Five Strategy Conversations EveryBoard Should HaveBob FrischManaging PartnerThe Strategic Offsites GroupSilicon Valley Cha...
Directors Consider Strategy A Top Priority                                        Strategic planning and oversight        ...
The Average Board Spends A Quarter of Its Time on Strategy30%25%               24%                         24%            ...
A Quarter to a Third of Board Members Report Having ‘Limited or no Understanding’ of Critical Strategic Issues 70% 60%    ...
The Most Common Response is to Spend More Time on Strategy        Percent of directors indicating they would like to spend...
SVNACD Members Also Report Wanting to Spend More Time on Strategy          How satisfied are you with the amount of time y...
This Morning is About Improving the Quality, not the Quantity, of Strategic Conversations           How satisfied are you ...
Two Dimensions of Strategy Conversations: Among theBoard…                ©2013 The Strategic Offsites Group®, Inc. All rig...
…And Between the Board and the Management Team               ©2013 The Strategic Offsites Group®, Inc. All rights reserved...
Directors are Less Satisfied With the Quality of Strategy Conversations With Management Than Among ThemselvesQ3. How satis...
Five Strategy Conversations Every Board Should Have•  Are We Working at the Right Altitude? Are We Clear on The Board’s   ...
These Five Conversations Help Set the Stage for Even More Focused and Productive Board Strategy Conversations25%          ...
ARE WE WORKING AT THE RIGHT ALTITUDE? AREWE CLEAR ON THE BOARD’S ROLE VS.MANAGEMENT WHEN IT COMES TO STRATEGY?
Are We Working at the Right Altitude?                 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Propr...
Are We Working at the Right Altitude?                 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Propr...
SVNACD Members Report a Wide Variation in Board Altitude My board debates and decides on strategy together with the execut...
Different Boards Play Different Roles In the Strategy Process       Which of the following roles does the board of directo...
Is Our Board Working at the Right Altitude? From the NACDPoint of View There’s no Single Right Answer…      “Boards should...
… Except That Each Board Needs To Be Explicit About TheirRespective Roles    “Management and the board should jointly esta...
At One Board Directors Had Very Different Views of Their Role      How would you describe the board’s role in the strategy...
At One Board We Worked With Directors Had Very DifferentViews of Their Role    How would you describe the board’s role in ...
Coca Cola Enterprises Board Guidelines    “The Board will assess the Company’s business strategies, goals and    objective...
Our Firm’s Experience Is That ‘Increasing Time’ Alone Won’t Solve the Underlying Problems Caused by Lack of Role Clarity  ...
This McKinsey Framework We Saw Earlier is an Example of a Starting Point for a Discussion About Roles         Which of the...
ARE WE ALIGNED AROUND AN ASPIRATION?
The Overall Level of Strategy Alignment Almost Always Bears AtLeast Some Degree of Improvement                   How well ...
SVNACD Members Saw an Opportunity to Improve Their Boards’ Levels of Alignment           How would you assess the level of...
The Starting Point of Strategic Alignment is Having aCommon Aspiration                                                    ...
Boards and Management Teams Typically Hold Too BroadViews of How To Define SuccessHow do you think about success for Compa...
It’s Not That The Aspirations Are Wrong In Any Way - It’s ThatThere Were Multiple ‘Most Important’ Goals Among 7 Directors...
ARE WE ALIGNED AROUND THE WALLS ANDFENCES THAT BOUND THE BUSINESS?
Walls and Fences - Defined •  Walls are the boundaries around any business that are assumed to be    immovable – so much s...
Walls and Fences – Company Z    1.  Operate in the U.S.    2.  Communications company    3.  Subscription-based revenue mo...
ARE WE GETTING THE INFORMATION WE NEED TODO OUR JOB?
There’s Generally Good Data Provided to Boards, But It Could Bear Improvement  70%            59%  60%  50%               ...
Some Directors Report That Critical Elements of Data Are Missing How well informed are you as a board member on the indust...
Better Access is Provided to Financial and Operational Information than Strategic or Industry Information 90%       85% 80...
The Board Should Inventory the Information Provided Over the Past Year and Validate That It’s Adequate To Do Your Job  •  ...
IS THE BOARD INVOLVED IN SETTING THESTRATEGIC AGENDA?
Boards Generally Don’t Set The Agenda of Strategic Topics in a GivenYear                   Who sets the agenda for the str...
