Article originally published in the Philadelphia Business Journal on September 30, 2019
What are the roles of management and the board in developing a company’s
strategic plan? This is an update of an article I wrote in June 2015.
One of the most important roles of the CEO and the senior leadership team is to
develop and successfully execute their company’s strategic plan. One of the most
important roles of a board is to provide input during the development of the plan
and vote on its adoption.
A strategic plan is management’s road map to take the company from where it
currently is to where it should go over a multi-year period. It identifies objectives,
strategies to pursue, obstacles to overcome and resources that are needed.
The strategic plan should be consistent with the vision and mission of the
company. The vision is an aspirational statement – the lofty purpose of the
company, a statement that inspires employees. The mission broadly describes the
business in which the company is engaged, the markets served and how the
company differentiates itself.
The foundations of the strategic planning process are the situation analysis and the
SWOT analysis. A situation analysis describes the current and projected
economic, competitive, technical, regulatory and societal environment in which
the company will operate during the plan period.
A SWOT analysis outlines the company’s strengths, weaknesses, opportunities
and threats. Strategies need to be developed for the company to build on its
strengths, minimize the impact of its weaknesses, take advantage of its
opportunities and defend against its threats.
The board’s role is advisory – to pose questions to management to stimulate
thought and provide guidance, to assess the risks of the strategies under
consideration and to evaluate alternative strategies. This process should take place
over a number of board and board committee meetings, so that the directors have
time to think about what is being presented before voting on the plan.
The board cannot hold management responsible for achieving the strategic plan if
the directors play a direct role in its development. The board’s role is to help
management think about issues that may not be on their radar. The CEO and the
senior leadership team must own the strategic plan. The board’s job is to monitor
progress and hold the CEO accountable for results.
A CEO with a strong reputation and many past achievements has built up political
and performance capital. A board will take the CEO’s track record into
consideration when assessing strategies that are presented for approval. However,
strategies presented need to be evaluated on their merit by the board and rejected if
they are judged to have a low probability of success, are considered to be too risky
or don’t fit the strategic direction of the company. It may take courage for a
director to raise these types of issues. It is their job to do so.
So, what are some of the pitfalls boards need to consider when CEOs present the
company’s strategic plan?
Failure to face the brutal facts of reality
As a director, I have sat through strategic planning presentations, incredulous that
the CEO and business unit leader were not facing the brutal facts of their reality.
In one example, the business unit held a weak market position, competing against
companies with superior technology. Revenues and earnings were stagnant. It was
very apparent that the strategies presented would not be effective in improving the
business unit’s competitive position and generate growth. The board convinced the
CEO that the business should be sold.
Setting a strategic objective without the right strategies to achieve it
Without the right strategies, objectives will not be achieved. Employees will
disengage and not feel a sense of ownership in the objectives. Boards play an
important role by questioning the CEO to determine whether the right strategies
are in place to achieve the objectives of the plan.
Doing the same thing and expecting a different result
Results will not change if strategies that have not been effective in the past
continue to be implemented. During the strategic planning process, paradigms
need to be challenged and changed. If no strategy is capable of achieving an
objective, perhaps the objective is not achievable, and another objective should be
chosen.
Underestimating the actions of competitors
As a CEO and board member, I have listened to business unit leaders outline long-
term strategies to gain market share with no thought to how competitors might
respond. You can be sure that they will. How will they respond, and how will the
company defend against their response?
Not shedding a losing strategy
Much can be learned from entrepreneurs and their mindset. How do entrepreneurs face the specter of failure? They pivot and pursue another strategy, another idea.
Why? Because resources are limited, and they are forced to move on. Established
companies should exercise the same discipline.
Failure to recognize that some leaders may need to be replaced
Members of the current senior leadership team of the company may not have the
experience, skills or mindset to execute the strategies or achieve the objectives of
the strategic plan. They may need to be replaced with other leaders that are more
capable of achieving the plan’s objectives.
Directors, ask penetrating questions so CEOs and the senior leadership team are
more effective at developing objectives and strategies. Monitor progress, and hold
the CEO accountable for results.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist on leadership, entrepreneurship and
corporate governance. Silverman earned a Bachelor of Science degree in
chemical engineering and an MBA degree from Drexel University. He is also an
alumnus of the Advanced Management Program at the Harvard Business School.
He can be reached at Stan@SilvermanLeadership.com.
