Is Good Strategy Governance Important?
When improving an organisation’s strategic capability it is important, right from the outset, to make sure that appropriate structures are in place for strategy governance. At Ironclad Strategy Training we recommend that the following questions should be considered and the answers confirmed as they will ensure an appropriate and value-adding strategy governance structure.
It is also worth mentioning at this stage that any significant deviation from these recommendations is not advisable as the structure we recommend is designed to meet best practice standards of strategy governance.
Who is responsible for overseeing strategy?
We recommend that overseeing strategy and ensuring the integrity of the organisation’s approach to strategy is the role of the Board or Council. The delegation of specific tasks to a sub-committee or working group is acceptable, however it should be understood that overall responsibility must remain with the Board.
Who is responsible for the actual planning?
At Ironclad Strategy Training we recommend that the actual planning is the overall responsibility of the Chief Executive Officer (CEO) or Managing Director (MD). Again, delegation of ‘hands-on’ management to a Senior Responsible Owner (such as Chief Strategy Officer, General Manager or Senior Manager) is acceptable however overall responsibility must remain with the CEO/MD.
The CEO/MD should form a Strategic Planning Team comprised of a multi-disciplinary group, and consisting of no more than six persons, under the guidance of a skilled Facilitator with extensive experience of strategy.
Ideally this team should include the Senior Responsible Owner, CEO/MD (if not the Senior Responsible Owner) and Chief Financial Officer (CFO), and should report through the CEO/MD to the Board. Other team members should be drawn from across the organisation and should have proven (or perceived) natural ability to think strategically and a broad knowledge and understanding of the organisation and its market(s).
Why do we insist that the team be limited to six?
Well, experience has shown that with any more than six participants in a team efficiency declines, distractions creep in and a phenomenon called ‘group think’ emerges. Also, in our experience of working with and training many different organisations, it is most often for political reasons that more than the six participants are included rather than their capacity to add value. This, of course, results in a team that is not necessarily the best to be considering strategy on behalf of the organisation. Ultimately the goal is to put together a team that demonstrates a wide knowledge of the organisation and its operating environment.
It is worth mentioning here that, in our experience, it is not strictly necessary to reflect the structure and hierarchy of the organisation in the composition of the Strategic Planning Team (for example choosing all members of the Executive Team) so long as the team:
- Allows ‘rank’ to be left at the door and supports an environment where all participants have an equal voice.
- Has been delegated appropriate authority and given sufficient resources by the Board.
- Has a thorough understanding of the organisation.
It can be very powerful to form a team from all parts and levels of the organisation but this approach will only work in an organisation where the existing culture is very collaborative and supportive of autonomy. While this may be a strategic objective for the organisation, if the existing culture does not already work that way the CEO/MD would be best advised to select from an existing senior team that is used to working together.
The Facilitator is not part of the Strategic Planning Team as their role is purely supportive and is not counted as one of the six team members.
Who is responsible for approving strategy?
It is our strong recommendation that approval of strategy can only be enacted by the Board. Ultimately, responsibility to the owners/shareholders/members of any organisation rests with the Board and it is very important that they are familiar and comfortable with the organisation’s strategy.
Who is responsible for reviewing strategic performance?
At Ironclad Strategy Training we advocate a scorecard-based approach to strategy reporting using ‘traffic lights’ and succinct summaries to provide information. Where possible scorecards should be kept up-to-date at all times and should be reviewed and updated regularly by the Strategic Planning Team.
We recommend that the Board receive a brief report in the form of a Summary Dashboard at every Board meeting. This report should note any milestones reached and any matters of significance relating to strategy that the Strategic Planning Team deems relevant. Indeed, it is highly recommended that strategy is included as a standing item on the Board agenda to reflect its importance to the organisation.
The Board should also conduct a more thorough review of strategic performance at least annually to ensure that a) the strategy remains current and b) the expected benefits are being realised.
By following this guidance an organisation is able to ensure it has implemented good strategy governance, and this will have a significant impact on the overall success of its strategy. For further information on implementing good strategy governance we would invite readers to consider our Strategic Management Training courses, and encourage them to sign up for our Ironclad Strategy Insights Newsletter.