How Strategic Is Your Board?

This is an MIT Sloan Management Review article. In a world where business models are evolving rapidly and new competitors can emerge almost overnight, strategic thinking -especially at the top of the company -is more important than ever to a company's survival. However, the authors argue, boards of directors have no clear model to follow when it comes to developing the strategic role that is best suited to the company they oversee. As with other leadership roles, the one played by the board varies with the company's culture and the norms and legal requirements of its home country, as well as the norms of the industry. More importantly, the board must play a role that matches the strategic needs of the company and the state of its sector. The board of a young company, for example, usually needs to wrestle with different strategic issues than the board of a long-established company. In the authors'view, three dimensions shape the board's contributions to strategy: 1. A Definition of Strategy Companies define strategy in different ways, depending on their place in their industry and the nature of their industry. Often boards go wrong simply because they have not defined the right measures of competition or the right challenges on which to focus. 2. The Role of the Board The board's role in strategy may range from that of advisers who supervise the strategy to full coauthors of the company's game plan. 3. The Context of the Company The board's involvement in strategy also depends on the context or environment in which the company competes. If the company operates in a market that has a fairly simple and stable competitive dynamic, the board may be well advised to remain distant and largely hands-off on strategy questions. In a more chaotic context, however, a board may choose to take a stronger, hands-on approach to strategy development.

• Boards
• Strategy