Prior to the Meeting To Set Strategy Topics Board MembersCompleted an Interview and Subsequent Online SurveyPre-meeting ac...
We Determined Which Strategy Topics (Beyond Specific Growth Opportunities) Will be Included on the Board’s 18-Month Agenda...
We Further Set Priorities For The Board Level Discussion Topics, and     Identified Areas Where Further Analysis is Requir...
For Some Top Priority Topics, The Board Identified Areas of Analysisto Inform the Discussions  Topics to be               ...
Five Strategy Conversations Every Board Should Have•  Are We Working at the Right Altitude? Are We Clear on The Board’s   ...
BACKGROUND
Strategic Offsites Group at a Glance•  A Boutique strategy consulting firm founded in 2002o  We work around the globe with...
How We Serve Our Clients•  Whether engaged for a single meeting or a multiyear change initiative, our role is to   help de...
For More InformationBob FrischManaging PartnerStrategic Offsites GroupRfrisch@StrategicOffsites.comwww.StrategicOffsites.c...
Bob Frisch, Managing Partner, Strategic Offsites Group        For the past 31 years, Bob has worked with executive teams o...
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Five Strategy Conversations Every Board Should Have

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Bob Frisch's Presentation at the Rock Center for Corporate Governance at Stanford Law School - Sponsored by the Silicon Valley Chapter of the National Association of Corporate Directors (NACD) - January, 2013

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Five Strategy Conversations Every Board Should Have

  1. 1. Five Strategy Conversations EveryBoard Should HaveBob FrischManaging PartnerThe Strategic Offsites GroupSilicon Valley ChapterNational Association of Corporate DirectorsRock Center for Corporate GovernanceStanford Law SchoolJanuary 17, 2013v9
  2. 2. Directors Consider Strategy A Top Priority Strategic planning and oversight 65% Corporate performance and valuation 42% Risk oversight 36% CEO succession 30% Executive talent management and leadership development 26% Director recruitment/succession 15% Financial oversight/internal controls 14% Board effectiveness 14% CEO compensation 10% Board and director evaluation 10% Relations with shareholders 6% Board leadership 5% CEO evaluation 5% Board culture (openness, respect, action orientation, CEO relations) 4% Board meeting processes (agenda, committees, etc.) 3% Director education and development 3% Crisis oversight 3% Disclosure (transparency of financial and other info.) 2%Info. Management (ensuring directors receive right amount, type, format) 2% Director compensation 2% Corporate social responsibility 0% 0% 10% 20% 30% 40% 50% 60% 70% *Respondents were asked to select three topics of highest priority Source: NACD Public Company Governance Survey 2012-2013 n=957 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 2
  3. 3. The Average Board Spends A Quarter of Its Time on Strategy30%25% 24% 24% 20%20% 17%15% 11%10% 5% 0% Strategy Execution Performance Core governance Talent management management and compliance (i.e. development, (i.e. prioritizing key analysis, and prioritizing initiatives against (i.e. development of (i.e. nominations, of strategies that strategy, approval of metrics, incentives, compensation, audit, maximize shareholder M&A transactions) monitoring, tracking of disclosure, Sarbanes- value) performance) Oxley Act )Source: McKinsey Global Survey 2008 n = 586 “Other”=4% ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 3
  4. 4. A Quarter to a Third of Board Members Report Having ‘Limited or no Understanding’ of Critical Strategic Issues 70% 60% 58% 58% 54% 55% 50% 50% 40% 36% 34% 32% 30% 26% 21% 22% 20% 14% 16% 14% 10% 10% 0% Your companys Your companys How value is Risks your Dynamics of your financial position current strategy created in your company faces companys company industries Complete understanding Good understanding Limited or no understandingSource: McKinsey Quarterly Survey 2006 n = 1,597 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 4
  5. 5. The Most Common Response is to Spend More Time on Strategy Percent of directors indicating they would like to spend more ‘time and focus’ in the coming year than in the past 80% 75% 68% 70% 57% 59% 60% 54% 50% 40% 35% 30% 30% 20% 16% 10% 0%Source: PWC Annual Corporate Directors Survey 2012 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 5
  6. 6. SVNACD Members Also Report Wanting to Spend More Time on Strategy How satisfied are you with the amount of time your board spends on discussing strategy? 50% 45% 45% 40% 35% 30% 29% 24% 25% 20% 15% 10% 5% 2% 0% 0% We dont spend We should spend a We spend the right We should spend a We spend too much nearly enough time bit more time on amount of time bit less time time discussing discussing strategy. strategy than we do discussing strategy. discussing strategy. strategy. today.Source: SVNACD Survey 2013 n=66 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 6
