The board agenda has come a long way. Gone for the most part are the long lists of matters to be discussed. At least matters are now usually organized into those requiring approvals and those providing updates and information.
However, there is still a great deal of concern about what should be on the agenda.
Well, given the primary function of a board is oversight of the strategic plan, we think a board agenda should support that responsibility. Here's how we recommend doing that.
Relating the board agenda to the strategic plan
We are saying that the board agenda should be closely related to the strategic plan. Yet, in many cases, it is not. This is because it is difficult to find any definition of a strategic plan that enables preparation of a board agenda.
But consider our definition: The strategic plan is a completed review of the 8 strategies common to all for-profits and nonprofits.
In other words, the completed strategic plan has considered the impacts that changing external factors and major stakeholder expectations are likely to have on the performance of current strategies. And the review has reached informed decisions on whether existing strategy needs to be changed. Those decisions may take the duration of the strategic plan to implement.
Consider also that we believe strategy is properly defined as a choice of action. Our research finds there are 8 common strategies or choices of action at the core of every organization, be it for-profit or nonprofit.
6 were identified by Henri Fayol in his book, General & Industrial Management, arguably the very first book published on the newly emerging subject of strategic management. The remaining 2 strategies were identified by Peter Drucker in The Practice of Management, 1954.
These 8 choices are the foundation of the strategic plan of any organization and the basis for all organization design. These are the strategies that boards are expected to understand and monitor.
In other words, our definition of strategy and of the strategic plan enables a board agenda to built around the 8 strategies.
Priorities: What is strategic and what is operational?
But what is strategic and what is operational? This is the perennial question asked by board members and management. We think the answer becomes apparent when the 8 strategies are seen as a system.
It has been known for some time that strategy organizes around a lead or dominant strategy. One of Dr. Henry Mintzberg's earliest research findings was on strategic direction and how it doesn't change over long periods of time. Couple that thought with Drs. Tregoe and Zimmerman’s concept of 9 Driving Forces and with Drs. Hamel and Prahalad’s notion of core competencies, and you have a broad picture of the strategy system.
Unfortunately, all of these fine academics were locked into the paradigm that “strategy” must be defined as a value proposition or way to compete. So at best, their system would have a strategy as the lead supported by something vague called core competencies. Hard to give those notions oversight at a board meeting.
If you accept older definitions of strategy as a choice of action, such as envisioned by Fayol, it is possible to replace vague terms such as core competencies with something more meaningful.
We think there are 3 types of strategy common to all organizations.
One of the eight strategies is the dominant and strategy and leads the other seven. We call the lead strategy the Alpha. We think it sets the dominant culture of the organization.
Influencers are the three strategies that most guide and constrain the implementation of the Alpha and the third category of strategies, the Enablers, being the remaining four strategies.
While all of the 8 are clearly “strategic”, considering it can take years to change strategy within any one of the 8 or to move any of the strategies within the system, clearly our model depicts a priority of strategies.
Indeed, in our experience, the Alpha and Influencers are the ones most commonly treated, albeit intutitively, as strategic while the Enablers are thought of a “operational”. This thinking misses the point that the system can be likened to an 8 cylinder engine. It any of the strategies misfires, performance of the system is seriously impaired.
Boards need to understand their organization’s strategy system and provide oversight to all 8.
Oversight starts with understanding the strategy system
Oversight has to start with understanding how the 8 strategies are configured within the organization's strategy system.
Consider the following map for a typical insurance company. Risk should be the dominant strategy for an insurer. That's what insurers do. They underwrite risk. Therefore, it must be their first priority and culture.
The Influencers mostly guiding and constraining implementation of the risk strategy are financial management, R&D/technology, and marketing/sales. The remaining strategies are enablers.
For purposes of building a board agenda, we would think a lot of board focus would be on implementation of the Alpha and the Influencers.
There would be reports on a less regular basis on the enablers.
Board members might want to additionally consider that we define “vision” as being a description of the successful outcome of long term pursuit of the dominant strategy, in this case, risk. This definition provides a means to test whether the vision statement is consistent with dominant strategy.
We define “Mission”, on the other hand, as Drucker did. It simply asks the question “What is our business?” and is what we call the business definition strategy. The business definition strategy is concerned simply with how the organization, for-profit or nonprofit, is positioned within the external environment.
Our approach, using an 8 strategy system configured into 3 types of strategy, gives boards a powerful means to build a board agenda that provides meaningful oversight of the organization's strategic plan. And that's the point of board oversight, isn't it?
For more on our strategy thinking, read The Alpha Strategies, Understanding Strategy, Risk, and Values in Any Organization.