The Board’s role in company strategy

7 min read
Feb 10, 2023 9:43:35 AM

How management can work with the Board in the creation of a business strategy

Wondering what the Board’s role is in creating, developing and implementing company strategy? You are in the right place!

The role of the Board in developing company strategy is heavily debated within the industry. Some professionals prefer that the Board be deeply involved in managing strategy for the organisation, whilst others may view this as overbearing. Certain businesses may wish to relegate the Board to a support position when it comes to strategy development.

The right balance between these techniques will depend on the type of business you are involved in.

What does it mean for the Board to direct its company?

By definition, the directors of a Board are responsible for governing their organisation, ensuring that it remains in compliance with local and industry regulations and on track to meet its goals. Board members should be keenly aware of company finances, operational procedures and trends within the workplace, including sustainability and productivity.

In general, shareholders elect Board members based on a variety of factors, such as their credentials and how their experience fits with their future plans for the company. They serve staggered terms; Boards may differ significantly in size from company to company depending on their organisation’s stages and present needs.

Boards then elect their company’s CEO (and other senior executives), determining how they will be compensated for their labour and establishing their roles and responsibilities within the organisation.

From this perspective, it is natural to understand the Board of directors’ input as being critical in creating company strategy. Directors are seen as key players in putting that strategy into practice.

Boards guide their organisation, steering it on course towards its goals. They make sure that there are adequate resources available to the company to achieve these goals. This all involves an awareness of strategic objectives. They also provide oversight and accountability in their role as directors, keeping management on the task at every level of the company in order to reach short- and long-term objectives.

Boards are also available for management to turn to in case of any issues concerning workplace culture or information discrepancies. They can help resolve conflicts and clarify company policy, serving as a record and repository of company information. The ultimate obbjective of the Board is to maximise company value for its shareholders by investing in the community, working to support the growth of the organisation and increasing profitability.

Clarity is key

Boards prize effective policy and efficient strategy in their operations. It can be tricky, however, to maintain this when the number of Board directors is small and the responsibilities endless. Adhering to best practices is key to making sure that companies stay on track towards their goals and in compliance.

To help with the risk of important tasks slipping through the cracks, companies and Boards should be sure to establish clear guidelines. Board members should easily understand their responsibilities to avoid blindsiding and overwhelming work levels.

Besides, if the duties of a Board are clearly presented, then it is easier to keep directors accountable for meeting these duties. The defined role serves as a yardstick against which to objectively measure performance.

Regular evaluations are an important aspect of business growth and organisational health. Companies that engage in regular self- and team assessment are better equipped to handle risk and future challenges, easily identifying weaknesses and giving themselves room for improvement (before it is too late).

So who is responsible for implementing company strategy?

As mentioned above, there is much debate on the ideal nature of the relationship between a Board and its management within the Boardroom industry, as well as how involved both parties should be when it comes to discussions of strategy.

Everyone agrees that the Board is ultimately responsible for determining the company’s direction and keeping it in line with its pre-established goals.

Likewise, no one worries over the fact that management is charged with daily company operations, making sure that the company is functioning according to the Board’s leadership.

We can see, then, how ideally, the development, implementation and monitoring of strategy would be a collaborative task between the Board and management as they work together to accomplish their company’s goals.

In this ideal world, the Board contributes overall guidance to management concerning the direction of the company, helping to establish a system of priorities for the organisation and identify key elements of strategy.

Management then is free to develop plans to achieve these goals with the insight provided by the Board. They should keep the Board informed of their progress and consult regarding any discrepancies or challenges that may arise.

Recent changes in the Boardroom

Boardroom culture – and the business world as a whole – is evolving at a never-before-seen rate. New trends such as AI, cybersecurity and remote work provide competitive edges for companies and increase challenges across industries as organisations strive to remain relevant and attractive.

Businesses need to be more adaptable than ever before – a fact brought to the forefront, particularly by the recent pandemic. They should be able to jump on new opportunities and adapt to ever-shifting environments.

