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4 Areas of Strategic Governance for New Board Members

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DOCUMENT DESCRIPTION
Induction programs for new Directors typically do not provide a sufficient understanding of the business. New Directors should take ownership of their induction, designing and conducting their own due diligence.

One way to start is by asking the 12 critical questions that can serve as the new Directors' guidepost as they assume their role as board member. These questions are not questions a new Director would ask during the first board meeting. These are questions the new Director must keep in mind while scanning through company documents and during one-on-one conversations with top managers.

This presentation provides the 4 core areas that new Directors must keep in mind. Each area covers 3 questions that will serve as guidepost as the new Directors assume their new role. In total, the 12 questions will allow a new Director to understand the company's critical issues and begin influencing board decisions quickly.

Core Area 1: Board Roles & Relationships
Core Area 2: Industry and Company Context
Core Area 3: Strategic Direction
Core Area 4: Organizational Health

Given the need for improved Governance, new Directors should set their aspiration at not only meeting the barest by fellow board members, but exceeding it.

This deck also includes slide templates for you to use in your own business presentations.

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4 Areas of Strategic Governance for New Board Members

  1. 1. This is an exclusive document to the FlevyPro community - http://flevy.com/pro Framework Primer 4 Areas of Strategic Governance for New Board Members Presentation created by Board Roles & Relationships Industry and Company Context Strategic Direction Organizational Health CORE AREA 1 CORE AREA 3 CORE AREA 4 CORE AREA 2
  2. 2. 2This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview 1. Board Roles & Relationships 2. Industry and Company Context 3. Strategic Direction 4. Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  3. 3. 3This document is an exclusive document available to FlevyPro members - http://flevy.com/pro The 12 guideposts of New Board Members sets the foundation towards achieving Strategic Governance Presentation Overview While the 12 questions will guide new Directors in effective Governance, it is not intended to be a comprehensive guide to a Director’s legal responsibilities. Induction programs for new Directors typically do not provide a sufficient understanding of the business. New Directors should take ownership of their induction, designing and conducting their own due diligence. One way to start is by asking the 12 critical questions that can serve as the new Directors’ guidepost as they assume their role as board member. These questions are not questions a new Director would ask during the first board meeting. These are questions the new Director must keep in mind while scanning through company documents and during one-on-one conversations with top managers. This presentation provides the 4 core areas that new Directors must keep in mind. Each area covers 3 questions that will serve as guidepost as the new Directors assume their new role. In total, the 12 questions will allow a new Director to understand the company’s critical issues and begin influencing board decisions quickly. Given the need for improved Governance, new Directors should set their aspiration at not only meeting the barest by fellow board members, but exceeding it. This deck also includes slide templates for you to use in your own business presentations. 1 Core Area 1: Board Roles & Relationships 3 Core Area 3: Strategic Direction 2 Core Area 2: Industry and Company Context 4 Core Area 4: Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  4. 4. 4This document is an exclusive document available to FlevyPro members - http://flevy.com/pro New Directors Orientation must be tactical in approach to be effective A Private Equity Model provides the fundamental foundation for new members to effectively function as Board members. New Directors Orientation A typical orientation for new Directors is a combination of a few internal meetings to learn about the company and an external program to learn about the fundamentals of Governance. A Private Equity Model to educate new Directors. Due Diligence used to understand the company in greater depth. 5-10 days devoted to engaging with a wider range of managers, customers, analyst, and industry experts. PROPOSED CHANGECONCERNS Internal meetings are too brief. External programs are too standardized to provide real insights. RESULT Directors are rarely prepared effectively for the role they are about to play. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  5. 5. 5This document is an exclusive document available to FlevyPro members - http://flevy.com/pro The 4 core areas represent the initial starting point for new Directors, as they prepare for the role The questions allow new Directors to understand the company’s critical issues and influence board decisions quickly. 