A board that provides effective direction will be able to determine:
- relevant and current organisational purpose, strategic outcomes and values (organisational culture)
- a positive vision of the future
- a process that can engage all directors
- a focus on the future
- how to win and maintain the commitment and confidence of key stakeholders
- a basis for effective governance by keeping board and staff focused on what’s important
- a process for identifying and reconciling conflicting expectations
- a framework for monitoring and assuring performance accountability.
The board, in conjunction with the chief executive and senior staff, should regularly address such questions as:
- What is our purpose, our reason for being?
- If this organisation didn’t already exist, why would we create it?
- What’s our vision?
- Is it still relevant?
- Who are we doing this for? Who should benefit?
- What’s the ‘essence’, ethos or spirit of this organisation?
- What’s important to us?
- What do we stand for?
- Where is the organisation at present?
- Where do we want to get to?
Answers to these questions are converted into more specific outcomes or key results to be achieved and the recipient of the benefit.
NOT: “We will help children under the age of 12 to learn to swim.”
BUT: “All children aged 12 will be able to swim 200 metres.”
The structure of the board’s statement of strategic direction
The following framework is consistent with commonly accepted definitions of key terms.
- Vision statement – an inspirational vision of an ideal future.
- Purpose statement – the most powerful single statement a board can make describing the organisation’s primary reason for being. “We exist so that…”
- Values – cherished beliefs and principles that are intended to inspire effort and guide behaviour (the core of organisational culture).
- Strategic outcomes – the organisation’s high-level, longer-term deliverables.
- Key results – the organisation’s priority short-term achievements on a year-to-year basis. Each key result is a subset of a larger strategic outcome.
- Performance measures – measurements or milestones that the board must monitor to be sure of achieving key outcomes.
- Resource allocation – resources should be allocated against each of the key result areas.
A summary version of the statement of intent is a useful public document that makes clear the board’s intent to all stakeholders and what benefit it seeks to create with the time and resources available.
The operational plan is the task of the chief executive. Boards should be cautious about signing off this plan, as it then becomes the board’s document rather than that of the chief executive.
The chief executive is responsible for the delivery of the strategic key result areas, not for ‘doing’ the things laid out in the operational plan. Failure to understand this will encourage the chief executive to report on activity rather than progress towards outcomes.
Good governance demands that stakeholder interests are identified and appropriate relationships established. Those the board considers it is primarily accountable to should attract the most attention. Boards should involve stakeholders when planning direction and priorities.
Strategic direction setting should involve key stakeholders. While stakeholders should neither determine its overall strategy nor drive a board’s decision making, the board has a moral responsibility to consult with stakeholders about their expectations and requirements.
Strategic risk management
Risk management is the process by which the board and chief executive ensure the organisation deals with uncertainty to its best advantage.
Strategic risk management embraces both possible gains and losses from risk. It seeks to counter all losses, whether from accidents or poor judgement calls, and seize opportunities for gains through innovation and growth.
Strategic risk management is about visualising futures and having a Plan B, C and even D in place to respond accordingly. A board prepared for a broad range of potential future outcomes faces less uncertainty and less risk.
The board’s expectations regarding risk management and the delegation of its authority to management should be formally documented in policy. This creates accountability and an explicit framework for monitoring performance.
What do we want to become?
How do we want to interact with each other and the outside world?
Have we fulfilled our purpose – is it time for us to close the doors and move on?