  7. 7. This Morning is About Improving the Quality, not the Quantity, of Strategic Conversations How satisfied are you with the current quality of strategic conversations among members of your board?60% 50%50%40% 30%30%20% 12%10% 6% 2% 0% We do not discuss We do not have the Our strategy Im satisfied with the Our strategy strategy as a board. kind of strategy conversations could strategy conversations conversations that use some conversations we represent a best we need to. improvement. have today. practice among boards.Source: SVNACD Survey 2013 n=66 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 7
  8. 8. Two Dimensions of Strategy Conversations: Among theBoard… ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 8
  9. 9. …And Between the Board and the Management Team ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 9
  10. 10. Directors are Less Satisfied With the Quality of Strategy Conversations With Management Than Among ThemselvesQ3. How satisfied are you with the current quality of strategic conversations between the board and the management team?40% 36%35%30% 27% 26%25%20%15%10% 6% 5% 5% 0% The board and the We discuss strategy The strategy Im satisfied with the The strategy management team with management, conversations with strategic dialogue conversations do not discuss but we dont have the management between the board between our board strategy together. the kind of team are adequate, and the and the conversations that but could use some management team. management team we should. improvement. represent a best practice. Source: SVNACD Survey 2013 n=66 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 10
  11. 11. Five Strategy Conversations Every Board Should Have•  Are We Working at the Right Altitude? Are We Clear on The Board’s Role vs. Management When it Comes to Strategy?•  Are We Aligned Around An Aspiration?•  Are We Aligned Around the Walls and Fences That Bound the Business?•  Are We Getting the Information We Need To Do Our Job?•  Is The Board Involved in Setting The Strategic Agenda? ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 11
  12. 12. These Five Conversations Help Set the Stage for Even More Focused and Productive Board Strategy Conversations25% 22%22%20% 18% 17%17%15% 14% 12%10% 9% 9% 9% 8% 8% 8% 8% 6% 6% 5% 5% 3% 0% 0% 0% 1 2 3 4 5 6 7 8 9 10 (Strongly (Strongly Disagree) Agree) My boards strategic conversations are focused and productive. Strategic conversations between my board and the executive team are focused and productive.Source: SVNACD Survey 2013 n=65 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 12
  13. 13. ARE WE WORKING AT THE RIGHT ALTITUDE? AREWE CLEAR ON THE BOARD’S ROLE VS.MANAGEMENT WHEN IT COMES TO STRATEGY?
  14. 14. Are We Working at the Right Altitude? ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 14
  15. 15. Are We Working at the Right Altitude? ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 15
  16. 16. SVNACD Members Report a Wide Variation in Board Altitude My board debates and decides on strategy together with the executive team, rather than simply reviewing plans developed by the executive team.20% 18% 18%18%16%14% 12% 12%12% 11%10% 8%8% 6% 6%6% 5%4% 3%2%0% 1 2 3 4 5 6 7 8 9 10 (Strongly (Strongly Disagree) Agree)Source: SVNACD Survey 2013 n=65 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 16
  17. 17. Different Boards Play Different Roles In the Strategy Process Which of the following roles does the board of directors (or equivalent) play in your company’s formal strategic-planning process? 70% 64% 60% 52% 50% 48% 40% 37% 30% 25% 20% 10% 6% 0% Approves final Challenges Monitors Identifies key Helps develop Not involved strategy emerging performance strategic issues strategys strategy against strategy contentSource: McKinsey Quarterly Survey 2006 n = 796 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 17
  18. 18. Is Our Board Working at the Right Altitude? From the NACDPoint of View There’s no Single Right Answer… “Boards should be constructively engaged with management to ensure the appropriate development, execution, monitoring and modification of their companies’ strategies. The nature and extent of the board’s involvement in strategy will depend on the particular circumstances of the company and the industry or industries in which it is operating.”Source: NACD Board - Letter to Congress recommending ten governance practices - May 3, 2002 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 18
  19. 19. … Except That Each Board Needs To Be Explicit About TheirRespective Roles “Management and the board should jointly establish the process the company will use to develop its strategy, including an understanding of the respective roles of management and the board”Source: The Role of the Board in Corporate Strategy - 2006 Report of the NACD Blue Ribbon Commission ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 19
