According to a recent McKinsey survey of 1,600 corporate directors, only 20% said they fully understood the strategy of the company upon whose board they sat. Perhaps not surprising, as only 10% said they had a full understanding of the industry in which that company competed.
What are the techniques that will permit boards to engage strategy, rather than spending their time on compliance? This question was explored by a panel at the April 9th Breakfast Meeting of the New England Chapter, National Association of Corporate Directors.
The panel (moderated by Willow Shire, independent director at TJX) included Jeffrey Naylor (Senior Executive VP at TJX), serial entrepreneur and angel investor Jean Hammond, and McKinsey director Jack Welch; they suggested:
- Educate yourself about your industry and company; this requires a CEO who will “let you in” sufficiently to get what you need.
- Regularly schedule board time to discuss broader trends; many boards feel restricted to passing upon strategic implementation rather than being able to discuss overall strategy.
- Push compliance issues down to committees to free up time for strategic discussion.
- Discuss long term strategies at retreats where there is less pressure.
- Reduce slides in management presentations; avoid “death by power point” and replace it with discussion.
- Define “strategic” as matters likely to have at least a 10% positive or negative impact on “corporate value.”
- Identify strategic subsets so as to create focus; examples include technology, competition, social trends, demographics.
- At executive session after a meeting wherein strategy was discussed, ask: how did that meeting go?
There was general consensus that strategy is first proposed by management. Boards heavy on CEO membership must be careful not to forget. But asking thoughtful questions can drive the strategic discussion.
And finally, remember that the literature suggests that diverse boards make better decisions.