Sunday, August 26, 2012

‘The Future of Boards’ by Jay W. Lorsch

Integrate strategy into board's monitoring function
"Although boards may discuss their strategy in their annual board
retreats, the quarterly board meetings often focus mostly on
short-term financial results. As a result, boards often fail to
monitor the vital intermediate steps – capability creation and
delivering the customer proposition – on a routine basis. This failure
can have serious consequences. Boards may make resource allocation
decisions – including major acquisitions – without a deep connection
to the overall strategy; they can put pressure on management to
deliver short-term financial results, rather than focus on long-term
strategic success; and they may not ensure that the company's
financial performance is communicated to investors in the context of
the company's strategy, leading investors to focus on short-term
"One way to make sure that a company's board integrates strategy into
its monitoring function is to (1) use the annual board retreat to set
the year's strategic agenda, (2) use a board strategic information
system to get regular information on the progress on this agenda, and
(3) design a quarterly meeting agenda to monitor and discuss it."
(p. 49, 'The Future of Boards: Meeting the governance challenges of
the twenty-first century' by Jay W. Lorsch – Harvard)

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