The Board's Role in Strategic Planning
Originally published in LeadingAge magazine.
Yogi Berra once said, "If you don't know where you are going, you'll end up someplace else." While his words may seem misplaced, the sentiment is not: Everyone needs a plan. This principle applies not only to individuals, but perhaps more importantly, to organizations. Without it, employees do not have a definitive roadmap from their employer, articulating their true purpose and course, nor, consequently, do they know how their individual role contributes to the company's mission and performance.
In business, the avenue for establishing that specific direction is the creation of a “strategic plan” which has the purpose of:
- Articulating long-term goals;
- Identifying the steps to achieve them; and
- Determining the resources necessary to implement the plan
It is not a wish list, report card, or marketing tool; rather, it is an express written company directive setting out the future state of what an organization believes it will, and realistically aspires to, be.
Historically, strategic plans sought to map out that course over a 3-5 year period. But rapid and significant changes in social, environmental, and technological factors have necessitated a movement toward annual plans. This temporal reduction allows for:
- Greater accountability in which goal assessments can be made with clearer and more timely metrics;
- A more frequent and thus better shared understanding among all stakeholders and workers; and
- More flexibility and agility to quickly respond to the demands of an organization's constituents.
Broadly, it falls upon the board to adopt and oversee a strategic plan due to its fiduciary responsibility which requires of each director a duty of loyalty, and care to the organization it serves. From those duties arises the need for “corporate governance,” a company framework that ensures accountability, fairness, and transparency. Through adherence to a strategic plan, each of these elements is expressed and met.
The board should assist management in developing the strategic plan and should take the lead in reviewing it annually with an eye toward:
- Revising the plan's key goals to accommodate any required changes;
- Prioritizing company objectives which helps focus on the employees on critical projects; and
- Adjusting any financial or human capital requirements to meet the plan's needs.
Board members should be knowledgeable about the organization's role in the environment in which it operates so they can contribute meaningfully to strategic plan discussions. Directors are involved in this process to answer the question of “what” the company is going to do, leaving the “how” to management in implementing the plan and its key objectives.
Through adoption, oversight, and maintenance of the strategic plan, the board will not only meet the individual director requirements as a fiduciary, it will also provide the employees with a uniform vision and single piece of music from which they can all sing.