The Strategic Planning Gap: Board and Management Disconnects

Is it desirable to have strongly opposing views on strategy and strategic planning between board members and management? Almost no one would think that this is the case, and yet the gap in views between these groups is real and is impacting strategy effectiveness in organizations around the world at this moment. As CEO of a strategy firm, I have seen firsthand that there is an ongoing misunderstanding between board members and management where strategic planning is concerned.

The Problem

Back in September 2011, I published an article entitled “The Changing Role of Board Involvement in Corporate Strategy”. The article addressed the evolution of board involvement in strategy and strategic planning – a trend that is manifested by stepped-up participation in strategy formulation and increased scrutiny of strategic plans with executive management teams and board members working more closely together than ever. What was not addressed in the article is abject failure of these two bodies of leadership to come together with a common foundation of knowledge and understanding of what strategic planning should address, how it should be performed and what it should produce in terms of business outcomes.

Getting on the Same Page

Board directors and management executives all seem to agree that strategic planning brings with it tangible benefits for their respective organizations. Despite agreement on that point, Directors and executives do not see eye to eye on the topic. To get on the same page so that they can effectively work together to satisfy the needs of the business, they must first resolve their differing definitions and understanding of strategic planning. The first challenge to address is that the two groups often approach strategic planning with different expectations for the outcomes of the process. In dealing with clients from across industries, this trend has emerged in conjunction with the ratcheting up of board interest and involvement in strategic planning. For instance, while a strategic plan addresses financial goals, it is not all about financial targets. Financial targets are a bi-product of strategy and the plans to accomplish it. That sounds simple enough, but is one common disconnect we see quite often.

A recent example of the expectations gap occurred when my firm was called in to meet with the board of directors for a publicly traded banking institution to discuss strategic planning. The bank’s officers were also in attendance at this meeting. The idea of having this audience come together was a fantastic opportunity to test the “disconnect” theory again. One might suppose that any internal conflict related to the planning objectives would have already been resolved and that the board and management team would enter such a meeting on the same page, so to speak.  Wrong. We ran a few facilitated exercises to “test” the understanding and expectations of strategic planning and found a uniform split between the groups, with the management team sharing one set of views and the board directors sharing an opposing view. It had happened yet again. This surprising and disturbing trend cannot help but undermine corporate effectiveness, so it must be reversed. But how?

Finding a Solution

To build a shared understanding of strategic planning and narrow or close the strategic planning expectations gap, board members and management teams should set and follow a regimen of strategy and management related reading. Such a regimen should be designed to create a common foundation of knowledge related to planning. A common foundation is usually accompanied by enhanced understanding of the objectives of the strategic planning process – followed by agreement on how to perform planning and what to expect in return. Both teams must see strategy as the anchor to a strategic plan, and recognize the plan has the vehicle to spell out the strategic goals associated with the strategy. Likewise, those involved directly with planning should understand that a strategic plan must define the major initiatives associated with accomplishing the goals that support the strategy and use that information to drive more accurate and meaningful budgeting. It is also a common problem to call things “strategic plans”, when in fact they have nothing to do with the overall corporate strategy or how it will be enacted. As such, many major initiatives get mislabeled as strategic, when in fact they are not. Identifying those initiatives associated with strategy implementation ahead of time can help solve the problem of the meandering spend on non-strategic projects. As a result, effective planning will tighten budgeting to be more reflective of reality, as it will then be tied to the actual strategic and operational plans.

In Summary

Directors serving on boards and the management teams that they oversee need a common foundational understanding of strategic planning in order to overcome the gap separating them related to strategy and the strategic plan’s function and expected outcomes. By acting now to develop a shared philosophy of strategic planning, both parties will benefit in conjunction with the business organization.

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