Implementing Effective Strategy Governance

James Leighton Davis, Ironclad Strategy, 12 November 2012 In order to realise the benefits of a good strategy, it is vitally important to ensure that good strategy governance has been established by the organisation. In this article we will consider the questions that should be answered, and I will offer my thoughts on what these answers should be. 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 organisation 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 'handson' 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 recognised 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 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 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 organisation, and is fraught with risk. I think it's also worth mentioning here that I do not believe that organisational 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 organisation and its markets. An important caveat however, this will only work in an organisation that is relatively 'flat-structured'. If the organisation is (currently) very hierarchical and traditionally deferential, 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 enacted by the Board who are ultimately responsible to the owners/shareholders/members of the organisation. It is also important that the Board is intimately familiar with the organisation'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 organisation'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 milestones 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 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. In conclusion, effective strategy governance is key to the success of an organisation's strategy, and by following these best practice recommendations an organisation will be able to ensure that it supports and enhances its strategic performance. It will increase its 'strategic maturity' as an organisation, and provide reassurance to its shareholders that it is managing strategy effectively. Ironclad Strategy helps organisations to gain and maintain competitive advantage by providing management courses in strategic management, strategic analysis and strategic thinking.