4 Core Areas of Strategic Governance – Overview Jumpstarting a seamless integration of new Directors to the Board and to the company can be a challenge. There are 4 core areas that new Directors must focus on to prepare them for their new role. Source: Twelve Questions Every New Director Should Ask, McKinsey, 2012 Each core area contains questions that serve as guidepost to better understanding of their role and the company. What strengths are they expecting you to leverage? What will be your level of engagement and contribution to board dynamics? How will you proactively shape key relationships? 1 2 3 How is the competitive context evolving? Where are the priority opportunities for the company? Which uncertainties could cause disruptions or opportunities for the company? 1 2 3 Does everyone have a consistent understanding of the corporate strategy? Are resources dynamically aligned with opportunities? Do business unit strategies meet the bar of effectiveness? 1 2 3 Is the board’s dashboard value-driven and does it cover non-financial metrics? Who are the 6-8 people that could make a real difference? Is management optimizing the tradeoffs around risk? 1 2 3 Board Roles & Relationships CORE AREA 1 Industry and Company Context Strategic Direction CORE AREA 3 Organizational Health CORE AREA 4 CORE AREA 2 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  6. 6. 6This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview 1. Board Roles & Relationships 2. Industry and Company Context 3. Strategic Direction 4. Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  7. 7. 7This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Understanding the dynamics within the Board Roles & Relationships will ensure new Directors become effective in the soonest possible time Board Roles & Relationships – Questions (1 of 2) CORE AREA 1 Board Roles & Relationships STARTING POINT Ask the chairman and CEO what they are looking for. What are the weaknesses of the board and how you can help to address them? Understand the norms prevailing within the Board. ̶ Does the CEO hold the board at arm’s length or do they actively solicit the board’s guidance? ̶ Do board members regularly challenge management’s point of view or do they prefer consensus? Decide the degree to which you want to follow them. 1 What strengths are they expecting you to leverage? 2 What will be your level of engagement and contribution to board dynamics? IMPORTANCE New Directors must learn about the role that they are expected to play on the board, including the skills they have that other members may lack. New Directors must have a good read on the level of engagement of the board. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  8. 8. 8This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Also, it is important for a new Board Member to build relationships within the organization outside of the Board Board Roles & Relationships – Questions (2 of 2) CORE AREA 1 Board Roles & Relationships STARTING POINT Get to know the dynamics within the organization. Proactively shape 3-4 relationships to gather unvarnished facts about the organization outside of the usual board-level presentations. 3 How will you proactively shape key relationships? IMPORTANCE New Directors must learn about their colleagues: the chairman, other board members, and key executives. The chairman can help build support for strategic ambitions and discover hidden boundaries. New Board Members are brought in to provide a more independent view. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  9. 9. 9This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview 1. Board Roles & Relationships 2. Industry and Company Context 3. Strategic Direction 4. Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  10. 10. 10This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Industry and Company Context provides understanding of the external context the company is faced with Industry and Company Context – Questions (1 of 2) CORE AREA 2 Industry and Company Context STARTING POINT Test if the managers understand who the next generation of competitors might be. Ask managers for their list of top ten competitors. Ask which companies would be the competitors of those companies. These companies might be getting systematically closer to your industry. Test whether executives are truly aware of the company’s geographic momentum in terms of revenue growth by country and shifts in talent and new initiatives. 1 How is the competitive context evolving? 2 Where are the priority opportunities for the company? IMPORTANCE Understanding the external context facing the company is essential. New Directors must naturally see which customer segments and product categories have experienced the most growth in recent years. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  11. 11. 