In Strategic Planning, the Board Owns the Race Car

During the first April session of the High Performing Boards Digital Series, presenter Steve Morrissette likened staffing a board-level strategic process to staffing a winning race car.

“All the best practices literature suggests that the CEO, the executive team should drive the process,” explained Morrissette, visiting professor of strategy at the University of Chicago Booth School of Business. “Sometimes they’ll use a consultant to help with the engineering, but the executive team, especially the CEO, needs to drive the strategic planning process.”

While the CEO is the driver of the strategic planning process, Morrissette believes it’s important for the CEO to have conversations with the board chair about what process will be used, then make sure the full board is in agreement with the approach.

“The CEO should recommend a process, but the board has to be bought into not just to the final strategy but the process by which we’re going to develop the strategy,” he said.

The board makes additional key contributions to the strategic planning process, Morrissette emphasized.

“We, as the owner of the race car, as the board who represents the member-owners of the race car, we have a role in this process,” he said. “We’re not just here to watch the race. We’re not going to get in the driver’s seat. We’re not going to grab and wrench and try to change the spark plugs. But we have a role and we’re going to talk about what that proper role is in that process.”

Whereas the executives draft, develop, design, propose and executive a strategic plan, Morrissette offered a variety of words to describe what the board does during strategic planning. These verbs included: review, challenge, pressure-test, validate and question.

“We’re more than approvers,” Morrissette explained. “We need to make sure it’s the right strategic plan—the right race car for our ownership.” In fact, he suggests the board needs to participate in several ways: by validating the work, creating a dialog with management about the strategic plan, approving the and allocate resources to it.

Morrissette quoted management great Ram Charan on the relationship between the board and CEO in strategy building:

“The best strategies are born from management’s analysis and creativity, coupled with the board’s incisive questioning and probing. The board should see the CEO and the top team present the strategy in their own words, then probe it, question it and offer opinions on it. In-depth interactions with management strengthen the strategy and ensure that it is realistic. As the strategy is reshaped and improved, management and the board reach a common understanding of it. In the end, directors will wholeheartedly support it.”

Refining and Overseeing Execution

Morrissette said another way to think about the board’s role in strategic planning is as the “refiner’s fire.”

“We need to help the management team improve the strategy by asking questions, bringing that outside perspective,” said Morrissette, who serves on several boards. “We’re not just there to listen and applaud or approve. We are going to help the management team” to build the right strategic plan for the organization.

“The goal in the end is we all understand it, we all embrace it,” he said. “We all leave the room singing kumbaya. We’re ready for the hard work of actually executing the strategy over the next couple of years.”

Indeed, after the strategic plan is in place and funded, the board’s role turns to one of oversight and monitoring.

“You need to make sure as a board member that the strategy is turned into action plans with accountability, and those action plans have results, and you want to see those results measured,” Morrissette said. “How they drive the car isn’t up to us. But we want to see, are we winning races or are we getting the speed?”

Using a gardening analogy, he added, “If we measure how much the plant (in the backyard) grows every day, we’re going to drive ourselves crazy. But if we ignore it for two years, we (might later) find out the plant withered and died, or we thought we planted a tomato plant and we actually planted a pepper plant. That’s not what we wanted, so we make some changes.”

How Low Should You Go?

Overall, the board should be focused on the conversation about “what” the organization should do, not the “how” the organization should do it, Morrissette continued.

Thinking about football, the board might decide whether to build a running team or a passing team, but not which quarterback to hire, he suggested. Thinking about navigation, the board decides whether the organization goes east or west, but not which highway to take.

Morrissette acknowledged that consistently taking a big-picture view can be tricky in the highly regulated financial services space.

“The regulator requires us to get down on the ground in certain aspects of the business,” he explained, “and expects board members to have a surprisingly on-the-ground knowledge. In some respects, it creates a bad habit.” After dealing with the details of spending time in an audit committee meeting, for example, switching to a 10,000-foot view to do the higher-level thinking required fro strategic planning can be challenging.

“You and your CEO need to dialog about what does 10,000 feet mean?” Morrissette added. “What’s the right level of engagement?”

Lisa Hochgraf is senior editor for CUES.

Apply It to Your Boardroom

• What is your board's process for strategic planning now? How might it be refined? 
• How is your strategic plan currently transformed into actions? How can this process be refined?
• What measures is your board currently using to oversee execution of the strategic plan? Are these the best measures? What other measures might you want to use?