Boards Role In Planning


Too often boards leave planning to management, rubber stamping what comes back. Only the board can decide the purpose of the organisation and what it is to achieve. In this second session, we discuss the board’s role in outlining the top lines of planning.

Listen to the podcast

Webinar Transcript

Welcome to session two of this series of six webinars about the principles of governance hosted by BoardPro and Boardworks-- myself, John Page, and Graeme Nahkies. In this second session, we're talking about the board's role in planning.

- Yeah, in our work, we look at a lot of strategic plans which are often the tool that boards rely on, to provide that direction to organizations. But I think it's fair to say, in our experience, most strategic plans have very little value at the board level because they're expressed in terms of activities rather than outcomes or impacts. It's really important for the board to do its own thinking, around what the organization exists to achieve.

Because it always sits outside the organization. Organizations don't exist for their own sake. They can only exist if they're providing products, and services, and benefits to outside parties. So the board has to look outwards at who it's serving.

- And very often, we see things expressed in a strategic place. We're going to be a leadership organization, you know, et cetera, et cetera. Well, that's kind of-- we think, good on you.


But where are we being led to, is the more important question. So if a strategic plan is full of internal processes, then it's not a strategic plan. It's a business plan at best.

- We strongly emphasize the need for a board to own a statement of purpose-- why the organization exists. Because the old-style strategic plans, which are still very prevalent, talk about mission statements. I'm often reminded of a comment that was made by Scott Adams, who is the creator of the famous "Dilbert" cartoons, cynical comments on organizational performance and issues.

He said that the typical mission statement-- this is words he's putting in Dilbert's mouth. Inside the operational part of the organization, and everyone who participates in that process, is looking for a hook to hang their job on. We need the board to be really clear about what the organization must achieve so that then the allocation of resources-- time, people, money-- are all attributable to the achievement of the purpose and the outcomes associated with it.

- And this comes back to the sort of more modern idea of organizational storytelling. What is the story that you're telling to your community, in terms of why you exist? There's a lovely story about a president of a large federated organization who used to suggest at the AGM that the first motion was a winding-up motion.

And if you couldn't argue away from it, you hadn't thought about why you existed in the world. And that's quite a good way to approach this. What would be missing if we were not here that could be done by other people? And if you can't answer that question, then clearly, the board hasn't thought hard enough.

- A very good question to pose in any sort of strategic workshop is, if this organization didn't already exist, why would we create it?

- And we see this particularly in the sort of prevalence of charitable trusts and things in New Zealand, of which we have 28,000. Probably 14,000 of them could either not be here or merged. And so they're not a good use of resource.

So this clarity of purpose thing is consistent with the sought of thinkers in the corporate world, like Jim Collins and Simon Sinek, who now see this idea at the center and heart of the organization. And there's a lovely phrase called, the board is the guardians of purpose. That is its primary job.

- Purpose statement has a flow-on effect, right through to some of the things that most challenge boards in their normal operation. And one of those things that we hear directors complaining about all the time is the quality of reporting from management to the board. And typically, unless there is some sort of clarity of purpose and the outcomes the organizations must deliver, then executive teams are going to report in terms of their activity, rather than their impact. If you've got a mission statement, old-style, that I was referring to before, it tends to be expressed in activity terms. Then all you're going to get from management is reporting in terms of how busy they've been, not on the impact that they've achieved.

- Yes. So we challenge organizations to write their purpose statement in the phrase, Organization XY exists so that. The "so that" forces people to describe an external benefit, not to be a leadership organization or anything internal in place. "So that--" what is the change that we are trying to make in the world? It's at the center of this thing, and it needs to be clarified and defined?

- Yeah, yeah. So in terms of the things that you would wrap around that, that are also very important in a planning sense, particularly now that boards are being held accountable for the culture inside organizations, for example, so that behavior is consistent with the brand or the benefit that organization is trying to achieve, they're things like discussions at the board level now of values. When I was a chief executive, we never took values anywhere near the board. It was something that was created inside the organization. Now that boards are being held accountable for positive and appropriate cultures, the board has to wrap its head around that. And that's an important part of the board's planning process.

- And values are really important. Because when we come later to talk about policies, values are the bedrock of policy. As human beings, our decision-making always falls back on values.

In the absence of specificity, you know-- you should not drive over 100 kilometers an hour-- we fall back on values, always. So they are the first place to start. And they are the board's to own and set.

- Yeah. And the board needs to think sort of, what does that value mean in practice? There are a lot of value statements that get saluted. And it's interesting. It's the 20th anniversary of the Enron debacle this year.

