Change Whisperer – Gail Severini, Symphini Change Management Inc.

What is the Board’s Role in Strategy and Strategy Execution? Post 1 of 3

Institute of Corporate DirectorsSOLD OUT! I signed up for this panel presentation, “Growth Strategy—the Board’s Role,” as soon as the fall season schedule from the Institute of Corporate Directors (ICD) came out.

Good thing I did—many, it seems, are interested in “practical tips to help boards apply their time and expertise effectively on strategy issues.”

In this series, I will share highlights from the line-up of incredible panelists—representing current board engagements on twelve of the most significant organizations in Canada today, including such newsmakers as: BCE, Bell Canada, Scotiabank, Loblaw, Shoppers Drug Mart, Sun Life Financial, Canadian Pacific Railway, and Imperial Oil. My own observations and comments are indicated by italics.

For readers whose interest originates out of Change Management, allow me to connect the dots: If we accept that helping people transition through change is an essential part of implementing strategy (often under the logistics of Project Management), then Change Management nests within Strategy Execution. More on this in “Change Management Methodology (Strategy Execution Methodology Series, Post 4).”

Please note this discussion moved like whitewater rafting. I have quoted panelists wherever I could capture their words accurately and have paraphrased with as much integrity as possible. Any misinterpretations here are entirely my own.

Strategy and its Siamese twin, Strategy Execution

For some time, I have been bending the ear of several senior members of my network with the argument that, at a very high level, Strategy Execution must be under the purview of the board.

It’s a pretty simple two-part argument:

  1. What’s the spend on Strategy Execution? What if it’s $5M or $55M? Given that failure rates on strategic initiatives range from 44-70% (see “Time to kill the 70% phantom failure rate”), there is $2.2M – $38.5M directly at risk.
  2. Perhaps even more importantly, does realization of those strategies materially affect the future of the organization?

In combination, surely these are equivalent to any of the board’s other responsibilities.

To be crystal clear, I am not referring to strategy here (I had assumed that this was under the purview of the board), I am referring to the execution of the strategy (i.e., specifically to tracking high-level risks, progress, and benefits realization). Not as crazy as you might first think. Have a look at BMO’s Performance Committee’s mandate: “responsible for driving enterprise results and taking action on initiatives relating to BMO’s strategic priorities.”

No, no, and…maybe

I have had varying reactions:

  • Some give me the standard aloof “brush-off”: “Boards are, of course, responsible for signing off on strategy. Execution, though, is what management is hired for. The board does not mix in with management responsibilities.” (as if this were a written law—it is not).
  • Some will go further: “Boards have many issues on their agendas, such as performance (aka quarterly results), compensation, and risk management. It is all they can do to keep up with this pace. Not to mention the fact that many do not really know the business or business practice very well.” Much of this disturbs me, and I think it should disturb you too. And, I don’t really buy it.
  • I had a wonderful conversation with a gentleman who serves on the boards of several mid-sized organizations and he was intrigued. He acknowledged the rebuttals above as standard thinking and their dismissive tone as common. However, he also acknowledged that he shared a level of concern regarding the ability of management teams to undertake transformational strategy and the board’s culpability in that.

With this context in mind, I was excited to hear what this panel might say.

So, what did they say?

This panel really focused more on the role of the board in determining strategy—and they had some interesting things to say about this. They touched down on Strategy Execution only lightly, but it was, I thought, promising.

Ken Smith did a solid job of constructing a set of seven questions that would draw out the expertise of the panel. Mr. Smith is an ICD.D and a veteran (25 years) strategy consultant. He was chairman of SECOR consulting and is the author of “Twenty Questions Directors Should Ask About Strategy,” published by the Canadian Institute of Chartered Accountants.

The rock stars of the morning were:

  • Thomas C. O’Neill, F.ICD, chair of BCE and Bell Canada, Director of Scotia Bank, Loblaw, Adecco, and chair of St. Michael’s Hospital
  • Krystyna Hoeg, Director at Shoppers Drug Mart, Sun Life Financial, Canadian Pacific Railway, Imperial Oil Ltd., and Samuel Son; vice chair of Toronto East General Hospital
  • Stephen Bear, director emeritus of McKinsey and Company, former member of McKinsey’s Global Board, chair of Princess Margaret Cancer Foundation

Question 1: Why is growth important?

Thomas O’Neill hit the pressure point with, “if you can’t grow you will lose your growth multiple” and “once Canadian companies reach a certain size they must go outside” with the caveat that the risk increases exponentially. He referenced the recent acquisition of Canada Safeway by Sobeys and the related competitive acquisition of Shoppers Drug Mart by Loblaw as examples of organizations making a move in the rising current economic cycle to create some growth momentum.

Stephen Bear addressed the question by focusing on two important issues:

  • “Quality of growth”: He recommended that organizations be selective in their growth and to focus on geographies or products or other dimensions that will optimize growth. He noted that, at McKinsey, they had to come to terms with the reality that they could not grow more than 10-11% annually due to investments required to inculcate values, mentor, and provide stretch experiences.
  • Shrink to grow: He gave the example of a conventional oil and gas company that looked at the strategic horizon and the beginning of new technology to access shale gas. Company leaders realized that “they would be pushed to the outer edge of price” if they did not make a move. They made the difficult decision to shift technologies. This required them to shed conventional assets and to use that to buy shale land. This took considerable time and they had to be resilient to the pressures in the market for short-term results.

Krystyna Hoeg led into her comment with the caveat that all strategy must start with “understanding what shareholders want” and, more specifically, with “not all growth is good,” (i.e., discrimination is warranted). She noted that “organic growth is usually acceptable and encouraged” and that “the capacity of the organization within the whole picture of what it is being undertaken” is important.

This last point, in particular, resonated with me. As consultants, we often see strategy snowball in the execution cycle and see organizations hitting very real capacity issues. 

In the next posts, I will share the panel’s responses to the remaining six questions. Links are provided below.

Thoughts? Reactions? Please share in the Comments section.

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