How can the board of directors add more strategic value?
In an uncertain economic context, how can the board of directors add real value to the quality of strategic company decisions?
During the 2008 financial crisis, Wells Fargo beat Citigroup to the punch in acquiring Wachovia. In situations like this, when sudden changes in the environment demand a rapid response, companies whose leaders and directors have maintained a rich ongoing dialog about strategy are at a big advantage, because their board is in a good position to make risky, high-stakes decisions without delay.
Generally speaking, active board involvement in strategic decision-making has many advantages. Namely, directors can put strategy into perspective for company leaders steeped in everyday operational issues, as well as contribute their expertise and opinions developed over the course of long and varied careers, etc. That being said, the board’s strategic contribution is often considered to be insufficient. For example, half of the directors surveyed by McKinsey feel that the board should devote more time to strategic issues. And while 79 percent think the Board can create significant strategic value for the company, only 43 percent feel this is currently the case!
Indeed, the board of directors has a lot to do in a limited timeframe, making it difficult to give it a concrete role in strategic decision-making. The companies that have done this successfully generally focus their efforts on four domains:
– Build up a board with a good balance of required skills.
– Optimize board access to information.
– Organize a structured strategic thinking process.
– Manage the progression of board competency over time.
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