The Role of the Board in Strategic Management

3 min read
Sep 5, 2022 9:11:40 PM

One of the defining features of an effective Board is its alignment with the organisation's mission, vision and strategy. The Board’s and management’s roles are generally disputed when it comes to developing and implementing strategic planning, and every company can have a different process.

However, it is typically agreed that the Board’s role is to oversee the establishment’s short-term and long-term strategy, whilst the management’s role is to put the strategic plan into action and manage expectations that the Board sets.

The Board’s role in strategic management

There seems to be an ongoing dispute between the Board director and the manager on where they draw the line between managing strategy and the company. Therefore it is essential to point out that the Board is responsible for strategic planning. With that, shareholders, regulators and other stakeholders all turn to the Board to seek answers about strategy.

Steven BowmanThe key role of any board is “to make the choices that create the future for the communities they serve”. Creating the future is all about being aware of what is happening in the strategic environment, focusing on the things that are likely to have an effect on your organisation, choosing what needs to be modified, created or discontinued and repeating this process continuously,” says Steven Bowman, Founder of Conscious Governance.

Another dispute often arises in whether Boards should rely on external experts to assist in reviewing corporate strategy, and the opinions on this vary. Some argue that external strategists can help prove independence and challenge top management. It is argued that the CEO is competent enough to handle the strategist.

Another way of looking at a company’s strategy is that the Board should be primarily involved only when a major event occurs. This could include a change in CEO, a significant opportunity for investment, a structure-changing acquisition, or a drastic decline in sales.

CEOs and other senior executives should have a deep understanding of the company’s position and the direction. Fundamentally, the company heads are in their position for a reason. They should be the most informed person in the organisation and, therefore, amongst one of the most competent to offer the most logical strategy. In addition, they must be competent enough to assess any issues, opportunities and risks that could drive the corporation’s performance.

When it comes to looking at best practices, it has been proven that Board directors are generally responsible for deciding on the organisation's strategic direction, including reviewing, understanding and approving particular strategic projects and plans. “The strategic plan is the Board’s greatest accountability tool, and monitoring, changing and communicating the key elements of the strategic plan are critical for external accountability,” says Bowman.

Strategic activities for the Board

There are many ways that Boards can get involved in strategic activities, and they can do this without overstepping their function. The strategic plan needs to match the company’s vision. Therefore, these topics should be on the agenda to be reviewed and discussed during Board meetings.

Boards may also develop a platform for strategic decision-making. This would define the important aspects of the business portfolio, including the primary business model, thus allocating appropriate human and investment resources.

The Board’s role in strategic planning includes identifying opportunities, establishing objectives, obtaining resources, managing funds, and assessing risks. The Board is also responsible for overseeing the initial stages of strategic execution whilst ensuring not to overstep management’s responsibilities. It isn't uncommon for Boards to reassess and revisit strategy, including the allocation of resources and funds, as well as incorporate change should acquisitions and divestitures happen.

Situations requiring significant attention

There should be substantial research behind a Board’s strategic planning. This includes but is not limited to data collecting, analysing, collaborating with management, and reviewing the organisation's direction. However, it isn't uncommon for more exceptional cases to arise, whereby the Board is required to get more involved. For example, the Board might need to get more involved in decisions about capital structure and questions about debt and equity. In addition, takeovers, mergers, acquisitions and any critical event that may cause external growth opportunities or pose a risk for the stakeholders are events whereby the Board would need to get more involved than usual.

Choosing metrics to monitor strategy implementation

Boards have several options for metrics to aid them in monitoring different areas of business, including operations, organisational challenges, sales, marketing and finances.

Corporate strategy is challenging. So with that, the CEO’s role and the role of the Board of directors often find themselves directly linked. And because of this, both parties need to find a way to cooperate by using secure electronic platforms, such as BoardPro for example.

When Boards are in their early stages, it's easier to track management decisions. However, as the Board grows, features become more challenging to track. Board management software will help Boards and staff find balance in strategic planning. With software like BoardPro, being able to track strategic planning means that there will be a better chance to outperform its expectations. Board management software also keeps discussions and evaluations confidential so professionals can remain secure in their planning and strategy.

New call-to-action

Get Email Notifications