  20. 20. At One Board Directors Had Very Different Views of Their Role How would you describe the board’s role in the strategy process vs. Andy and the management team? “Review” “Scrub and “Help to “Help vet” supplement management management generate expertise, fresh e.g. thinking” marketing”N=7 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 20
  21. 21. At One Board We Worked With Directors Had Very DifferentViews of Their Role How would you describe the board’s role in the strategy process vs. Andy and the management team? “Review” “Scrub and “Help to “Help vet” supplement management management generate expertise, fresh e.g. thinking” marketing” The problem isn’t that different boards do it differently. It’s when different members of a single board have a different view of the board’s role, or when the board’s view differs from management. ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 21
  22. 22. Coca Cola Enterprises Board Guidelines “The Board will assess the Company’s business strategies, goals and objectives annually, to determine their effect on long-term shareowner value, and to discuss with management the results of that assessment.”Source: Coca Cola Enterprises Board Guidelines ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 22
  23. 23. Our Firm’s Experience Is That ‘Increasing Time’ Alone Won’t Solve the Underlying Problems Caused by Lack of Role Clarity 60% 56% 53% 49% 49% 49% 50% 45% 43% 41% 40% 39% 40% 29% 30% 23% 21% 21% 20% 14% 12% 10% 8% 6% 0% Monitoring Developing Approving key Evaluating Developing Challenging performance short-term strategic options for long-term existing strategy against strategy strategy initiatives short-term and strategy long-term strategies Increase Hold Steady DecreaseSource: McKinsey Global Survey 2008 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 23
  24. 24. This McKinsey Framework We Saw Earlier is an Example of a Starting Point for a Discussion About Roles Which of the following roles does the board of directors (or equivalent) play in your company’s formal strategic-planning process? 70% 64% 60% 52% 50% 48% 40% 37% 30% 25% 20% 10% 6% 0% Approves final Challenges Monitors Identifies key Helps develop Not involved strategy emerging performance strategic issues strategys strategy against strategy contentSource: McKinsey Quarterly Survey 2006 n = 796 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 24
  25. 25. ARE WE ALIGNED AROUND AN ASPIRATION?
  26. 26. The Overall Level of Strategy Alignment Almost Always Bears AtLeast Some Degree of Improvement How well do the following groups understand Company X’s overall strategy: The Board Andy and the Executive Committee 4 5 Some newer Board members rated themselves lower than the overall Board” 2 2 1n=6 1 2 3 4 5 n=8 1 2 3 4 5 Not at all Completely Not at all Completely SVP Level Executives and Above Wall Street Analysts 3 2 2 2 2 1 1n=6 1 2 3 4 5 n=7 1 2 3 4 5 Not at all Completely Not at all Completely ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 26
  27. 27. SVNACD Members Saw an Opportunity to Improve Their Boards’ Levels of Alignment How would you assess the level of alignment regarding a view of the company in three to 70% five years… 60% 58% 52% 50% 40% 30% 24% 20% 20% 17% 11% 10% 8% 6% 5% 2% 0% Not at all aligned Somewhat aligned Completely aligned ...among your board? ...between members of the companys board and its executive team?Source: SVNACD Survey 2013 n=66 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 27
  28. 28. The Starting Point of Strategic Alignment is Having aCommon Aspiration 1. Aspiration “Our Board Members and Management Team don’t have a strong shared view of what the corporation is trying to accomplish or what we could become.” 5. Resources 2. Strategy “The organization may not “I’m dissatisfied with have the resources, skills our strategy’s ability to or physical assets to Sustained achieve our aspiration.” implement the strategy and Organizational achieve the aspirations.” Success 4. Organization & 3. Alignment Processes “It seems like the organization “We may not have people or doesnt’t understand the processes structured strategy, doesnt’t support it, appropriately to implement or both.” the strategy.” ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 28
  29. 29. Boards and Management Teams Typically Hold Too BroadViews of How To Define SuccessHow do you think about success for Company Y? If we were meeting at the end of FY2017, and we were looking back at another tremendous 5-year run for Company Y, what would have happened?Qualitative:•  Gone into new businesses•  Grown good businesses•  Become recognized as an industry leader•  Moved from a product approach to a solutions approach•  Met the needs of our customers seamlessly•  Be identified as a major INDUSTRY firm•  ‘Own’ MARKET A - become the dominant player in MARKET A•  Have a coordinated Company Y strategy•  Launched a successful NEW SEGMENT ENTRYQuantitative:•  Double MEASURE OF SCALE to $2.6 trillion•  Enjoy a 20% unit cost advantage over competitors•  Number of new customers•  Market share vs. LARGEST COMPETITOR•  Margin 17-18%•  Retention ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 29