Boards of directors are increasingly required to possess lengthy foresight in order to successfully direct their company. It can be tricky to know what the right move is for the company when the business environment is in a state of constant evolution.

Boards need to think on their feet to make apt decisions that will have a huge impact on the future of their companies. They should strive to anticipate trends and risks, fortifying the business.

There also needs to be an effective balance between the control exercised by the Board and the independence necessary for management to operate successfully.

In all practices, Boards should keep in mind geographic and industry regulations as well as shareholder expectations.

Creating strategy

Many stakeholders are involved in the decision-making when it comes to business strategy. It can be difficult to find the right balance of leaders, yet it is vital to avoid having “too many cooks in the kitchen.”

Often, leaders wonder about the role of the CEO in the decision-making process of the company, as well as the role of the Board. Figuring out how these two aspects of the business direction can work together is key to effective company strategy and implementation.

We can define a business strategy as a plan written up by a company outlining a goal or an objective they hope to achieve. In general, these will have to do with the growth of the organisation, increasing profits or pleasing shareholders.

A business strategy is a roadmap that a company can follow to achieve its goals. Helpful business strategies take into account the current market trends and conditions in the company’s field, the areas within which the company excels and its current risks, where it could improve, its reputation and the needs of its customer base, employees and shareholders.

Company strategy and the CEO

CEOs are a key part of the strategy development process. They help to establish their company’s direction and allocate resources necessary to achieve its goals.

They should have a clear understanding of their company’s strengths and weaknesses in order to effectively implement strategy, making sure that any strategy created is relevant to current industry trends.

CEOs should embody the company’s vision and work to achieve its goals, putting plans into action and achieving fruition. They should act as a symbolic guide for the other employees, motivating them to achieve the company’s goals and fulfil the proposed strategy.

If a CEO is able to balance all of these aspects of leadership, then they have hit upon the recipe for strategic success.

Company strategy and the Board of directors

The Board is another key player in strategy development. They work to define and implement the strategy in tandem with management.

Boards determine their companies’ strategic direction, keeping in mind their organisational values. They also develop business plans, keeping them ambitious yet achievable.

Implementing strategy at all levels of the organisation and then monitoring to what extent said strategy is integrated into business operations also falls to the Board of directors. If problems arise, the Board is equipped with the authority necessary to make changes, bringing the company back on track.

The guidance provided by Boards in their capacity as a directing body helps keep their companies relevant, anticipating risks and navigating around challenges within the industry.

It is all about balance

At any organisation, no matter the industry or size, the overall direction and daily decision-making of leadership falls to the CEO. Boards balance out the CEO's input by contributing strategic guidance and directive oversight.

How much crossover should there be between these roles? And, should the two parties be subject to peer review and assessment between each other?

CEOs possess crucial insight into the daily operations of their companies on a functional level. Many believe because of this that, they should have a greater say in the Board’s decisions. Who else is better situated to keep an eye on – and cater to – company needs?

From the other side of things, we could understand the Board as having greater long-ranging insight into the company’s future and broad direction, thus justifying an increase of their power and say over the CEO.

The right balance will be different for every company, but it is important to keep these different factors and perspectives in mind when deciding what suits your organisation best and to set out clear responsibilities for all parties.

Who has the last say when it comes to the strategy of your organisation?

The answer will depend on the organisation in question.

If the organisation is structured in a traditional manner, the CEO will be tasked with the responsibility of developing and implementing the organisational strategy.

If the organisation has elected to take a more modern, flexible approach, then it may be appropriate for the Board to play a part in setting strategy. This depends on the company's hierarchical structure and established roles.

Either way, the CEO and directors must ultimately work together when it comes to effective company strategy. If not, it would be easy for the company to block its own growth and get bogged down in internal squabbling.

An organisation’s strategy should always parallel its ultimate goals. If a Board determines that its CEO is not acting effectively in implementing appropriate strategy, they may elect to establish a new CEO more in line with company efforts, expectations and long-term vision.




New call-to-action

Get Email Notifications