Boards must add value during strategic planning sessions
By Chisom Obiudo *
Strategic planning is a critical component of any organisation, yet it is often overlooked or not given the attention it deserves. There has been an evolving and accelerated pace of change in the corporate world, increased regulatory requirements and technological developments. Therefore, gone are the days when boards are expected to just rubber stamp management’s strategic plan without providing valuable input.
Board members play a vital role in strategic planning and can significantly impact the organisation’s ability to create long-term sustainable value.
However, as a board member, keep in mind that you are not the executive or operational manager of the company. Your role is to bring your life experiences, expertise and diverse perspectives to enable you provide guidance and oversight on the company’s strategic direction and not to dictate to the management team what the strategy should be. You are required to constructively challenge management’s assumptions on the strategy by asking the right questions to gain reasonable assurance that management is exercising sound judgement in its strategic planning.
With that in mind, here are a few tips to help you prepare for your next strategic planning session:
1. Research on the company’s core business:
Your gift to any board is to be proactive by looking beyond your induction pack by going a step further and collecting and analysing as much information relating to your organisation’s industry and business model.
Understand how the company generates money and how it creates value for its shareholders and stakeholders. Take the time to visit your competitors, whether online or in person, to see which areas your company can improve and gain a competitive advantage in the market.
Educate yourself on the latest emerging trends such as environmental, social and governance (ESG) issues, board diversity equity and inclusion (DEI), digital disruption, cyber security and industry regulatory requirements that may impact your company’s operations.
Once you have gathered these insights, you should be prepared to return to the boardroom and fully engage with the management in the strategic discussions.
2. Understand the main elements of your strategic plan:
Firstly, as strategic directors of a company, you can’t provide input into a strategic plan if you don’t understand the company’s mission and vision which is who and what the company exists for and where its future is headed.
Secondly, understand the strategic plan; this is a short-term strategic filter of the company’s 3 to 5 board-approved objectives in the next 3 to 5 years and the risks and opportunities emanating from those objectives.
Finally, understand the operating plan, which sets out how management intends to actualise the strategic plan, and the resources (human and financial) required.
3. Ask strategic thinking-type questions:
Having done your preliminary research of the company’s external environment, you need to have a dialogue with management and constructively challenge their assumptions on their strategic direction before approving the plan.
For example, you could start by asking members of the executive team what they see as the strategic environment of the company and its potential risks in the next 2-3 years, what impact it would have on the company and what patterns of demand or expectations are they seeing amongst its customers, the community, regulators, and investors.
In addition, companies worldwide are experiencing increased pressure from investors, employees, and other stakeholders to address their ESG performance issues. Therefore, if you are on the board of an investment company, a mining, manufacturing or oil and gas company, you may want to ask management if they have considered integrating ESG issues into their strategic plan.
Addressing ESG issues can provide companies with several benefits, including improved risk management, enhanced reputation, and increased access to capital.
Just recently, the Namibian Stock Exchange included ESG reporting as part of its listing rules, so if you are on board whose company intends to one day list on the Namibian Stock Exchange, start becoming ESG competent.
By asking the above strategic questions, it will enable you to determine whether management has thought outside the box and is thinking along the same strategic trajectory set by the board which ultimately should be in the company’s best interest.
4. Engage your key stakeholders:
According to Peter Trucker, “Business enterprises … are organs of society. They do not exist for their own sake, but to fulfill a specific social purpose and to satisfy a specific need of a society, a community, or individuals.”
To this end, some of the answers to an organisation’s future direction lie with its key stakeholders. So as forward-looking boards, consider inviting 2 to 3 key stakeholders to be part of your strategic planning sessions as they may also provide some insights on what they see as the strategic and regulatory environment facing your organisation. This approach helps expand the questions asked and viewpoints to help inform the strategy.
In conclusion, always remember that your role as the board is to create the long terms sustainable future of the organisations you serve. This role requires a strategic mindset and being an active board member who asks probing questions, challenges existing ways of thinking, and offers fresh perspectives that can accelerate your company’s growth.
Be that diverse board of the future that adds value from day one. It all starts with strategic planning.
* Chisom Obiudo is an admitted legal practitioner and the Principal Governance Consultant and Trainer at Directed Governance. She is currently a member of the Institute of Directors South Africa and serves as the Deputy Chairperson of the Governance Committee at Namibia Investment Fund.
She holds an LLB degree and a Masters degree in corporate governance and specialised certificates in compliance, non-executive directorship and legislative drafting.