  30. 30. It’s Not That The Aspirations Are Wrong In Any Way - It’s ThatThere Were Multiple ‘Most Important’ Goals Among 7 Directors How do you think about success for Company X? If we were meeting at the end of 2013,and you looked back at a successful 3-year period for the company, what would have been accomplished? How would it be measured?Grow Sales (5)•  “The only measure that matters to a retailer is revenue growth”•  Consistent sales growth and comp store growth•  “Generating organic growth = 3% comp store sales growth”•  “Boost sales per square foot across the chain (not just existing stores)”Grow Shareholder Value (4)•  “As a director I work for shareholders – market value is the #1 measure”•  “Total shareholder return in the top quartile of the industry group”•  “Provide shareholder value relative to macro environment“Grow Profitability (4)•  “Get back to level of profitability of several years ago“•  5 - 20% EPS growthGrow Number of Stores (3)•  Overall growth of stores•  “Expand presence through a new concept or acquisition”n=7 for the first, 6 for the second, 5 for the third success factor ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 30
  31. 31. ARE WE ALIGNED AROUND THE WALLS ANDFENCES THAT BOUND THE BUSINESS?
  32. 32. Walls and Fences - Defined •  Walls are the boundaries around any business that are assumed to be immovable – so much so that executive don’t even bother to approach them •  But by challenging these assumptions teams discover that the walls are sometimes actually fences – boundaries that can in fact be moved, opening up strategic space for the company to grow ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential.
  33. 33. Walls and Fences – Company Z 1.  Operate in the U.S. 2.  Communications company 3.  Subscription-based revenue models 4.  Controlling group of shareholders 5.  Conservative, Investment Grade rating 6.  We would never take any actions that would challenge our core ethical and moral principles 7.  Expand by entering ‘near adjacent’ spaces – leverage what we know 8.  Buy and hold – would not buy a business and sell 4-5 years later 9.  Every deal justified on DCF – no ‘strategic’ investments. ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 33
  34. 34. ARE WE GETTING THE INFORMATION WE NEED TODO OUR JOB?
  35. 35. There’s Generally Good Data Provided to Boards, But It Could Bear Improvement 70% 59% 60% 50% 43% 42% 40% 34% 34% 30% 29% 25% 20% 20% 10% 7% 4% 5% 1% 0% Excellent Good Satisfactory Below acceptable levels Corporate performance Strategy Risk managementSource: NACD Public Company Governance Survey 2012-2013 n=957 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 35
  36. 36. Some Directors Report That Critical Elements of Data Are Missing How well informed are you as a board member on the industry, competitive, market and strategic context of the company? Are you provided with the background you need to have a rigorous discussion of strategy?50% 44%45%40%35% 29%30%25% 20%20%15%10% 6%5% 2%0% Our board is not well We get some The information we Im satisfied that, as a The information I am informed on the information, but there are provided is board member, I am provided with as a strategic context of are critical elements adequate, but could provided with the board member the company. we as a board dont be improved. information I need to represents a best know enough about. have a rigorous practice. strategic conversation. Source: SVNACD Survey 2013 n=66 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 36
  37. 37. Better Access is Provided to Financial and Operational Information than Strategic or Industry Information 90% 85% 80% 70% 67% 61% 60% 50% 45% 40% 28% 26% 30% 23% 20% 19% 20% 12% 10% 10% 3% 0% Financial information Operational information Strategic information Leading indicators on about company about company relevant to company direction of industry, (e.g. key performance sector, company indicators linked to companys strategy) Good/optimal access Adequate access Insufficient/no accessSource: McKinsey Global Survey 2008 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 37
  38. 38. The Board Should Inventory the Information Provided Over the Past Year and Validate That It’s Adequate To Do Your Job •  66% evaluate external benchmarks and data to independently corroborate management’s assumptions/assertions •  53% consider alternative strategies to those presented by management •  66% of directors are happy with the customer satisfaction research management provides •  72% of directors are comfortable with information about employee values and satisfaction •  A number of boards do not receive any information about either customer or employee satisfaction (20% and 16%, respectively) •  21% of directors are dissatisfied with the information management provides on competitors’ initiatives and strategySource: PwC’s Annual Corporate Directors Survey 2012 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 38
  39. 39. IS THE BOARD INVOLVED IN SETTING THESTRATEGIC AGENDA?
