Exclusive Article on Where does the Strategy Buck Stop?

So what is the role of a board and how involved should a board be in the development and design of a corporate’s strategy? Opinions as to where and with whom the strategy buck stops can vary from one extreme to the other; Some board members believe that strategy resides firmly within their remit and actively seek to participate in strategy retreats. Other directors believe the contrair. They will wait for the executive to develop the strategy so that the board may approve or otherwise. Most of us will assume that all other boards will find themselves at some point in between.

A leading US Business School (*) has stated that “If the board feels it needs to do strategy for the company, it is prima facie evidence that it should fire the CEO. If a board that meets just a few days a year can do a better job of setting strategy than the CEO who is in the business 24/7, then the board has the wrong CEO.” Whereas I would argue that a Board that was unable to contribute significant value to a Corporate’s Strategy Development did not have the required Strategy Skills and Industry Experience. I would also add that a significant part of a Board’s Agenda should be focused on Strategy and that Board Directors now find themselves dedicating at least 20 to 30 days per year to individual Boards. (How Board Directors manage to sit on 10 or more Boards is beyond me and the subject of another article.)

The board retains both the accountability and responsibility for the strategy’s approval and implementation oversight

It is interesting to step away from the intellectual debate of whom may be right and whom may be wrong, to note that whilst the Board may elect to delegate part of, or even the entire development of, the corporation’s strategy to the company’s senior executive, it ultimately retains both the accountability and responsibility for the strategy’s approval and implementation oversight, with the senior executive retaining responsibility and accountability for the strategy’s implementation.

Good practice would therefore see both the board and senior executive participate in an annual strategy retreat (which an experienced and suitable CEO should lead, whilst actively seeking the wisdom and guidance of the board) where the senior executive would present strategic options and alternatives for the board’s review and debate. These would incorporate the industry’s particularities and further reflect the risk appetite as defined by the board in generating a return on investment for shareholders. The elected strategy should also identify the associated risks with the chosen strategy and the required risk controls for implementation so as to provide a better opportunity to reach the strategic objectives. And yes, risk management is an integral part of a corporate’s strategy development process.

The regular reporting of an organisation’s progress on the implementation of strategy should be a standing item on a board’s agenda; good practice would see the board receive concise reports on the progress of strategy implementation by the senior executive, including the development of a visual strategy dashboard, highlighting both progress and gaps against key strategy implementation indicators.

The perception that boards may somehow alleviate themselves of the ultimate responsibility for strategy by outsourcing its development is erroneous

The regular outsourcing (to professional services firms) of a Corporate’s strategy development may be indicative of both the lack of strategic skills on a board and / or the lack of a clear internal process for the development of the corporation’s strategy, including an appropriate CEO. But one factor does not change: The perception that boards may somehow alleviate themselves of the ultimate responsibility for strategy by outsourcing its development is erroneous; The strategy buck stops with the board.

Nigel Jan Bladen. September 2021