Key issues: Strategy and growth

Overseeing strategy is a core board function. Company strategy lays the foundation for how the company allocates resources, structures operations, and measures success. When well executed, the right strategy creates significant shareholder value. In order for a director to effectively contribute to strategy discussions, he or she must dedicate sufficient effort, have the right information, ask the right questions, evaluate the efficacy and team buy-in, and be willing to challenge the assumptions underlying management’s thinking.

According to PwC’s 2012 Annual Corporate Directors Survey, directors realize the importance of strategy discussions, and virtually all (99%) discuss the continued viability of the company’s strategy at least once a year. More than one-third (36%) discuss strategy twice a year and 42% do so at every formal board meeting. Still, directors would like to increase the amount of time they dedicate to strategy oversight going forward. In our survey, strategic planning topped the board’s “wish list,” with over 75% of directors wanting to devote more time to it during the next year. This is a striking increase from the 60% who wanted to do so in 2011. Possible reasons could include how the competitive landscape and customer buying patterns are evolving, increased globalization, and the impact of new technologies on business models. Consequently, directors are probably feeling the pressure to be more agile and re-evaluate the strategy more frequently.

In our 2012 survey, we identified several leading practices that boards use to oversee their company’s strategy. Then we asked directors which ones have been adopted by their boards. Here are some of the survey results that should help directors evaluate the effectiveness of their own approach:

  • 88% integrate discussions of risk with strategy;
  • 78% establish minimum guidelines for return on investment from strategic transactions (This suggests that boards are very sensitive to the potential downfalls of a bad merger or acquisition);
  • 74% believe their company’s approach to IT contributes to and is aligned with setting strategy;
  • 70% use annual special meetings/retreats to discuss strategy. (This suggests directors think strategy is important enough to change the venue. Dedicated time, often at a separate location, may facilitate how effectively the board interacts and focuses on this important task.)

PwC perspective

Catherine Bromilow
“Directors should insist that time is made for meaningful strategy discussions. Those discussions work best when directors bring their combined perspectives and experience to collaborate with management in exploring opportunities, push management to stretch in expanding products and geographic reaches, and help management navigate the pitfalls ever present in forging new paths."
—Catherine Bromilow, Partner, Center for Board Governance

Other key issues

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