Implementing Good Strategy Governance

The first question that must be answered is “Who is responsible for overseeing strategy?” This question is key to the overall formation of an effective strategy governance structure, and highlights the importance the organization places upon its strategy. To my mind this is simple – responsibility for overseeing strategy should rest with the Board, Council…

The first question that must be answered is “Who is responsible for overseeing strategy?” This question is key to the overall formation of an effective strategy governance structure, and highlights the importance the organization places upon its strategy. To my mind this is simple – responsibility for overseeing strategy should rest with the Board, Council or other governing body. Delegation of tasks and actions can be made to a sub-committee or working group of course, but it should be understood that oversight of strategy remains with the Board as part of their overall responsibility to their shareholders / stakeholders.

The second question is “Who is responsible for planning?” This question really relates to the overall 'activity' of strategic planning and, accordingly, should be the responsibility of the Chief Executive Officer (CEO) or Managing Director (MD). I think it is acceptable that 'hands-on' management is delegated, where appropriate, to a Senior Responsible Owner (such as a Chief Strategy Officer, General Manager or Senior Manager), but it should be clearly recognized that overall responsibility remains with the Chief Officer.

In order to undertake effective strategic planning, I recommend that the CEO / MD form a multi-disciplinary Strategic Planning Team consisting of no more than six persons under the guidance of a professional facilitator with deep experience and understanding of strategy and group dynamics. 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 organization and should have proven (or perceived) natural ability to think strategically and a broad knowledge and understanding of the organization and its market (s).

Why do I recommend that the team be limited to six people only? Well, in my experience, in any team larger than this efficiency Declines, distractions can creep in, and 'group think' begins. Also, it is most often for internal 'political' reasons that more than six are proposed (rather than their individual capacity to add value to the group). This of course results in a less-than-optimum team developing strategy on behalf of the organization, and is practice with risk.

I think it's also worth mentioning here that I do not believe that organizational hierarchy is important in the composition of the strategic planning team – it's more important to have a team that represents a wide knowledge of the organization and its markets. An important caveat however, this will only work in an organization that is relatively 'flat-structured'. If the organization is (currently) very hierarchical and traditionally ignorant, this will simply not work as more junior members will be less likely to offer their thoughts, and more likely to follow the lead of a dominant individual (a typical example of group think) . In this case, I think it is more sensible to stick to the senior leadership team.

The third question is “Who is responsible for approving strategy?” Well, it is my very strong recommendation that this can only be enabled by the Board who are extremely responsible to the owners / shareholders / members of the organization. It is also important that the Board is actually familiar with the organization's strategy, and this will help ensure this.

The final question that should be answered is “Who is responsible for reviewing strategic performance?” As we know, as many strategies fail through questionable implementation as through poor planning (what is worse, good implementation of a poor strategy, or poor implementation of a good strategy?) And it is a key factor of good strategy governance that the performance of the organization's strategy is carefully monitored and measured. I generally recommend that the Board receive a brief report in the form of a Summary Dashboard at every Board meeting. This report should note any dilemmas reached and any matters of significance relating to strategy that the Strategic Planning Team deems relevant. Indeed, I strongly recommend that strategy is included as a standing item on the Board agenda to reflect its importance to the organization. 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 realized.

In conclusion, effective strategy governance is key to the success of an organization's strategy, and by following these best practice recommendations an organization will be able to ensure that it supports and enhances its strategic performance. It will increase its 'strategic maturity' as an organization, and provide reassurance to its shareholders that it is managing strategy effectively.