11This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Specifically, it is important to identify and understand 3-4 key industry trends Industry and Company Context – Questions (2 of 2) STARTING POINT Make sure that management understands the financial implications of the 3-4 trends facing the industry. Determine which trends represent the biggest uncertainties.3 Which uncertainties could cause disruptions or opportunities for the company? IMPORTANCE New Directors must understand the key trends within the industry. Identified trends can be used to build alternative scenarios, estimate probability of each scenario, and estimate industry impact. CORE AREA 2 Industry and Company Context The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  12. 12. 12This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview 1. Board Roles & Relationships 2. Industry and Company Context 3. Strategic Direction 4. Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  13. 13. 13This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Strategic Direction is the 3rd Core Area that focuses on Corporate Strategy and alignment of resources Strategic Direction – Questions (1 of 2) STARTING POINT Determine whether they have the same understanding of the company’s relative advantage. Do they describe the company’s new growth platforms and investment requirements in similar terms? Do they describe the company’s new growth platforms and investment requirements in similar terms? Have the core elements of those views been communicated to the entire organization? Test for flaws by rating each strategy against ten tests of effective strategies. 1 Does everyone have a consistent understanding of the Corporate Strategy? 2 Do business unit strategies meet the bar of effectiveness? IMPORTANCE A sound corporate strategy must be universally understood. At the level of individual business unit strategies, Directors should understand the assumptions, priorities, and options forwarded by management. CORE AREA 3 Strategic Direction The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  14. 14. 14This document is an exclusive document available to FlevyPro members - http://flevy.com/pro A Board Member should usually have the business experience to validate the feasibility of the strategy and the organization’s ability to execute it Strategic Direction – Questions (2 of 2) STARTING POINT Check whether portfolio is constantly refreshed by forward thinking investments. A balanced portfolio must include initiatives to meet current earnings expectations, some to create medium-term growth and others to serve as high-return options. Check for examples of regular, non- incremental shifts of resources such as R&D, sales and marketing dollars across different businesses and geographies. Test if capital spending is a leading indicator of how the company’s growth emphasis is shifting across businesses and geographies. 3 Are resources dynamically aligned with opportunities? IMPORTANCE A balanced portfolio will include initiatives to meet current earnings expectations to either create medium-term growth or high-return options. The tests determine whether the strategy taps a true source of advantage, granular about where to complete, and avoids biases. CORE AREA 3 Strategic Direction The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  15. 15. 15This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview 1. Board Roles & Relationships 2. Industry and Company Context 3. Strategic Direction 4. Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  16. 16. 16This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Organizational Health focuses on value-driven dashboards, talents, setting company’s risk parameters Organizational Health – Questions (1 of 2) STARTING POINT Test if value is the common denominator of the performance management system. Determine if management understands which businesses and drivers create value, uses a balanced set of performance and, health metrics that take value creation into account. Understand the talent issues across key layers of the organizations. Ask to rotate executives who present to board, interviewing the peers, and direct reports of CEO succession candidates. Ask for the performance reviews of the top 5 candidates for critical senior management positions. 1 Is the board’s dashboard value-driven and does it cover non- financial metrics? 2 Who are the 6-8 people that could make a real difference? IMPORTANCE Board members must typically review results quarterly, discuss material variances, and ensure that corrective actions are taken. It is critical to understand the company’s talent pool that includes the level of effectiveness within the top team, the development plan of pivotal roles, and the optimal capabilities needed below the top team. CORE AREA 4 Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  17. 17. 17This document is an exclusive document available to FlevyPro members - http://flevy.com/pro The emergence of sophisticated risk-transfer markets encourages a shift from pure risk mitigation to risk-return optimization Organizational Health – Questions (2 of 2) STARTING POINT Test whether management has a list of the potential crises that could occur as well as steps taken to prevent the situation. Check whether management is ignoring big risks, paying too much to reduce minor risks, or missing high return/low risk projects. 