Despite their differences, boards and management might agree that a strategic plan is necessary. They occasionally disagree over how to define the board’s and management’s roles in creating and carrying out the strategic plan. Who truly determines the approach is the key query. Some people think the board decides it, while others think the board waits for management to decide it before approving it. The exact procedure varies greatly from company to firm. The key is to guarantee that the procedure is followed and that everyone is in agreement. The most secure method for boards and managers to work together on the company strategy plan and the expectations for the board of directors’ role in strategic management is a board of directors software application.
The Board’s Role in Strategic Management: A Clarification
Where each of them draws the line between managing strategy and operating the firm concerns both board directors and managers equally. Strategic planning eventually falls within the purview of the board. When company performance is poor, they have been under intense pressure to be prepared with answers about strategy for shareholders, regulators, and others.
Another issue is whether and how much boards should rely on outside specialists to help them analyze business strategy. Independent analysis from outside specialists can support top management challenges by establishing independence.
Others contend that if boards must perform all of this labor, what function does the CEO play and whether or not that individual is qualified for the position.
Another school of thinking holds that big events like a change in the CEO, a significant investment opportunity, a potential acquisition, a drop in sales, or an unwanted takeover offer should be the main triggers for boards to get involved in strategic planning. Boards may decide to conduct strategic planning retreats and include it heavily in the CEO’s performance review.
Senior executives, including CEOs, should have a strong understanding of both the current state of the business and its prospective future state. CEOs are often the best knowledgeable about how to handle difficulties associated with strategic planning because of their extensive involvement each day.
The final direction for their organizations is decided by the board of directors, as can be seen from best practices. They are also accountable for studying, evaluating, comprehending, and approving certain strategic programs and strategies. Board members must be able to evaluate and comprehend the problems, opportunities, and risks that affect performance in the present market in order to execute their duties in strategic planning.
Boards’ Strategic Activities
There are numerous methods for boards to engage in strategy-related tasks without micromanaging the CEO or going beyond their authority. The strategic strategy should be in line with the company’s vision, thus those two subjects need to be discussed at least sometimes a year. Board directors should gather and assess information on the industrial environment, the nature of the competitors, and the business models in advance of a board debate regarding strategy.
In order to assist establish the future allocation of resources and skills, boards can also create a platform for strategic decision-making that outlines the basics of the company portfolio and the dominant business model. To support the decisions that must be made about strategic planning, the board’s participation in this process comprises creating priorities, setting goals and objectives, sourcing resources, and distributing monies. The board is also in charge of keeping an eye on the strategic plan’s implementation. As a result, the board must supervise how the strategic strategy is put into action. Boards may need to review the funding allocation as the strategy develops and take the effects of acquisitions and divestitures into account.