The Board’s Role in Strategic Planning

Monday, 07. October 2013

An important aspect of strategy work that has so far received relatively little attention in the research literature is the question of the role of the Board of Directors. In his recently published book All Above Board: Creating the Ideal Corporate Board, Ulf Lindgren is now taking a closer look at the issue. Lindgren has conducted interviews with 48 chairmen of the board, 22 senior board members, and over 50 CEOs of large corporations mainly in Europe and North America, coming to the sobering conclusion that “in many corporations, the Board of Directors are simply not performing to their full potential.” He argues that “the board should take an active role in strategy” and “act as a guide and leader for the company in times of change and disruption.”

Key Tasks of the Board

Lindgren identifies the following key tasks of the board:

  • Supporting management in the strategy formulation and review process
    While the majority of respondents agreed that the board should be involved in formulating and reviewing corporate strategy on an ongoing basis, in reality this is rarely the case. Lindgren points out that making sure that the strategic direction of the organization is still relevant may well be the most important task of the board. In particular, this includes defining and articulating relevant strategic goals, challenging strategic goals as being presented by the executive management as well as existing strategy paradigms, driving and rewarding new ideas and concepts, and reviewing the corporate strategy and its implementation at regular intervals, if necessary, with the help of external strategy consultants. Performing this duty properly requires continuous and close monitoring of changes in the business environment, the willingness to invest sufficient time, and a well-structured process where the board effectively collaborates with the executive management.

  • Supporting the implementation of strategic initiatives
    Most of the respondents shared the view that the prime responsibility for implementing strategy lies with the executive management. Lindgren argues, however, that “certain tasks should involve the board if its members possess the relevant skills to add value to the strategic initiatives pursued by the management.” As examples, he cites the negotiation of mergers, strategic partnerships, and key customer agreements. Board members tend to have vast experience, skills, and personal contact networks, Lindgren says, making the board a "hidden asset" that can and should be used to create value for the corporation.

  • Serving as a guide and leader in times of change and disruption
    Proactive change management is another important task of the board. The board should challenge any unwillingness to change within the corporation and at the same time lead through the impact of changes in the external environment of the corporation. It should act as a "catalyst for change and new ideas."

  • Driving innovations
    Many of the respondents expressed the widespread opinion among executives and board members that innovation is not the responsibility of the board, as the board members know too little about research and technology. Instead, their job is limited to approving and reviewing R&D budgets as proposed by the CEO. Lindgren challenges this traditional view on innovation. He believes that innovation is not only derived from systematic and structured R&D efforts, but also from finding new solutions for core process design, new innovative customer solutions, and new business models. Therefore, the board should constantly monitor the business model of the corporation and, if necessary, push the management to rethink and reinvent it. In addition, the board should create an innovation-driven performance culture, where being “just ‘good’ is not good enough."

To be able to perform all these duties, Lindgren recommends that the board members should be recruited in such a way that their skills and competencies match the needs of the corporation and complement each other. In addition, the board should act as one team with the chairman being the leader and coach. Only if these conditions are met, the board can indeed reach its full potential for creating value for the corporation.

Since the beginning of the financial crisis, public criticism of the work of the board of directors has not abated. While the boards alone cannot be blamed for the crisis, as Lindgren says, the question remains whether they should have been able to see the warning signs of the crisis earlier and to better guide their corporations through it. Therefore, it is just about time to generally rethink the role of the board. Lindgren's book will make a valuable contribution to that discussion.

All Above Board: Creating the Ideal Corporate Boardhighly recommendable!

 Lindgren Cover

Lindgren, U. (2013). All Above Board: Creating the Ideal Corporate Board. New York: Palgrave MacMillan.