  40. 40. Boards Generally Don’t Set The Agenda of Strategic Topics in a GivenYear Who sets the agenda for the strategy-related topics the board discusses?50% 45%45%40%35%30% 26%25% 21%20%15%10% 6%5% 2%0% The CEO The board as a The non-executive The board as a The non-executive whole in chairman or lead whole chairman or lead consultation with director in director the CEO consultation with the CEOSource: SVNACD Survey 2013 n=66 ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 40
  41. 41. Prior to the Meeting To Set Strategy Topics Board MembersCompleted an Interview and Subsequent Online SurveyPre-meeting activities: Interview Aggregate and Collect Additional Subset of Synthesize Written Input from Board Interview Results Board Members Members and Written InputKey Outcomes:•  18 potential board level strategy topics (beyond specific growth opportunities)•  15 specific potential growth opportunities•  11 walls and fences ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 41
  42. 42. We Determined Which Strategy Topics (Beyond Specific Growth Opportunities) Will be Included on the Board’s 18-Month AgendaThe board kept 13 strategy topics from pre-offsite …. added two topics…data gathering with slight modifications… 19. How can we accelerate our study/execution of what we1. White space opportunity analysis decide to do?3. How should we define growth (i.e, profitable growth, not just 20. How do we ensure the analysis is done in an objectivegrowth)? fashion?4. Can/how we improve operating margins in the XXXbusiness?5. Can/how we reverse the revenue decline and maintain …. and deferred discussion on five individualprofitability in the YYY business? topics. (2)6. Why is our EBITDA multiple so low? 2. Analysis of growth opportunities within existing lines of business7. Will S-shares prove to be an effective acquisition tool asplanned? 11. How can we ensure that we delight our customers?8. Can/how we strengthen our position versus national 12. What are our options for improving our position withcompetitors in ZZZ? REGULATORY AUTHORITY and Congress?9. What should we do about MARKET A and MARKET B? 13. What is required to ensure platform interoperability as10. How do make our business stronger (i.e. What if one or technology moves quickly?more big players attack our core markets)? 17. Should we change our corporate definition from “AAA”14. What is the long term role of the YYY business in our to “BBB”?portfolio?15. What is our management succession plan (especially at The board did a similar validation/DIVISION A)? edit of the potential growth16. Should we acquire 100% of QQQ? opportunities18. How should Board members shape the strategy? ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 42
  43. 43. We Further Set Priorities For The Board Level Discussion Topics, and Identified Areas Where Further Analysis is Required Board-Level Discussion Topics (Priority vs. Readiness) 3 15 18 19 5 discuss Ready to 4 20 1 6 7 14 Requires analysis further 8 10 16 9 Now Soon Later NOTE: Client data has been altered, as has positioning in the matrix, for confidentiality purposes Legend: Board Level Discussion Topics1. White space opportunity analysis 9. Market A and Market B 20. Ensure analysis is objective3. Definition of growth 10. Make core business stronger4. Operating margins in the XXX business? 14. Long term role of YYY in portfolio5. Profitability in YYY 15. Management succession plan6. EBITDA multiple 16. Acquire 100% of QQQ?7. S-Shares as an acquisition tool 18. Board members shape strategy8. Strengthen position vs. national players in ZZZ 19. Accelerate study/execution of what we decide to do ©2011 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 43
  44. 44. For Some Top Priority Topics, The Board Identified Areas of Analysisto Inform the Discussions Topics to be Analysis Required /Considered Now Other Notes •  Analysis of existing markets: - What are our top 15 markets? What is our market share? White space - Why are we strong in our top markets? opportunity - Who else competes in these markets? How do we compare? analysis (1) •  Analysis of white spaces (Businesses operations in which we do not currently compete): - Identify lines of business that would accelerate our ROC, revenue/EBITDA greater than on a standalone basis •  How/can we Improve operating margins in cXXX? What are our existing and potential markets (e.g. 6 specific urban markets)? Can we grow and achieve acceptable returns? •  How/can we strengthen our position versus national players in YYY? •  What is the growth strategy for the XXX business? What is the role of MARKET A andAnalysis of the MARKET B?XXX business - How much have we invested to date? What are the projected future investment requirements? What are the related tax costs? (4, 8, 9) - What are the potential scenarios for (minimum) 5 year operating results? - What are the costs of transfer (including impact on other parts of the Company)? - What are our strategic options and associated economic projections (e.g., How strong would a turnaround have to be in MARKET A or MARKET B to justify leaving our “recoverable” capital in these markets)? ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 44
