Strategise, Plan, Manage

Does your organisation have a clear strategy? Does your board know where it is headed? Are there plans in place to get there? And if so, how is your organisation performing against the plan?

We have come across lots of different types and sizes of board across many different sectors and industries and it is amazing just how differently boards view their role in organisational strategy. The specific role it takes will vary and depend on the size and type of business but can range from the board being solely responsible for setting strategy to those boards that don’t get involved at all, seeing the formulation of strategy as fundamentally a management responsibility where the CEO both develops and approves the strategy.

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We believe that it is essential for good governance to ensure that, firstly, there is a clear strategy in place and secondly, that the board contributes to the formulation of that strategy and fully understands it. Indeed, Principle B of the UK Corporate Governance Code states that “The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned.”

So, where should the board start?

Vision and Values

As a first step, the Board should consider the company’s vision and values. Some organisations also choose to make a Mission statement at this point too.

  • A Mission statement tends to describe an organisation’s purpose and overall intention – i.e. why does this company exist? To do or be what?
  • A Vision statement is forward-looking and should be inspirational as well as aspirational – where do we want to be – what is the ultimate goal? For example, at Bridgehouse our Vision is to “Be the centre of excellence for corporate governance, providing flexible corporate governance services for a variety of organisations”.
  • Values – these are the core principles which guide the organisation and its employees. They should guide decision-making and will help define and support an organisation’s culture.

For a Vision and Values statement to be effective, the Board and management must consider how it is going to embed them within the organisation. Values, in particular must form part of the day to day activities of the company and staff. It will not be enough to simply write them down and put them on the website.

Setting the Strategy

The Vision and Values (and Mission statement if there is one), will form part of the organisations strategic document. The Board will also need to consider the core business and purpose of the company and the long-term goals – where do we want to be in 3, 5, 10 years-time?

The focus of a strategic plan (and its difference from a business plan) is that it is long-term in nature. It should be primarily used for implementing and managing the strategic direction of the organisation, over a period of 3 to 5 (or more) years.

An effective strategic plan should provide focus, direction and action in order to move the organisation from where it is now to where it wants to be. On a practical level, the plan should enable the business to prioritise resources (time, money and people), to grow revenues and increase the return on investment (ROI).

Again, depending on size and type of organisation, establishing a strategy will take differing levels of involvement and time, but as a start for all types of board, we would always recommend one (or even a series of) “away day” sessions. This is a session, outside of a Board meeting where the Board (together with the senior management team, who should also be involved in the strategy process), can discuss long term aspirations and goals; opportunities upon the horizon as well as risks; and how to seek and achieve competitive advantage.  All with the aim of devising and agreeing a strategy for the business.

It may take weeks or even months, and a number of different sessions and contributions to finalise a strategy ready for approval, but it is important that the board gives itself time and resource to do this.

Business Planning

Once the Strategic Plan is approved, the board and management need to consider how the long-term goals are going to be achieved. This is usually done by considering and implementing, shorter term goals and actions in the form of annual business planning. A business plan should set out the goals for the year and should include:

  • Actions
  • Timescales
  • Milestones
  • Resources
  • Risks and management thereof

Once the Strategic Plan is set, the business plan will largely be drafted and managed by the CEO/Management Team, but it is important that the board approve each plan to ensure firstly, that it is in line with the strategic goals of the company and, secondly so that it can monitor the performance thereof.

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Performance Management

So, the Strategic and Business Plans have been approved, and now is the time to ensure that both are achieved through appropriate performance monitoring.

As with strategic planning, how much performance is monitored by the board will vary from organisation to organisation. However, it is important to note that by performance management, we mean performance of the company and not performance of employees…we have often been met with horror and confusion where board members think that we are advising them to manage the performance of employees. This is of course a job for management, although the board is expected to manage/monitor the performance of the CEO.

This is about the board monitoring the performance of the company itself, ensuring that it stays on track to achieve its short and long term goals. Delivery is obviously the responsibility of the CEO/Management, but it is the board’s job to ensure that management are doing this and that delivery is achieved.

Most boards will be familiar with performance management in the form of reviewing financial information and performance. I have yet to attend a board meeting where a significant amount of time isn’t spent reviewing the quarterly financial performance of the company and if appropriate and adequate budgets are set, it is the most obvious way of monitoring performance. Adequate financial information should clearly show if sales are ahead or behind expectations, for example.

However, financial management shouldn’t be the only indicator of success, and good performance management should look at other elements of the business too.

Every organisation should adopt a properly structured framework to measure performance in the key areas that determine the success or failure of its particular business. These will vary but will typically cover the financial information (sales, margins, costs) but should also include other elements such as productivity, quality and customer satisfaction (number and type of complaints, for example). The Board together with management should consider what Key Performance Indicators (KPIs) are needed to help track progress against achievement of the strategic and business plans. It may even include KPIs in relation to employee satisfaction and retention.

Once performance is monitored in this way, targets for improvement can then be set for the organisation as a whole or broken down by department, team or individual.

Effective performance management will lead to improved productivity, better resource management, cost-savings, better customer satisfaction and ultimately, increased revenue.

Performance Reporting

Given the non-executive nature of some Board members it is important that performance monitoring reports are clear and concise, to enable the Board to see at a glance how the organisation is performing.

It is important therefore to:

  • Set context – for example, how the performance compares with competitors (benchmarking)
  • Provide timely information – the Board should receive the most up to data available
  • Make data reader-friendly – keep jargon to a minimum and consider presenting data visually
  • Link the data and performance to strategic as well as short-term objectives

Performance management and monitoring against business plans and strategic goals should form a standing item on the board meeting agenda, in the way that financial monitoring so often does. This will ensure that the board never loses sight of the long-term strategy and ultimate objectives of the organisation.

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Help where you need it

Bridgehouse Company Secretaries can help by supplying experienced business coaches to work with your board in developing a vision and values statement or to assist with formulating a strategic plan.We can also help improve performance management in your organisation by working alongside you to identify key indicators and establish a performance management structure.

For more information and to get in touch click here.


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