3 Is management optimizing the tradeoffs around risk? IMPORTANCE The board is charged with setting the company’s risk parameters, understanding major risk exposures, and ensuring appropriate risk mitigation approaches. For information on the Organizational Health Index (OHI) framework, refer to this deck: XXXXXXXXXX CORE AREA 4 Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  18. 18. 18This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Templates Overview 1. Board Roles & Relationships 2. Industry and Company Context 3. Strategic Direction 4. Organizational Health The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  19. 19. 19This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Insert bumper. 4 Core Areas of Strategic Governance – TEMPLATE Source: Twelve Questions Every New Director Should Ask, McKinsey, 2012 Board Roles & Relationships Industry and Company Context Strategic Direction Organizational Health CORE AREA 1 CORE AREA 3 CORE AREA 4 CORE AREA 2 • Insert filler text, filler text, filler text, filler text, filler text, filler text. • Insert filler text, filler text, filler text, filler text. • Insert filler text, filler text, filler text, filler text, filler text, filler text. • Insert filler text, filler text, filler text, filler text. • Insert filler text, filler text, filler text, filler text, filler text, filler text. • Insert filler text, filler text, filler text, filler text. • Insert filler text, filler text, filler text, filler text, filler text, filler text. • Insert filler text, filler text, filler text, filler text. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  20. 20. 20This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Insert bumper. 4 Core Areas of Strategic Governance (and 12 Questions) – TEMPLATE Source: Twelve Questions Every New Director Should Ask, McKinsey, 2012 Board Roles & Relationships CORE AREA 1 Industry and Company Context CORE AREA 2 What strengths are they expecting you to leverage? What will be your level of engagement and contribution to board dynamics? How will you proactively shape key relationships? 1 2 3 How is the competitive context evolving? Where are the priority opportunities for the company? Which uncertainties could cause disruptions or opportunities for the company? 1 2 3 Does everyone have a consistent understanding of the corporate strategy? Are resources dynamically aligned with opportunities? Do business unit strategies meet the bar of effectiveness? 1 2 3 Is the board’s dashboard value-driven and does it cover non-financial metrics? Who are the 6-8 people that could make a real difference? Is management optimizing the tradeoffs around risk? 1 2 3 Strategic Direction CORE AREA 3 Organizational Health CORE AREA 4 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  21. 21. 21This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Insert bumper. 4 Core Areas of Strategic Governance (and 12 Questions) – TEMPLATE ALTERNATE Source: Twelve Questions Every New Director Should Ask, McKinsey, 2012 Board Roles & Relationships What strengths are they expecting you to leverage? What will be your level of engagement and contribution to board dynamics? How will you proactively shape key relationships? 1 2 3 Industry and Company Context How is the competitive context evolving? Where are the priority opportunities for the company? Which uncertainties could cause disruptions or opportunities for the company? 1 2 3 Strategic Direction Does everyone have a consistent understanding of the corporate strategy? Are resources dynamically aligned with opportunities? Do business unit strategies meet the bar of effectiveness? 1 2 3 Organizational Health Is the board’s dashboard value-driven and does it cover non-financial metrics? Who are the 6-8 people that could make a real difference? Is management optimizing the tradeoffs around risk? 1 2 3 CORE AREA 1 CORE AREA 2 CORE AREA 3 CORE AREA 4 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  22. 22. 22This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Download 100s of similar frameworks from the FlevyPro Library: https://flevy.com/pro/library/frameworks The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  23. 23. 23This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Need more frameworks? Download our Complete Business Frameworks Reference Guide, a 350+ slide compilation of 50+ frameworks, on Flevy The Complete Business Frameworks Reference Guide is a best selling document on Flevy. It is 350+ slides--covering 50+ common management consulting frameworks and methodologies. A summary is provided for each business framework. The frameworks in this deck span across Corporate Strategy, Sales, Marketing, Operations, Organization, Change Management, and Finance. This reference guide is great for those who need a refresher on common frameworks, as well as be introduced and learn new useful frameworks. You can find this document here; http://flevy.com/browse/business-document/complete- consulting-frameworks-toolkit-644 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  24. 24. 24This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/4-areas-of-strategic-governance-for-new-board-members-3783
  25. 25. 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com

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