And they had wonderful value statements and all the rest of it. They got routinely saluted. But actually, the board had allowed-- or even instituted-- performance management processes and remuneration systems, in particular, that encouraged bad behavior. So there's a total mismatch.

- And we say all the time-- you know, paint it on the wall-- we value our people. Well, what does that mean? Does it mean that we apply the legislative minimum?

Or do we go beyond that? And if so, why, and how far? Just having it painted on the wall is a relatively meaningless statement.

- Yeah. Codes of conduct, and ethics, and that sort of thing are increasingly recognized as really important statements for the board to both generate and own, so that they then are forced to hold themselves accountable for creating the right sort of incentives inside the organization. And when we talk about planning, we're talking about the board having those kinds of conversations.

It's not like a project management plan or something like that. It is about where we steer and where are we directing the organization, and what are the risks that we must control?

- So when you come down, there's sort of a hierarchy of things to think through. The next step is the setting of outcomes. So in specific terms, what are we going to achieve? How are we going to measure? And by when?

- Yeah.

- And for whom?

- Yeah. It's, what benefits for what people?

- Yeah.

- At what price, or what worth, or what investment value? Those three elements are really critical elements of the ends component that we referred to in the previous module-- you know, the difference between ends and means. The board has to define what those ends are in the first place, before you can logically choose between alternative ways of achieving them.

- So this is what we talk about, the board having to undertake some strategic thinking before you can plan strategy. Because until you've worked out what you believe in and where you're going, you can't actually work out how you're going to get there.

- No.

- So, I mean, yes, yes, as management, we'll input all over the place here, but it's the board that owns these high-level conversations and is responsible for setting the tone. Then you can start working out how.

- And we're going to talk about that a bit more in the next module. But I like your spine analogy.

- Oh, yes.

- Why don't you explain that?

- Yes. So, I was just trying to, some years ago, explain about how all this fitted together. And so those of you who have had any kind of bad back problem, you know that one little bit out causes pain up and down the system. And so we sort of extend that analogy to the vision, the purpose, the outcomes, the measurement. It all has to be aligned, right down to where the resources go, how it's monitored, and how the board works.

All flow from one another. And in particular, when we do our evaluation, we look for this alignment, specifically. But actually, what you're saying up here, and what's happening in terms of allocation of resource, and the work that management do have an alignment.

- Yeah. When we're talking about that distinction that we were making between ends and means, I'm often reminded of Lewis Carroll's Alice in Wonderland. And Alice got lost at one stage in the story and happened upon the Cheshire Cat, who was concerned about her being upset, and asked how he could help. And she said she didn't know where she was going.

And the response from the cat was very succinct. Well, if you don't know where you're going, it doesn't matter which road you take. [LAUGHS] OK? So it just reinforces the need for the board to have clarity of both, where is the organization today-- where's it starting from-- and where does it want to get to? We haven't talked about vision statements, but they can be a useful adjunct to that longer-term, horizon type of destination, even though, in the shorter and medium-term, something more specific needs to be defined, in terms of outcomes and key results.

- And there's a useful related concept which we use, called True North. And we've referenced this in your readings. There's a wonderful article about mission-driven governance.

It has the idea that your purpose is the True North of your compass, so that everything you do should be judged against that. If the winds blow you off course a little bit, back to True North again. If an opportunity comes up, that's sort of way out here to the far West-- well probably, it's actually not going to work for you.

Because if you embrace too many of those, you end up with a bit of a muddle of the organization. And there's a number of well-known people-- Steve Jobs and others-- who have said, actually, the primary purpose of the strategic plan is to be very, very clear about what to say no to. And I think that's right. So just focus on purpose through the True North. And also, in particular, in the non-profit world, it's really, really important to understand what you can control and influence, and not go Don Quixote charging at things that you have no ability to actually make an impact on, because that's just a waste of time and resource.

So I think in summing this little section up, it says, we've tried to communicate to you this absolute need for clarity of purpose, the separation between where we're going and how we get there, and the sort of purpose from path, and the idea that the work of the organization is lined up down a particular spine. And True North-- keep focus on True North. If you start wandering too much, it's a bit of a serious problem. So in the next session, we're going to delve a bit deeper into some of these things.

So thanks for joining us across these six short seminars. Thank you to my colleague, Graeme. Thank you to BoardPro.

We really do hope this has been useful. If you want to continue the journey and learn some more, look to our website We've got lots of great articles.

We're committed to writing and have done for 20-odd years. There's a lot of reference up there and BoardPro's own site. There's a lot of materials. So please avail yourself of that. Thank you for your time, and we hope it's been useful to you.

Webinar Files: