The amount of time board directors spend on strategy has been rising for at least the last decade. And most directors I work with want to commit even more time to this type of work. But in a previous post, I argued that CEOs need something other than the annual planning process and off-site to involve their directors in shaping strategies. They need what I call dynamic engagement.
Here’s how dynamic engagement works: Whether it’s monthly, bimonthly, or quarterly, the CEO and board carve out regular time to work together on an ongoing, prioritized agenda of strategy issues and opportunities. At any point in time, this entails one or more of the following:
• Deciding which particular issues and opportunities have potentially strategy-changing implications for the company, and which need to be addressed now
• Agreeing on how to frame each issue/opportunity (a well-framed statement, based on an agreed-upon set of facts, that calls for a rethink of the strategy in some important way)
• Generating alternative responses to each particular issue/opportunity (the ideal number of alternatives is two or four — an even number to prevent defaulting to a middle-of-the-road fudge, and no more than four to avoid getting bogged down when presented with too many options)
• Choosing the criteria that will guide how alternatives are evaluated
• Agreeing on whether the alternatives have been evaluated well enough
• Selecting the alternative that’s best for the company (the question is not “What is the right thing to do?” — it’s “What is the best thing to do?”)
• Deciding on how the company’s strategy and plans should change in response to the issue/opportunity, given the selected alternatives.
Working on these things together with the CEO is what it means for the directors to be actively engaged in strategy. Consistent, open discussion of each one minimizes the chances that directors and the CEO will hold different views on a company’s direction without knowing exactly why.
Dynamic engagement also operationalizes the practical reality that strategy is not a one-and-done thing. It is either dying or evolving. The right attitude is not “We set strategy and then execute like hell” — it’s “We execute like hell and never stop evolving our strategy.”
Dynamic engagement operationalizes the practical reality that strategy is not a one-and-done thing.
Adopting the latter attitude is critical, because technological innovations, competitive disruptions, changing customer expectations, political movements, regulatory shifts, and many other forces ensure that there will be an unyielding stream of challenges and developments that demand change to some aspect of your strategy. A strategy that is immune from such things is likely pitched at such a high level that it’s not a strategy at all, but just a series of big, sweeping statements.
Thus, the true work of strategy is never done — and it certainly doesn’t follow the tidy, annual rhythm of the typical strategic planning process and board off-sites. Strategically important issues and opportunities can occur at any time, and they can’t always wait for the next planning cycle or off-site to roll around. Nor can you do full justice to the biggest issues and opportunities within an annual planning process or off-site, given their practical limitations on time and agendas that are necessarily packed with other essential duties.
Moreover, the CEO and board’s work together on strategy should be kept separate from their all-important business on governance, compliance, finance, risk management, investor relations, compensation, succession, and other such matters. Strategy making is a creative act that benefits from an unrushed agenda with external inspiration, new insight, and collaborative iteration. It does not mix well with the typical board agenda.
Directors love the dynamic engagement approach when they experience it. They much prefer doing the real work of strategy, rather than rubber-stamping visions, mission statements, and plans. When they are actively engaged, it does amazing things for the metabolic rate of a company’s decision making and execution because of the shared commitment and understanding it produces. They recognize how it forces execution-sapping differences to the surface, makes subsequent agreements that much truer, and renders resulting decisions much less ripe for unpicking down the road.
Directors also discover that dynamic engagement creates a culture of trust and respect that fosters an environment in which they and company leaders can challenge each other in ways that move the ball forward, benefiting not only the company’s strategy, but also their other duties as a board. And as directors become increasingly involved in investor relations (thanks to growing shareholder activism), they feel much more confident communicating and supporting the company’s strategy, as well as soliciting shareholder feedback on it. Finally, an added bonus: Directors find their annual off-sites are much better because they are so deep into the company’s strategy throughout the year. And they see more clearly the essential purpose of the annual planning process, which is to plan the implementation of a dynamic, living strategy, not to create it.
The best CEOs recognize that you get out of your board what you put into it.
To be sure, dynamic engagement demands a lot from a CEO. He or she needs an effective chairperson or independent director to help run the strategy meetings well, prepare the directors between meetings, and generally herd the cats. Even then, it’s not easy to come to your board with issues and opportunities for which there are no obvious answers. In the school of management, we are taught never to bring forward problems without a recommended solution. It’s only human to jump to a conclusion and latch on to it. It can be nerve-racking to invite critical thinking, disagreement, and creativity from your directors. And it can feel burdensome to set aside time on a regular basis for shaping the strategy with your board.
However, the best CEOs I know recognize that you get out of your board what you put into it. That strong leaders are willing to say “I don’t know” and ask “What do you think?” That having your directors actively shape the company’s strategy, versus just reviewing and approving it, greatly increases your ability to execute because of their ownership and appreciation of it. And that directors are more confident in the company’s strategy and the CEO because they are working with each other (and the CEO) in a fashion that is not only deliberate, disciplined, and decisive, but also open, dynamic, and creative.