A board's guide to company strategy

Company strategy: the role of CEOs versus Boards

A business or company strategy is a comprehensive plan that outlines how an organisation will achieve its objectives. The role of the Board in company strategy is a hotly debated topic. Lisa Cook, Managing Director of Get On Board Australia holds that "Whilst the Board itself is generally not the one to create the strategy, it is intended that they contribute their skills and experiences towards its development." Some argue that the Board should actively devise and execute strategy, whilst others relegate the Board to a supporting role. Ultimately, the ideal level of Board involvement in company strategy depends on the company and Board in question, resting on various factors, including size, industry and the company's goals.

Companies can need help finding the right balance of involvement for the Board in building strategy. Too much influence from the Boardroom runs the risk of building conflict between the CEO, the executive team and the Board itself, whilst a lack of insight can have the company operating under false pretence.

If your organisation is looking to improve its strategy and find balance in Board involvement, look no further. Below, we analyse the responsibilities of the Board when it comes to company strategy, normal challenges of strategy, as well as how to create and maintain a healthy balance between the roles of the Board, the CEO and executive directors.

The Board determines direction

As the governing body of their organisation, Boards set the goals of their company and oversee operations. Members are elected by shareholders alongside the CEO and executives. They decide the company's course of action through key decision-making, allocating resources and evaluating risks. Boards also keep an eye on management, steering the company towards its long-term objectives. Board responsibilities should be clearly defined to ensure efficient operations. That way, Board members are held accountable for their performance rather than being bogged down by a surplus of work responsibilities.

The relationship between the Board and management

When it comes to strategy development, implementation and monitoring, navigating the relationship between the Board and management can be tricky. Whilst the Board is responsible for the company's overall direction and alignment with its goals, management oversees daily operations and adherence to the Board's directives. Close collaboration is key when it comes to creating and executing strategy throughout the organisation; Boards should provide guidance about the overarching direction and strategic priorities whilst management creates concrete plans to achieve these goals.

The challenges

These days, Boards must remain more flexible than ever. In an increasingly competitive and unpredictable business environment, there is a lot of pressure on Boards to make sound strategic decisions. Boards must be able to think on their feet whilst also exercising caution and foresight in order to create an effective strategy that benefits their organisation. The ability to seize upon opportunities as they arise and navigate around risks requires Boards to steer their companies with careful attention to detail, capitalising on the dynamic marketplace of the modern governance world.

Why strong business strategy is key

With many stakeholders involved in the decision-making process, determining who owns an organisation's business strategy is tricky. The Board and the CEO work together to shape strategy and achieve company objectives. The business strategy acts as a roadmap, guiding the organisation's actions in line with the desired outcome. Successful company strategy depends on key insight into the business climate, the organisation itself and its target audience.

The role of the CEO vs the role of the Board

When it comes to strategy, CEOs provide leadership, vision and direction. They work to align their business's strategy with its overall goals. They must also make sure that their strategy is realistic, with achievable milestones and objectives. The CEO establishes company direction and allocates resources to achieve strategic objectives in line with company strengths and weaknesses. They should be aware of current industry trends that might affect their goals and be able to articulate their company's vision to stakeholders. A comprehensive approach will help CEOs balance risk assessment, organisational resources and market trends – as well as company and employee performance – to develop a successful company strategy.

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The Board shapes business strategy by providing oversight, guidance and support. They, too, must align company strategy with the organisation's goals, allocating resources to bring the plan to fruition. Boards dictate company direction and align said direction with their organisation's values. They develop the company's business plan in line with the reality of their company and industry. They must also closely monitor the execution of strategy, stepping in to adjust the trajectory when necessary. A culture of innovation and creativity will allow Boards to maintain momentum whilst adhering to ethical and legal standards when it comes to implementing company strategy.

Steven Bowman, the Founder of Conscious Governance, says, "The key role of any board is "to make the choices that create the future for the communities they serve. Creating the future is all about being aware of what is happening in the strategic environment, focusing on the things that are likely to have an effect on your organisation, choosing what needs to be modified, created or discontinued and repeating this process continuously."

Some argue that CEOs should be more involved with the Board's process due to their insight into daily operations within the company, whilst others recommend that Boards have greater power when it comes to the role of the CEO based on their understanding of the company's long-term direction. Ultimately, the CEO is responsible for company operations and day-to-day decisions, whilst the Board of directors provides strategic guidance and oversight. Boards and CEOs should collaborate when creating company strategy, with the CEO updating the Board on the organisation's progress towards its strategic objectives and the Board providing guidance to shape and realign the strategy and keep everyone on track. The exact balance between both bodies will vary per company and depend on their particular needs.

So, who’s really in charge of strategy?

The appropriate level of involvement for both CEOs and Boards in company strategy will vary for each organisation. The right balance will be based on company size, industry standards and the goals of the organisation. 

In a traditionally-structured company, the CEO will generally hold more responsibility when it comes to strategy, whereas in a less hierarchical model, the role of the Board may be greater. Whatever the balance, it is imperative that Boards and CEOs work together to align on long-term goals and their execution.

Collaboration is key to enacting a successful company strategy. CEOs and Boards may serve as checks and balances to each other, ensuring that the organisation is enacting its strategy as outlined, adjusting as necessary and working effectively to achieve its goals.

An organisation's success mirrors that of its strategy. In order to align company strategy with its objectives, organisations must empower their Board and their CEO to work together on strategy. Although CEOs and executives have their say when it comes to creating strategy, Boards should be ready to step in when necessary to adjust said strategy and make changes that align it with long-term company goals. Through effective collaboration, the company can achieve its strategic objectives and succeed in its industry.