ABSTRACT
This chapter opens with the context that organisations find themselves in today in which strategies, business models and assumptions are being upended by new entrants and greater consumer power, underscoring the need for boards to become more involved in strategy.
Building on the opportunities to shape strategy described in Chapter 1, this chapter examines the range of practices that boards currently engage in, ranging from simply approving strategy to shaping the content and conduct of strategy. There are life cycle reasons for why these variations occur from one board to the next, such as boards needing to involve themselves more when the company is under financial stress. However, Part 1 showed that, often, strategy shaping depends on the confidence and capabilities of NEDs in navigating the power dynamic in the boardroom.
First, the chapter considers the case for change and how rapidly changing expectations of corporations requires boards to consider the role they play in creative disruption of strategy and the role modelling of this skill in their interactions with management. Second, the chapter describes the challenge of shaking off legacy thinking. Finally, it considers what a strategically active board may look and feel like and suggests four common characteristics, providing predictive power in distinguishing effective boards from ineffective ones: diversity in sources from which board capital is derived, CEOs who demonstrate perspective-taking behaviour, chairs skilled at managing agreement as well as disagreement and directors who show as much humility as courage—humility to know they may be wrong and need to be open to the perspectives of others and courage to stand by their convictions in the face of social pressure to conform with ‘groupthink’.
The chapter provides some tools for boards and NEDs to reflect on how strategically active they have been, and explores practical ways in which NEDs may strengthen their involvement in strategy and become more strategically influential as a group. It doing so, it challenges the rational models used today to explain strategic decision-making, which largely ignore the social and relational dynamics that result when individuals interact in groups to make strategic decisions. The chapter also identifies some of the pitfalls in the approach taken by current board effectiveness reviews and suggests some improvements.
