TOWARDS DYNAMIC GOVERNANCE 2014
European Corporate Governance Report
STRATEGIC ALIGNMENT AND EXECUTION
Organisational nirvana occurs when everyone knows where they are going, the strategy for getting there and then makes that happen.
The theory is alluringly easy; practice, devilishly difficult.
Research has found, dauntingly, that 85% of UK board directors cannot clearly identify or agree between themselves how the organisation is differentiated from the competition or what is the firm’s competitive advantage.7 Research by McKinsey found that around one-third of directors say they have a complete understanding of current strategy.8
Our own research found that chairmen and CEOs commonly don’t agree on how the company is – and should be – performing. This is perhaps not as surprising – or as depressing – as you might think. Successful conversion of strategy to execution requires a number of vital elements: clarity, commitment, consistency, capability and constancy.
“It is even more crucial these days for boards to resemble a Great Group, more than ever before,” says Warren Bennis, distinguished professor of business at the University of Southern California and author of On Becoming a Leader. “That means, among other things, shared goals, a healthy respect for the institutions they are trustees of, and full
7 Kakabadse, Andrew and Kakabadse, Nada, Leading the Board, Palgrave Macmillan, 2008 8 McKinsey & Company, Improving board governance, 2013
transparency. This isn’t easy when the board members do not meet regularly, often have day jobs elsewhere and where deadlines and decisions are of a different order than those of insiders. That leads to a difficult, hard to achieve, but absolute imperative goal: transcending the inherent ‘role strain’ of all board members of public institutions. They have to be loyal and affirming board members and simultaneously critical and watchful of the fiduciary and leadership performance of the firm. In short, they cannot be uncritical lovers but have to be loving critics to the institutions which they are paid to serve.”9
Stakeholders increasingly look to the boards of corporations to explain how what they are doing fits in with the company’s strategy. Boards must engage in strategic debate, they must explain the agreed strategy to align all stakeholders around it, but also ensure the execution of strategy.
There are a great many potential pitfalls and grey areas. The board plays a key linking role in uniting strategy, communication and execution.
9 Dearlove, Des, “Boards of deflectors”, Business Strategy Review, Spring 2008
10 Towards Dynamic Governance 2014 – European Corporate Governance Report
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