •

Think about your strategic orientation and engagement (slides 16-17).

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Your strategic options

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A  basic  “Purpose”  test• Do  we  have  capacity?  

• Do  we  have  support  from  those  we  need?  

• Does  it  advance  our  purpose?

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Three  elements  of  engagement

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Strategic Content

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Strategic hierarchy

Corporate StrategyParenting Advantage

Competitive Advantage

Functional Advantage

What is the basis for this value?

How do we create value in these areas?

What services or areas should we operate in?

Functional Strategy

H.R. Marketing Operations Finance Etc.

Business Strategy

Business Strategy

© Geoffrey Kiel 2011

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Porter’s five forces

http://commons.wikimedia.org/wiki/File:Elements_of_Industry_Structure.svg#mediaviewer/File:Elements_of_Industry_Structure.svg

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Strategic Audit• Political/Legal • Economic • Social • Technological • Environmental

Threats

Key Issues

• Markets • Customers • Competitors • Suppliers

• Purpose • Vision • Mission • Values • Goals

• Capabilities • Assets • People and management • Systems and processes • Culture

Opportunities

Strengths

Weaknesses

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Blue Ocean Strategy

http://busn3021win.wikispaces.com/3.+How+did+Nintendo+implement+Blue+Ocean+Strategy+into+the+market.

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Balanced Scorecard

http://bluesummitstrategy.com/strategy-mapping/

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Simple questions!

‣What is our purpose?

‣Who uses our outputs?

‣What do they value?

‣What are our results?

‣What is our plan?

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‣Do I understand it?

‣ Is it appropriate

‣ Is it sustainable?

‣ Is it feasible?

‣ Is there accountability?

Source: Trudeau & Associates Advisers to Boards and Management.

Source: Drucker

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What tools/content do we currently use?

• • • • • • •

Benefits of this tool Disadvantages of this tool

• • • • • • •

• • • • • • •

Ideas for change

• • • • •

Thinking about your strategy content

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Strategy Processes

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The engaged board

Goal formulation/

boundary setting

Information gathering & networking

Ideas/ options generation

Detailed planning and

feasibility

Assumption testing and

choiceImplement-

ation

Monitoring & Adjustments

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Integrated planning cycles

Implement

1. Agree roles and responsibilities

Budget and operational plans

Strategic Intent document

External environment

Strategic options

Preferred option

Review

Plan and measures

AspirationsInternal capabilities

Based on model developed by Kevin Hendry

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What is our current process

• • • • • • •

Benefits of approach Disadvantages of approach

• • • • • • •

• • • • • • •

Ideas for change

• • • • •

Think about your strategy processes

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Strategic Thinking

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Strategy in the Boardroom

Strategy workshops/sessions during the year

Agenda item on each board meeting

Focused strategy reviews at specific times during the year

Injections from external experts

Encourage interactions regularly in a process

Integrated into papers

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What is our current approach?

• • • • • • •

Benefits of approach Disadvantages of approach

• • • • • • •

• • • • • • •

Ideas for change

• • • • •

Think about your strategic thinking

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Implementation: The (often) missing factor

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Drucker on measurement*

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‣What is our purpose?

‣Who uses our outputs?

‣What do they value?

‣What are our results?

‣What is our plan?

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Control Orientation

Strategic Planning (Narrow delegations)Strategic

Control (Mixed model) Financial

Control (Broad delegations)

High

Low

Control Influence (Importance of meeting

short term budgets)

Planning Influence

(Centralised planning)

Highly centralised

Highly decentralised

HighLow

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MeasurementIntegrated into strategy, systems (e.g. budgeting and HR) and processes

Qualitative, quantitative mix

Measurement and goals drive behaviour (with or without remuneration links)

Lead indicators

Lag indicators

Review of indicators

Relevant benchmarks

Time frames (short, medium, long)

Trends and goals

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What is our current approach?

• • • • • • •

Benefits of approach Disadvantages of approach

• • • • • • •

• • • • • • •

Ideas for change

• • • • •

Think about your measurement

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And so finally…

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Thinking points

What three things can I take back to my board from this evening?

1.

2.

3.