  45. 45. Five Strategy Conversations Every Board Should Have•  Are We Working at the Right Altitude? Are We Clear on The Board’s Role vs. Management’s When it Comes to Strategy?•  Are We Aligned Around An Aspiration?•  Are We Aligned Around the Walls and Fences That Bound the Business?•  Are We Getting the Information We Need To Do Our Job?•  Is The Board Involved in Setting The Strategic Agenda? ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 45
  46. 46. BACKGROUND
  47. 47. Strategic Offsites Group at a Glance•  A Boutique strategy consulting firm founded in 2002o  We work around the globe with CEOs, senior executive teams and boards across industries on their most important strategic issues and opportunities•  We specialize in the design and facilitation of strategy processes and discussions to help executive teams make better decisions and convert those decisions to measureable actions•  Through our thought leadership, SOG offers new ways of approaching strategy processes and decision making•  We do not work for direct competitors•  We operate from a single office in Boston with a seven-person team ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 47
  48. 48. How We Serve Our Clients•  Whether engaged for a single meeting or a multiyear change initiative, our role is to help design and manage critical strategic discussions•  The common denominator underlying our work is expertly facilitated and prepared workshops and processes designed to achieve organizational, executive and board alignment•  Beginning with setting clear objectives, we help clients maintain a balance of process, content, and conversation to ensure that strategies gain and hold momentum•  We collect and synthesize relevant data that inform objectives and frameworks to drive management teams to actionable outcomes ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 48
  49. 49. For More InformationBob FrischManaging PartnerStrategic Offsites GroupRfrisch@StrategicOffsites.comwww.StrategicOffsites.com+1 617 266-8711@OffsitesGuy ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 49
  50. 50. Bob Frisch, Managing Partner, Strategic Offsites Group For the past 31 years, Bob has worked with executive teams on their most vital strategic and organizational challenges, both as a consultant and a corporate executive. He is considered one of the world’s leading strategic facilitators, having conducted executive offsites in fifteen countries with companies ranging from Fortune 10 multinationals to German mittelstand family businesses. Bob’s work has been featured in publications ranging from the Wall Street Journal to the Johannesburg Business Report, and he is the author of three Harvard Business Review articles: Off-Sites That Work, When Teams Can’t Decide and Who Really Makes The Big Decisions in Your Company?. When Teams Can’t Decide was recently named one of HBR’s ‘10 Must Read Articles on Teams’. Bob’s first book, Who’s In The Room? How Great Leaders Structure and Manage the Teams Around Them, was published by Jossey-Bass/Wiley in January 2012 and is now in distribution in 12 countries. Bob is a frequent keynote speaker has been a guest lecturer at Harvard, Yale, the University of Chicago, Northwestern, Stanford and Brandeis. Before founding Strategic Offsites, Bob was a Managing Partner of Accenture, where he helped create the Organization and Change Strategy practice. Bob joined Accenture from Cap Gemini Sogeti, where he created the firm’s global capability in corporate vision and growth and led the Strategy practice for the Americas. He began his career at the Boston Consulting Group, where he helped found the Los Angeles office. Bob’s executive roles began when he went to work for a client, running planning and business development for The Dial Corporation. Bob went on to become the youngest Division President of this Fortune 500 company. A decade later, he took another leave from consulting to head corporate strategy for Sears, Roebuck and Co. Bob is a magna cum laude graduate of Tufts University and earned his MBA at the Yale School of Management. Bob lives in Newton Centre, Massachusetts with his wife Iris and their four children. Dangerous Company, a best-selling book on the consulting industry, says of Bob: "He has been there, small company and big, strategy and operations. He has lived much of his professional life on the road or in the corridors of power of huge institutions. In the game of business, he is equipped to be the perfect coach." ©2013 The Strategic Offsites Group®, Inc. All rights reserved. Proprietary and Confidential. 50
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