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As with board structure, form should follow function. Most important, there should be occasions, some structured, others not, for trustees to think strategically—sometimes in response
1In Chapter 6, we provide still other devices to encourage robust discussion that are applicable here as well.
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to management, sometimes in response to events, and sometimes simply at the request of the board. The question on the table is,“What’s the big idea?”As James Barksdale, former CEO of Netscape, commented about how to lead a business in constant flux, “The main thing is to be damn sure that the main thing is really the main thing.” In other words, boards should find and focus on the strategic bull’s-eye while management lays plans to gather the bows and arrows and to shoot straight. (Exhibit 4.4 describes a simple exercise any board can use to see whether the trustees are thoughtfully and strategically engaged.)
3. Communication and information. The insularity of the Type I board and the attendant show-and-tell sessions will not support or advance Type II work. To think strategically, trustees must understand what influential internal and external stakeholders think as well. At this stage, trustees need only intelligent questions, not brilliant answers.The answers will emerge from twoway communication with a cross-section of constituents, as when conversations with stakeholders prompted a foundation to concentrate on intervention programs for at-risk preschool-
exHlblT 4.4 strategic thinking
Invite a few peers, generally unfamiliar with the mission of your organization, to observe two consecutive board meetings. At the end of the second meeting, ask the outsiders to identify the most important strategic challenges to the organization that the board thinks about. If the answers contradict the trustees’ impressions of what matters most (or worse, if the guests saw no evidence of strategic thinking), then surely the content and format of board meetings needs to be revamped. In Type II mode, trustees at board and committee meetings should, as much as possible, be thinking and talking about “the main thing.”
7 4 GOVERNANCE AS LEADERSHIP
ers, or when discussions with professional staff and community leaders persuaded the board and CEO of a museum to launch programs targeted at local arts teachers and inner-city school children.
Beyond constituents, direct access to experts can also strengthen a board’s ability to uncover and then think strategically about complex, important questions. Some experts may already be on the board—the minister on a seminary board, the ecologist on an aquarium board, or the social worker on a hospice board. In other cases, the resources may be outside consultants. On a Type I board, these experts would advise only the CEO or the senior staff.The board might not know what the consultants recommended and why, or which features of the consultant’s report were accepted and what elements were rejected. Access to unfiltered information and unfettered opportunities to ask questions of experts precipitate greater insight and better questions.
In addition to comparative perspectives, Type II governance requires comparative data, especially information that can be analyzed across institutions and over time. In the fiduciary mode, boards need data to ensure organizational compliance. Type I boards are prone to request all the data all the time as a way to make management accountable and as a means to check for problems. In the strategic mode, boards also use data to understand organizational performance relative to plans and peers. Objective, trend-line data, clearly linked to strategic priorities, permit a board to assess progress, spot downturns and, ultimately, rethink strategy. Devices like “dashboards” (Chait, Holland, and Taylor, 1996), “balanced scorecards” (Kaplan and Norton, 1996), or “strategic indicators” (Taylor and Massy, 1996) equip boards to track data on institutional performance, capacity, and condition. The information spotlights not only areas ripe for tactical adjustments, but areas where conventional
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exhibit 4.5 coMpARiNG Type GoveRnAnce i and type ii
Type I Governance Type II Governance
Management defines problems and opportunities; develops formal plans. Board listens and learns; approves and monitors.
Board structure parallels administrative functions. Premium on permanency.
Board meetings process driven. Function follows form.
Protocol rarely varies.
Staff transmits to board large quantities of technical data from few sources.
Board and management think together to discover strategic priorities and drivers.
Board structure mirrors organization’s strategic priorities. Premium on flexibility.
Board meetings content-driven. Form follows function.
Protocol often varies.
Board and staff discuss strategic data from multiple sources.
strategy needs to be reexamined and new ideas entertained.The questions before the board subtly change from “How do we maintain market share?” to “Are we in the right markets?” or from “How much debt capacity do we have?” to “Where do we want to invest (or disinvest)?”